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The New Era for Service Providers

Eliminating the cloud IT nightmare for users, SMBs and enterprises

In their March 2013 report "Business Technology Innovation," Ventana Research found that 40 percent of companies attributed cloud usage to reduced costs, followed by improved efficiency of business processes (39 percent).[1] Though the benefits of the cloud, like business and social collaboration, are clear, many organizations are having trouble seeing past the potentially overwhelming transition to the cloud. Most enterprises do not want a one-size fits all solution, which requires them to manage multiple relationships, negotiate multiple contracts, maintain multiple payments, remember multiple passwords all with multiple service providers. Maintenance is already a challenge, and by adding the complexity of transition, cloud computing can easily seem like an IT nightmare.

Cloud Adoption from Different Perspectives
Users are ready to make the transition
A "top-down adoption" is a process when the CIO or IT department mandates the type of software that all of their employees must use. This centralized structure means that the ones choosing the software are not the ones using it day-in and day-out, which leads to buying decisions based on ease of support and feature lists instead of ease of use and real world functionality. Enterprise 2.0 is flipping this old model into "bottom-up adoption." Employees, who have been using consumer tools in their personal lives, now expect the same level of quality in the software they use at work. They are seeking out and signing up for whichever tools will help them the most, instead of relying on what IT gives them, and CIOs are often put in a position requiring them to follow along their fellow employees.

Historically, cloud services, SaaS or any new technology that enters the market at a similar price point follows ‘a bottom-up adoption.' For example Salesforce.com, launched well over a decade ago, initially wasn't selling into the upper echelons of organizations. Instead, they were selling to individual sales representatives. By selling to individuals, Salesforce.com was able to build up the momentum within each of their customer organizations, resulting in selling sideline licenses or subscriptions for their service. With the consumerization of IT, this type of sales model is becoming a trend. Users are seeing they can get easy, affordable access to capabilities and services that are not supported internally, and as a result, individuals don't have to spend months justifying the business case with IT in order to get the solution they need. From a user perspective, the cloud is a new paradigm that supports a ‘bottoms up' approach and offers the ability to work more efficiently.

SMB owners need clarity
TechNavio's analysts forecast the small and medium-sized business cloud market in the US to grow at a CAGR (compound annual growth rate) of 18.45 percent over the period 2012-2016.[2] Despite apparent growth, SMBs are also finding that cloud adoption is creating a lot of confusion around choosing the right service. When SMBs speak to an IT reseller, they find the reseller tries to sell them a new server, license or on-premise software the company doesn't want or need. When SMBs search for a cloud provider independently, they often feel like small fish in a big pond; providers don't always give the assistance organizations need and they are left to fend for themselves.

Enterprise IT Is Worried About the Resources Needed
With enterprise IT organizations, particularly from a governance risk, management and compliance standpoint, the cloud can be frightening, and whether it's resource allocation, data governance or policy enforcement, there is a lot to consider when moving to the cloud.

One of the realities in moving to the cloud is that IT should not be required to invest countless hours managing the data center. Whether it's a public or private cloud, resources can be compiled, utilized and abandoned without the active participation of data center management. For some, this can be somewhat unsettling.  With the adoption of any new technology, enterprises should re-evaluate their management style; this is particularly true for cloud adoption.  The cloud represents a fundamental shift in information technology, and it shouldn't come as a big surprise, that the old ways of managing and organizing IT infrastructure can no longer apply.

Why Should Service Providers Care About Cloud Adoption?
Most service providers sell traditional money making services like broadband, hosting, voice communication and networking services. Over time, all of these markets have become fairly saturated, which has led to price competition as traditional competitors battle for a finite market. As a result, service providers are forced to cut prices, leading to reduced gross margins and a significant impact to the bottom line.  The solution is to begin considering an alternative source of revenue. The business impact with this double sided competitive scenario is that increasing commoditization leads to declining profit margins; as there is more price competition, there is more customer churn which leads to market share loss.

Cloud Marketplaces Best Practices
Many service providers are evaluating their cloud marketplace strategy, and several are finding that aggregating and delivering a rich catalog of cloud services to current customers creates new lines of revenue. The checklist below can help ensure increased profitability and greater customer retention for your organization.

Six Cloud Portfolio Strategies:

  • Provide complementary third-party services - Increase customer/partner retention and profitability, as well as incentives for partners to add value to core offerings.
  • Bundle third-party services with existing core offerings - Grow market share via differentiated offerings.
  • Provide a unified usage experience across different vendor services - Extend brand visibility and innovation to end-users to drive complementary benefits.
  • Enable existing and new service channels - Increase channel loyalty and profitability.
  • Create a phased go to market approach, starting with current services - If you are a service provider, the first thing to consider is your current portfolio and customer segments, and then break down your strategy.
  • Start with basic services that do not require a lot of high touch selling - Offer multiple services like security, data backup and collaboration conferencing across multiple categories to help customers choose the segment that is right for them.

Eight Essential Cloud Market Platform Features:

  • Catalog management - Where service providers define the user interface of the cloud marketplace, onboarding different services from the data center, defining the services and price points, tracking costs and negotiating wholesale.
  • Self-service fulfillment - A complete and automated self-service capability, so that users can go through, pick different services from the catalog and provide payment information. The platform should then be able to provision users for the different clouds they have ordered.
  • Service and user provisioning - Service adapters provide provisioning and communication between the platform and different cloud providers. This is a key component for operating within the cloud marketplace.
  • Authentication, authorization & access control - Covers a large range of capabilities from role based access control, which is important if selling to large enterprises. In this instance, enterprise customers can govern from the admin interface to the platform, which allows users within the organization to use the service.
  • User and service administration capabilities - When an individual leaves any size organization, the administrator should have the ability to delete that user and de-provision them from the services they use. A key value is allowing the organization to unify administration and lifecycle management, offering various types of services within the organization.
  • Reporting and auditing - Important at all levels of the platform architecture, this should range from tracking the services that are selling and customer segments to auditing where data is going, which services are being logged into and which users have access to which services.
  • Helpdesk ticketing & support - The key for customers is a single point of support for all the different cloud services that they have chosen for their platform. Federated help desk support across the various cloud providers and aggregated into one platform is essential in assuring down time is limited and maintenance is seamless.
  • Billing, metering & chargeback - Application services tend to have a monthly user subscription fee, while other services lean toward a metered solution. A key benefit for customers is aggregating billing for all cloud services.

Increasing customer ROI
A cloud marketplace drastically improves the end user experience by providing a single point of access, discovery, user management and administration, which is important in terms of reducing the overhead cost that IT managers typically face. It also enables end users to aggregate their buying power within organizations, reducing the number of users going out on their own. Being able to audit how users are accessing servers, deleting employees from the entire cloud platform and reducing exposure to data loss are essential in centralizing and managing access to IT tools needed by each employee, and assuring that companies are compliant with regulatory standards.

Conclusion
Even with users, SMBs and enterprises looking for customized cloud service solutions, transition and maintenance could be enough for anyone to halt cloud adoption; however, with a proper platform, service providers can integrate or aggregate services, to provide a customizable, easy to deploy solution. Cloud Services Brokerages (CSBs) make cloud services more valuable because they work closely with cloud providers to get price breaks or access to more information about how a service works. A viable CSB can make it less expensive, easier, safer and more productive for companies to navigate, integrate, consume and extend cloud services, particularly when they span multiple, diverse cloud service providers.

The world of cloud computing has created a huge business opportunity for service providers to differentiate themselves. As the demand for cloud services grows, it's a natural fit for providers to take advantage of the growth and cater to the needs of their customers. Aggregation services like CSBs will help a customer navigate through the various cloud offerings, which is becoming an increasingly difficult task. For providers, it will increase their relevance and provide a growing revenue stream, something that a lot of organizations are currently looking to do in a saturated industry.[3]

References:

  1. http://www.ventanaresearch.com/bti/
  2. http://www.reportlinker.com/p01095425/Small-and-Medium-sized-Business-Cloud-Market-in-the-US.html#utm_source=prnewswire&utm_medium=pr&utm_campaign=IT_Hosting
  3. http://it-tna.com/2013/05/17/jamcracker-if-it-aint-cloud-services-brokered-fix-it/

More Stories By Steve Crawford

Steve Crawford is Vice President of Marketing and Business Development at Jamcracker. He was formerly CMO for PKWARE, where he helped lead a turnaround that increased revenue growth by tenfold over a three-year period. Previously, he was with VeriSign during its growth from pre-IPO to over $2B in revenues, where he negotiated strategic alliances, launched its enterprise solutions product-line, and was responsible for its $200M service provider business. He has also led marketing and business development activities at Octel Communications and managed advanced development programs at Lockheed.

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