The essentials of survival in the IDC space
“To be taken seriously as a player, you need a substantial amount of upfront investment for a very speculative return. It doesn’t matter what xSP you are, it still requires a tremendous amount of investment in infrastructure to get close to offering a viable service. The revenue outlook is pretty grim. Players like Worldcom clearly can absorb that better as they already have a substantial amount of infrastructure and they are in a better financial position to go through that period of dryness where the revenue doesn’t meet the initial investment. But a privately funded startup IDC has got to be in a very worrying position till they can get to a get to a point where they can justify the investment.” These were the words of caution spoken by Ammar Hindi, VP Asia Pacific Operations of Micromuse NetCool Solutions, during an interview recently in Singapore.
Hindi and Richard Whitehead, VP of Strategic Technologies were both in Singapore for a meet-the-customers session.
Whitehead’s words of caution for the industry were that users did not care how things worked; they only cared about the service provided. It was imperative for an IDC or xSP to ensure not only availability to data but accessibility as well.
Hindi also spoke about the need for an IDC to differentiate itself from the competition. Given that so many of them use the same hardware and provide similar services, it is imperative for an IDC to differentiate itself to compete effectively. He also said that the time to market and the ability to quickly launch services that will make it competitive and ensure its success.
According to Whitehead, one of the biggest challenges and perceptions that IDCs have is that of integrity. For many organizations, their data is valuable and mission critical. They have to understand that the IDC will be there for them and will not disappear soon. This makes it a business issue where companies like WorldCom, with its global presence is going to be able to differentiate itself. “You need to feel secure that after 12 months, the investment that you’ve made, the company is still going to be there. But also from a technology standpoint, it is not acceptable to have your data stored on a site that becomes unavailable for any reason.” Whitehead said.
The evolution of IDCs was another area that was important to both Micromuse and the survival of IDCs. Hindi proposed that there needs to be some consolidation in the market and Value Added Services (VAS) need to be offered. An IDC needs to offer more than co-location and hosting. He sees the need for on-site services, i.e., moving up in the value chain. IDCs could not simply rely on a commodity sort of based value.
Whitehead agrees, “Most organizations that we deal with seem to feel that the VAS is the best way to differentiate them. The ASP model in particular is under tremendous pressure right now because simply offering a cheaper way of doing something is attractive initially but is not a long-term sustainable business model. Organizations like the Meta Group all agree that you have to add additional value. What is interesting from Meta’s point of view, is that they say that is essential for long term survival for an xSP, IDC, IDV, etc to offer the VAS but the best way to do that is to establish a good base service. Their assumption is that while you may not make money from the basic hosting service, it is the best possible platform to build the VAS on. You cannot simply go straight to being a VAS provider. IDCs are the organizations most likely to succeed in offering VAS as they already have the infrastructure.”
The Next Big Wave
When asked about what they saw as the next big wave in the industry, Hindi sees two things having an impact.
Firstly, a pickup in the enterprise side of things where enterprises themselves start looking at becoming services providers. A bank for example looking to treat its network and the applications that are running on that network as a core asset and in fact offering SLAs to its customers.
Secondly, on the traditional Telco and service provider side, probably the biggest thing he sees right now are broadband services and wireless. Now that the infrastructure is there and people have some control over their networks some of the add-on values are coming up.
Whitehead sees convergence as the next big tech wave. Currently mini-waves of technology changes, specifically, optical, broadband and wireless are having a big impact. These are basically access methods and what is happening is that these changes are providing high bandwidth access to provide the end goal - unified services.
He foresees the ability to offer all services in one particular solution. In a few years time, he projects that it was going to become common for an email to contain a voice message and vice versa. This is going to become the norm and people are going to come to expect that. Telecommunications companies are going to have to support this in their network and IDCs are going to have to offer this unified messaging capability. Converged networks are going to be huge, and the technology that will let this happen is likely to be software-based.