Our thoughts on the future of digital innovation and the cloud.
Traditional IT Services Firms are Conflicted When it Comes to the Cloud.
You probably work with at least one IT services firm either in a professional services or managed services arrangement (or both). These are the companies that you trust and turn to when you need to get something done that your internal team either doesn’t have the capacity or skills to complete. The reality is that IT services firms or VARs are a critical piece of any IT operation.
So why am I saying that these same trusted firms are conflicted when it comes to the cloud? The first reason is because these firms are having to transform themselves to adapt to the changing world of the cloud. They were not created with the cloud in mind and as a result their processes and technologies do not put the cloud first.
Many of these traditional IT services firms have been around for years and have large investments in data centres, co-location facilities or physical infrastructure that was built to service their customers’ needs. Unfortunately for these firms, their customers’ needs are changing. The customer is demanding more for fewer dollars because the public cloud infrastructure players are pushing prices down below the level that these services firms can compete.
I first saw the transition occurring about five to seven years ago when IT services firms began offering “private cloud” solutions, which was only a rebranding of their co-location services where you could host your applications in their data centre. Is this truly a cloud offering? You could argue that by definition it is because it exists in the ether and is accessed over the public internet or another other method.
However, these firms will not be able to enable their customers to achieve the full benefit that the cloud has to offer because they can never compete with the big gorillas in this game that have billions of dollars to invest in cloud technologies and infrastructure. These gorillas will always be able to offer a similar service at a much lower cost than your traditional IT service provider who is hosting their own infrastructure in a data centre that they either own and manage themselves or rent from someone else. It’s simply a matter of economies of scale. For more on this, see “Cloud vs. Data Center: What’s the Difference?” from Business News Daily.
When you look deeper at some of these IT services firms you see that in many cases a not so insignificant portion of their revenue comes from hardware sales as well as software and services. Hardware usually goes in a data centre somewhere. Your friendly IT services firm will of course offer to host the hardware for their customers in their “private cloud” after they convince you of the need to buy the hardware. However, that is not leveraging the real benefits of the cloud. What if that customer bought a server that turned out to be under-sized for the application, the service provider would have to sell them a new (larger) server to host their application, which the client would likely have to wait weeks to receive. With a real cloud solution (IaaS or PaaS) in this scenario, you would simply spin up a larger instance and you’re done in minutes rather than weeks.
Another interesting point to consider is that many service providers are offering cloud products like Office 365 and Azure not because they think it’s a good idea and it will help their customers. Instead, they are doing it because they are being forced to by Microsoft. For service providers to maintain their Microsoft partner status, they must sell a minimum number of Microsoft cloud licensed products. That’s right, Microsoft has changed their entire partner model (as well as their entire sales incentive structure) to be heavily weighted on a partner’s performance with cloud products. Microsoft has bet big on the cloud and they recognized that they needed to shift their entire organization (not just product development) to focus on the cloud, which roles downhill to their partners.
What this has led to is service providers who may not have any expertise in the cloud now claiming to be experts and selling cloud solutions to their customers. However, there is a significant skills gap and many of these service providers don’t have the certified or qualified staff to be able to deliver on all the services that they are trying to sell. This will change over time, but it is definitely a conflict for the service providers in the short term.
As you can see, your traditional IT service provider has a conflict and may not be representing your best interests when it comes to the cloud. They will naturally be motivated to fill their data centres in order to recoup the costs invested in that infrastructure. They may also be trying to protect their traditional sales channels like hardware sales, which in the cloud world should disappear or become obsolete for most companies.
All the reasons stated here, and many more, are why we created Blue Silver Shift, an IT Services firm that truly puts the cloud first. We were born in the cloud, we have no infrastructure, we have no data centre or co-location facility. When a client wants us to host their infrastructure for them, guess where we host it? In the public cloud (Azure or AWS). Our focus is on selling cloud services, helping companies get to the cloud and help them to manage their systems once they are there. Contact us today to discuss your cloud needs and we’ll prove to you that we can be much more cost effective for you than the traditional IT Services firms who still have to pay for their infrastructure for many years to come.