Q&A: Logicalis CEO On Who's Winning, Who's Losing In The Cloud Wars

Staying Strong In The Cloud Wars

Vince DeLuca took over the CEO role at New York-based Logicalis, No. 26 on CRN's 2014 SP500 list, in 2012 with a mission to help evolve the big-time solution provider into a more services-oriented company. As the company continued to evolve and adopt a cloud strategy, DeLuca said he started to see what he called "cloud wars" emerging, as vendors fight for prominence and solution providers work hard to evolve their business models.

"Our world is certainly changing; that's for sure," DeLuca said.

In an interview with CRN, DeLuca dug deep into the evolving cloud world, which vendors are pulling ahead and how partners will be affected. Take a look at what he said.

What exactly do you mean by 'cloud wars'?

When I look at cloud computing in total, I think it's just evolved quite a bit. It's moved past the initial position of customers experimenting and using it almost as a test-dev, QA, R&D-type development platform, and it's maturing.

If you look across the spectrum of Infrastructure-as-a-Service and Software-as-a-Service, there's varying levels of maturity across that spectrum; customers are embracing full production in the cloud, and I think an element of that maturity is just a number of choices that are out there.

With whom do you partner for cloud?

In our world, we've traditionally partnered with infrastructure OEMs in the U.S. Our go-to-market in the core has been around IBM, HP and Cisco. While AWS I think has been the 800-pound gorilla in the public Infrastructure-as-a-Service cloud space, every one of those OEM partners are investing significantly into that type of platform.

IBM's acquisition [of SoftLayer], Cisco's recent position on InterCloud, HP's public cloud investment, there's just a number of different indicators out here where I see these very, very large companies putting significant dollars into either cloud standardization ... [and] acquisitions and other investments ... By the way, I used the three big OEMs that we deal with, but you also have Microsoft out there [and] their platform is as formidable as any. We don't happen to do a lot of work with them, but I think over time they're going to be hard to ignore as well, considering the way they have the market.

Do you see any players taking a clear lead?

While I think AWS gets a lot of press, I've also seen a lot of customers pull back their workload from AWS. So I don't know if there is a clear choice in terms of just a leader. There's some clusters, but I think some of the big companies are very formidable.

What's interesting is, I think the base product will become quickly commoditized. You already see Google and AWS going at it from just the raw infrastructure. So when I saw these cloud battles or cloud wars I think it really starts to become more of a specialization or differentiation through specialty. We'll see that take shape outside of just the basic -- if you look at Infrastructure-as-a-Service -- compute network and storage capabilities that's out there today.

How do you see cloud companies differentiating themselves?

I think Microsoft, Google, AWS, [IBM, HP and Cisco], they're pushing hard to provide differentiated options for public cloud users. I think hybrid structures will be the lion's share choice for most companies that have any investment in existing infrastructure. If you look at some levels of differentiation out there now, it's showing that seamless integration, how to transition workload, how to move that workload, the user experience in terms of what vehicles they have, whether it's a mobile device or whether it’s a traditional platform to acquire those services.

There's a number of different things that they're looking at to provide a platform for differentiation. Over time, however, I think it becomes, especially with software defined everything taking shape in the infrastructure, best-of-breed solutions for different applications. You'll see some of that.

When you say you predict cloud companies will begin to specialize, what will that be around? Applications? Verticals?

I think it varies. The specialization is really at its infancy. Today I think they're all competing just for share in the basic compute platform space.

I think you'll see differentiation by industry vertical over time where there will be communities and groups of applications, characteristics of those applications and functionality that will be geared towards a particular use. So I think, over time, we'll see that type of maturity spectrum take shape in the ways that those customers are differentiating themselves.

If you see specialization around applications and verticals, do you predict companies will ultimately have a blended architecture with multiple major vendors?

I think so. While it presents a great opportunity for providers, on the flip side, I think managing many different cloud solutions will be a significant challenge for many organizations. Understanding cloud characteristics and making transitions between providers when needed will be areas where companies will need and require outside expertise. That’s where a company like Logicalis can really fit in and help them.

I think the term 'cloud broker' is a bit overused, but in the medium term horizon, I think that's the state that most companies will find themselves in. They'll find a multiuse cloud infrastructure and application platform that needs to be tied together. In managing that, I think they’ll require outside help to do, and be efficient at, and they'll look at providers like a Logicalis to be able to do that.

It sounds like a pretty good position for Logicalis to be in.

I think so. I mean, one of the challenges we have is just structuring our company in a way that [can accommodate that]. All companies, inclusive of Logicalis, we're trying to put investment and put the requisite structure in place to allow us to grow in that third platform, which cloud is an epicenter to. But, at the same time, we need to carefully manage our existing core business. That's not an easy thing to do for any company, whether it's someone like Logicalis or some of the bigger partners out there that I referred to earlier.

What about the vendor side, are they transitioning as well?

I think it's a bit of a tricky transition for most companies, including the bigger guys [like] Microsoft, IBM, HP and Cisco. If you look at the way those companies are built, they're traditionally built around core products and services that are very different from these cloud-based capabilities that they are looking to go to market with now.

It also creates a real gray line between what's direct-led versus partner-led. Their business models are getting turned upside-down. And everything, from the way their sales forces are orchestrated and organized, to how they deal with partners, I think, is a very tricky transition.

That's interesting about vendors adjusting their partner strategies from the cloud. Do you see signs pointing to them continuing their engagements with partners, or going direct?

It's interesting. They all say that they have no intention to modify their business model to drastically change their partner strategy, but at some level they have to. I think it's a public statement of continued partner-centric business models, but beneath that external statement, I think they have to change it a bit. I don’t see how they continually perpetuate a model that doesn't have a bit of a change in it as it continues to progress and move forward. By the way, in the traditional OEM, distribution, value added reseller model, it's blurred across all three of those. The distribution companies now are seeing that commoditization of hardware and they're seeing less value in their domain, and they're all trying to move into a services or cloud space as well. It becomes more blurry if you add distribution into that mix of a traditional model.

How is Logicalis approaching these 'cloud wars'? What is your strategy?

If you just look at the Infrastructure-as-a-Service component of cloud right now, early on, and when I say early on I mean about four or five years ago, we saw some of this happening and we made some initial investment into an infrastructure platform.

We don’t own any data centers in the U.S.; we partner with a company called IO Data Center. We made an initial investment into those two architectures and have been fairly successful in terms of bringing customers onto those cloud-based, shared multitenant, leveraged infrastructures and manage them accordingly.

How has that strategy evolved?

In the last year, we've seen that we will never be able to scale to the likes of these larger players. While we maintained good capability in that multitenant infrastructure in our own data center capabilities, we are now moving to a point where we will partner with the larger entities, in particular, IBM SoftLayer and Cisco InterCloud as -- at least for right now -- our two primary Infrastructure-as-a-Service partners that have that scalability out there.

Our strategy has changed from one where we invested initially into our own infrastructure to one where we'll partner with the raw capability and the scalability that is inherent in those other companies' capabilities, both now and, as far as we can tell, into the future.

How does distribution fit into that strategy for Logicalis?

As far as distribution, we're using them a bit differently as well. Avnet is our primary distribution partner in the U.S. We're using them to help us incubate things. For example, they’ve built, in this platform that I'm talking about, open capabilities to extend workload into these multiple Infrastructure-as-a-Service platforms, and instead of us developing it all on our own, we're using them to help us develop and incubate in areas where they've already made investments.

Right now, we're stitching together a solid position using the capabilities of all of those partners, and then we make a critical choice at points in time where it makes sense to continue investing on our own or continue using them.

Where do you expect this to be a year from now?

I mean I think in a year, I don’t know if [there will be] a lot changes in a year. I think we'll see just more solidification of a strategy that’s in flight right now. I think we'll continue to see these big guys battling for share. We certainly see it through price and commoditization of the basic services, and I think we will see more maturity in specialty, whether it's in an application-centric infrastructure, whether it's in a vertical specialty, or whether it's in how migrations occur in this sort of well-stitched-together environment that will inevitably be hybrid in its orientation, using multiple applications, infrastructure providers and overall workload capability to extend whatever they're trying to accomplish as a business.

I think we'll just see more maturity in it. I don't think we'll see a drastic difference only a year out from where we're at.