A Race To The Bottom In Cloud Infrastructure


OPINION


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If we had this kind of free market competition in government, we would have efficiency, low cost and something that actually works for the people — but that's another story.

What I'm referring to here is the turmoil we are seeing in the data center business with Google getting in, top-tier telcos getting out, and second-tier suppliers increasingly being favored by strategic service providers.

As Senior Associate Editor Gina Narcisi's cover story explains, there is major disruption happening at the top tier of the cloud platform infrastructure market with Google, Microsoft, Amazon Web Services and other deep-pocket competitors duking it out on price and capability and looking for a profitable offering.

[Related: 10 Signs Of Telecom Turmoil]

That is forcing Verizon, CenturyLink, Windstream and others to re-examine and, in some cases, decide there are better places to be than in this dogfight.

For strategic service providers, this brings a set of headaches and opportunities. The good news, of course, is that strategic service providers are adapting and solving customer problems. But more importantly, in my opinion, is that this is why it never makes sense to be totally focused on a single supplier in any part of your business.

If you have a single supplier and it decides to sell off its data center assets to a company that is either unfriendly toward the channel or just doesn't understand it, you have revenue at risk and not enough time to pivot to a new supplier.

For strategic service providers that have or are considering building out their own data centers, it warrants an examination of whether that strategy will hold over time.

Regardless of all that, this is a big market that is getting bigger. Strategic service providers can make a very respectable margin and build a base of recurring revenue by picking the right suppliers.

Google is intently focused on the enterprise market and, having just grabbed a chunk of the business AWS had with Apple, is driving prices to the bottom to get there. But Google has not shown itself to be channel-friendly. And, frankly, the company's tendency to play it fast and loose with privacy in its consumer product set should give strategic service providers pause. There is an old saying that the big print giveth and the small print taketh away—so read the small print.

The market turmoil is a good thing for partners that understand the importance of building their own brand. Successful strategic service providers will be those that understand their position is a collection of the services they bring to customers—regardless of the suppliers that make up the services-based solution.

In the future, end users won't care which suppliers are in the background. But strategic service providers must still have a stable of the best suppliers with solid, profitable partner programs. Strategic service providers will remain in the driver's seat as long as they have alternatives.

Having answers and alternatives is what the customer wants. They also want continuity of service and infrastructure that first and foremost works and, secondly, delivers value.

In the end, the disruption in the carrier data center arena is a good thing for strategic service providers that can navigate the landscape.

BACKTALK: Make something happen. Robert Faletra is CEO of The Channel Company. You can contact him via email at rfaletra@thechannelcompany.com.

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