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In depth: Cloud services - marking the margins

Nermin Bajric | April 3, 2014
The multi-faceted Cloud market is chugging along; some components are ballooning, while others crawl.

"A small, focused managed services provider cannot compete with the likes of AWS as it does not have scale. While price is important, it's actually about partners being able to articulate the difference between their offering and the big players."

Show me the money
For the smaller players, the consensus from industry experts is that the way forward is through partnerships.

Dimension Data Cloud services general manager, David Hanrahan, said there is good margin in partnering and the resale of Cloud, because building a service and infrastructure base is challenging. He also claims it is not worth investing in public compute-as-a-service and the likes of Exchange- and Sharepoint-as-a-service as these are becoming commoditised.

Partnerships allow smaller businesses to leverage larger players' scale and deliver Cloud services without needing a massive investment on a global scale to be competitive.

"Smaller players need to be looking for organisations that can give them the same reach as if they were a global player," he said.

"They need to be able to compete on price and scale, and also need the security and local infrastructure that Australian organisations are demanding. But to partner with multiple Cloud providers to deliver different services makes for a very complex portfolio.

Hanrahan said businesses which are unable to help a client through the evaluation and selection of Cloud solutions and migration run the risk of being pushed out over time due to the lack of control. It is therefore critical to make an investment in consulting and skills in order to retain ownership of the client.

Risk woes
Part of the puzzle is addressing customers' risk woes. Last year's top concern was data sovereignty but organisations have stepped past that to question where data is stored, who has access to it, and what happens at the conclusion of a contract.

Meridian IT business solutions manager, Leo Silva, said major consolidation can be expected on the Cloud computing front across both the channel and vendor spaces due to the capital-intensive nature of the investment; some will exit the market due to the funding shortfalls, and others as a result of competition.

Silva sees margins in consulting, integration, application and business process delivery services. Small businesses which predominantly rely on already-commoditised IaaS will face continuous financial pressure.

For Distribution Central managing director, Nick Verykios, small companies by definition make money by working the niche, and must continue to take on emerging and advanced area to remain relevant specialists.

"If small players are going to try to do the same thing as Amazon Web Services, it won't happen. If you're a specialist and you're going to be delivering specialist solutions you will probably partner with companies you thought you would compete with."

 

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