It's no secret –- there is money to be made in the cloud computing services space, and everyone wants in on the action. SMB cloud providers are no exception, and as the market heats up and competition gets fierce, smaller players need to find ways to compete with the big boys. They will never be able to take advantage of the economies of scale that the largest hosting providers can generate to drive down costs and preserve margin.

At this year's HostingCon, we conducted a survey that yielded some very interesting results. Nearly 50 percent of respondents cited cloud price wars as the greatest threat to their businesses. So what are the opportunities for SMB providers to create true services differentiation and "swagger" versus the industry behemoths, like Rackspace, Amazon and Google?

Interest in and adoption of cloud computing has steadily grown over the past several years. Today, momentum is accelerating as cloud technologies evolve and provide more robust public, private and hybrid cloud opportunities, not just for test and development applications but for enterprise applications.

[Related: We Price Out 7 Cloud Providers So You Don't Have To]

At its core, cloud computing has an element of commoditization, i.e., IT as a service, which in turn puts increasing pressure on hosting providers, especially SMB hosts, to launch and justify higher-margin cloud services that help to differentiate themselves from the competition. The smart hosters will focus on providing value-added services, such as proactive enterprise-class management and support and managed application services that are aligned with critical business goals.

Today, many SMB hosters leverage a variety of open-source and homegrown tools for management and monitoring. In the interests of time and costs, they stretch these systems as far as they can, but as the business grows, they reach an inflection point where these initially inexpensive and/or free tools quickly become complex, hard to scale, and highly inefficient and expensive to maintain. The next investment must be in automated technology that intelligently removes human intervention, which is unprofitable over the long term, and replaces it with solutions that increase profit and scale on-demand. When it comes to providing cloud services, operational efficiency and the agility to respond to changing demands in real-time can be a real competitive advantage.

NEXT: The Two Faces Of Amazon -- Friend And Foe

Among the cloud giants, Amazon Web Services (AWS) continues to maintain the bulk of the mindshare among businesses. Along with Google, AWS was the No. 2 threat to hosters, just behind "price wars." In reality, recent measures taken by Amazon show them reaching out to the hosting industry; instead of focusing on competing, Amazon is trying to co-opt smaller hosters to resell Amazon's services.

While this shift in thinking may take some time, the co-opetition with AWS is healthy and also forces SMB hosters to take an introverted look at the way in which they intend to grow and retain profitability for survival. Perhaps competing with Amazon works; perhaps reselling Amazon is the better strategy. Either way, the important part is to focus and execute on the core competencies of the hoster.

Competing in today's industry can be challenging, and retaining "swagger" when competing with giants requires a shift in thinking. The winners will effectively launch differentiated services on top of reselling IaaS, such as AWS, or will need to gear up and elevate themselves to the professional leagues.

As the cloud grows up and makes itself a viable enterprise-class option, smart hosters will need to upgrade various systems to keep up -- such as security and billing, as well as introducing automation as a part of daily workflow and rapid provisioning. Enterprise and service provider cloud management requirements will become more complex and perforce sophisticated, which in turn will require a new set of management and monitoring tools, purpose-built with these advanced requirements in mind, including automation, analytics and the ability to scale rapidly and efficiently.

The old systems management tools just won't cut it. As the cloud matures, the opportunities will expand, and SMB hosters should educate themselves on the options since an investment for any successful strategy is going to be necessary. The good news -- the options are more affordable than ever, which is a good sign for the entire ecosystem.

PUBLISHED NOV. 21, 2012