The five keys to building a successful cloud services business

To make the most of the cloud opportunity, service providers need to combine the winning mix of smart business decisions, partnerships, and technology.

Commentary - The market for cloud computing is growing, and the competition is fierce. To succeed, there's little room for service providers to make mistakes. They first must come to terms with what kind of cloud-based services they'll provide: SaaS, PaaS, IaaS? Are they better suited to target the enterprise market, SMB, or maybe even other service providers?

They must also choose the right technology to deliver the services to customers cost-effectively and with scale – and to do it skillfully enough to carve healthy, recurring margins.

The service providers that are grabbing market share are adapting to market changes. Here are five keys to success in this highly competitive market:

1: Differentiate and focus
Service differentiation is essential. One proven way to succeed is to find a business edge -- anything from technology to geographic focus to creating a niche in a specialized market -- and build from there. "My advice is to begin with a niche. Pick a service or an application or a target market and become very good at offering and supporting that," says Stephen Hurford, cloud services director for UK-based cloud services provider DNS Europe.

Service providers can offer a specialized SaaS application to a particular vertical market, such as healthcare, manufacturing, or government. Or provide a dedicated platform for SaaS or managed service providers. Once the initial cloud service infrastructure is in place, it's possible to expand from there, perhaps offering additional applications, platforms, and infrastructure services.

2: Capitalize on new opportunities created by cloud services
Today, business units within an enterprise expect new IT resources to be delivered within days or even hours. Slow IT response is causing business managers to bypass IT and procure the applications – CRM, productivity suites, billing, etc. – with near instantaneous fulfillment from external service providers.

Service providers are working with their traditional IT customer base, but now are also successfully selling directly to business users. To effectively engage these less technical customers, they must carefully consider and invest in ways to simplify the customer experience, making it turnkey and automated whenever possible.

"We came to the realization that the real users of cloud are not cloud-savvy and shouldn’t have to be." says Scott Sanchez, vice president, cloud business solutions, ScaleUp. The changes includes engaging customers at all levels – IT departments, business users, developers, CIO, and in some cases, even the CEO. "When we show them how we can change the way they run their business from an IT perspective, they go ‘wow, that’s great. My IT people can go back to supporting the business rather than managing what’s in the data center,'" Sanchez says.

3: Realize not every IT challenge is answered by cloud
Not all prospects will want to approach cloud on the same path. Service providers may need to support public, private, and legacy architectures. ScaleUp’s Sanchez agrees: “Don’t force customers into this thing called the cloud because everyone thinks it’s the right decision. In some cases, people are better off on dedicated hardware or in a hybrid model, in which some is dedicated and some in the cloud,” he says.

Taking the right tempo toward cloud computing is also vital. Launching into a "we’re going to convert everything" to the cloud attitude is an approach that is almost always doomed. There is a relatively steep learning curve with it all, explains Hurford. “Experienced service providers can place themselves in a unique position to help enterprises avoid the pitfalls. Enterprises are starting to look much more to service providers – not necessarily to host their stuff for them, but to teach them about hosting – because their internal IT departments are becoming hosting companies," he says.

4: Leverage the right platform to deliver services customers demand
We've focused on many of the key aspects associated with building a successful cloud business, but the importance of choosing the right cloud technologies should not be understated. Service providers can build their own cloud infrastructure and management system, but this requires architecting, building, and orchestrating the infrastructure for hundreds to thousands of clients. And to do so with the sustainability and security that customers expect is more challenging than many at first suspect.

Ideally, the cloud platform should be designed for service providers – so that services can be quickly and cost effectively launched – with virtualized, or encapsulated, application workloads that run within a highly-available and secure infrastructure.

A flexible cloud platform has enabled Bird Hosting to tailor its business to customer needs. "Using a private cloud platform has transformed the economics of how we deliver services and also opened up the opportunity to offer higher-value services," says Mike Wallace, CEO Bird Hosting. "We used to offer web hosting services on dedicated and virtualized servers. But, even in virtualized environments, I would need separate machines for each individual task and for different operating systems. A solution like 3Tera gives me a lot more flexibility, " Wallace says.

5: Utilize every resource available to succeed
With competition tight, and changes rapid in technological adoption, picking the best partners is crucial to success. Many technology partners have educational and training programs – service providers should take full advantage to help get their offerings to market as quickly and profitably as possible.

Conclusion
The market for cloud computing is growing, and so is the competition. That means there is little time for missteps if you are a service provider. To win, you must select the right technology and business partners, choose the right cloud offerings, and execute as flawlessly as possible.

biography
Matthew Richards is Senior Director of Cloud Strategy and Solutions for CA Technologies.

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