Consolidation Among Cloud Service Providers

Industry:    June, 2016

Time to Get Big, Get Local or Get Out!

While much of the recent focus has been on the big players in the Cloud market, that are all competing for scale, there remains a competitive play for focused MSPs that is often overlooked.

The #cloud market is heading the same way as automotive manufacturers says @zsahLTDCLICK TO TWEET

After an initial growth phase in which many pioneers crate a new market, there typically follows a consolidation phase in which mergers, acquisitions and divestitures herald the beginning of a level of market maturity. There were once hundreds of small motor manufacturers, but now you have the volume players like Volkswagen, Ford or Toyota and the specialists with niche brands like Porsche, Mercedes or Jaguar. Those caught in no-man’s land tend not to survive – just look at Fiat – it lacks the volume to compete on scale and the brand to compete on quality.

The same trend is currently playing out in the cloud market. Signs of this process are as follows:

1) Generalists quit:

HP has been a leader in printers, PCs and corporate servers, but it realised that it couldn’t compete in public cloud so pulled out (shortly before splitting into two firms) to focus on what it really was good at. Likewise Verizon has attempted to span the areas of wired and wireless connectivity as well as cloud, but is now reportedly looking to sell off some of its data centre facilities, in a move to refocus back on its wireless business.

2) Large players acquire smaller ones:

Before admitting defeat HP had bought Eucalyptus, ContexStream, Aruba Networks and Voltage Security. Meanwhile Microsoft has bought companies like Adallom, while IBM has added Gravitant, Blue Box, and Cleversafe to its earlier big Softlayer purchase.

3) Specialists emerge:

MSPS FOCUS ON THEIR CORE AREA OF EXPERTISE AND PARTNER ACROSS VALUE NETWORKS

As markets mature, niche or vertical segments appear that are served by local, specialist or premium providers as has been the case with the many segments now served by local MSPs. Unlike Verizon that tried to do everything from connectivity to cloud, the MSPs focus on their core area of expertise and partner across value networks in which each player from the MSP itself to the connectivity providers ISVs and other players that they team with to provide a solution that meets a client’s needs more closely than the big players ever could.

So what should clients make of this or understand if they are to get the most from their provider?

  • For commodity requirements (like long term storage) consider the big players – for example AWS Glacier is less then a cent per gb per year.
  • For business critical needs consider an MSP with the specialist skills and knowledge that you are looking for – one that understands your business.
  • Also try to avoid generalists and instead concentrate on those suppliers that are best at what they do and that focus on driving value and competitive advantage through their core strengths.
  • Consider value networks where the various players have experience of working together to provide best of breed components in a fully integrated overall solution. Avoid that jack-of-all-trades that claims to be able to do it all.
  • Be aware: Firms that get acquired are either keen to sell (cashing out) or forced to sell (fire-sale bargains). If your provider is one of these and does get acquired then you need to be prepared for the consequences – your applications and data may change hands meaning potential changes in terms of service, SLAs, etc.
There are #MSPs for every industry, you just have to find one that serves you right says @zsahLTDCLICK TO TWEET

In any business there are commodity needs (like long term storage) that are hardly critical, but there are also areas where your data and your applications are critical, not only to the way that you do business, but also to the value that you provide to your own clients. If you are a law firm then there are MSPs that serve this segment. They understand how law firms operate, they are familiar with the applications that they use and have worked regularly with the ISPs and connectivity suppliers that also serve this market segment and they are probably the best option for you. The same is true for many other segments. Whatever your business there is likely to be an MSP out there that is right for you – we’d like to think that it might be Zsah, but even if it isn’t then these rules still apply!

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