In my last post I made the observation that we were seeing accelerated change in the service provider market as consumer trends were forcing new service delivery models.
These in turn have catalyzed a new wave of investment and innovation for SPs. In this post, I lay out five key trends that are enabling and empowering European SPs to follow this path without forcing unsustainable capital commitments.
1. New finance models for infrastructure investment: First, SPs need to realise the options open to them for capitalising their infrastructure have changed dramatically. Despite the relative scarcity of traditional corporate finance options from financial institutions, a few vendors have innovative finance models that allow a total transformation in the way that IT investment is undertaken. For example, pay-as-you-go or profit-share models, in which major suppliers can become partners in the delivery of new IT services, taking a share of both the profits – and the risk involved – in bringing a new service to market. This is the case in the Netherlands, where our financial engagements with SPs are often structured around the agreements the service providers have with their customers themselves.
2. Evolved product portfolios for the cloud age: Many SPs are still acclimatising to the new customer expectations around commodity IT service delivery. The reality is that, thanks to cheap consumer services, the expectations have changed and in the main – rather than trying to compete with the vast scale of public cloud providers – enterprise SPs must find a balance that allows them to deliver high-value services that meet these customer needs with significant value added options; for example 99.999% availability, stronger governance and corporate controls, permanent deletion of data from public cloud services, better e-discovery capabilities, better back-up, recovery and continuity options and beyond. In the Netherlands, we’ve worked with Open Line to collaboratively develop and its ‘Smart Cloud Back-Up’ service in precisely this way, for example, powered by our Avamar technology to increase the efficiency and reduce the capital cost of the back-up service to Open Line.
3. Meeting local data regulation and compliance needs: Related to route (2) above, there is growing concern in light of the Patriot Act (amongst other pieces of privacy legislation and Government practice around the world) that is being reflected in different local law in every country in Western Europe, as well as in end-customer demands. Data often needs to be held locally and many of the disruptive entrants into the service provider market are global and do not – or cannot – meet these needs. There’s therefore an opportunity for the innovative SP to define itself by its local data centre, market knowledge, language support and legal compliance to meet a new class of customer needs. Look at Swisscom, for example, who are advertising new services under the ‘Your data in Switzerland’ banner built on private cloud infrastructure powered by EMC Atmos.
4. New infrastructure models to escape the 80/20 rule: The 80/20 rule references the fact that 80% of IT cost is locked in maintenance, leaving only 20% for innovation. In many ways this is the defining requirement for the new SP landscape. Doing IT in the way many of us have done it since the decline of mainframes began – what IDC calls the ‘second platform’ of computing – doesn’t scale to the agility required in a landscape where the Apple App Store and the iPhone have set customer expectations. Rather, we need ‘third platform ready’ infrastructure – converged or proven IT infrastructure that free SPs from the vicious cycle of maintenance and management. If we can do this, additional capacity will be freed to support innovation and service development. Consider ReasonNet in the Netherlands; using converged infrastructure from VCE (a company founded by EMC, Cisco & VMware), it was able to cut deployment times for IT resources from days to minutes and dramatically lower per-unit infrastructure costs for virtual machine & other resource delivery. This will give it a competitive edge in the 10 markets in which it operates.
5. Enhanced governance and security frameworks to cope with the new attack surfaces: Finally, these new services will change the points of vulnerability for businesses. If you have end-users that are syncing data to the cloud in real time from end-user devices, or using mobile applications to access sensitive corporate data in a private cloud, the mechanisms malicious users or cyber-attackers have to gain access to sensitive materials will change continually.
The expectations customers have for their SPs are rising: to deliver a strong total customer experience in this phenomenally competitive context requires new levels of agility and a new model for innovation. It’s great that many European SPs are already embracing these challenges, but the game is changing on a monthly basis and building the platform for innovation, agility and change is as important as the specific service innovations themselves. I believe that this is the context of the new competitive landscape for Service Providers in the years ahead. I would be interested to hear your experience in facing off against this problem, and your thoughts on the above – please let me know in the comments.