Business Model Cloud Provider: Selling Infrastructure

vom 20.08.2019

20.08.2019 l by Henrik Hasenkamp

Small and medium-sized IT service providers cannot compete with the cost advantages of large companies. The alternative is cost-effective infrastructure services from the cloud.

Cloud computing has established itself: According to the European statistics authority Eurostat, every second company (56 percent) with more than 250 employees used at least one cloud service across Europe in 2018. This figure represents a critical development for all IT service providers that have specialised in the market for small and medium-sized enterprises (SMEs): The cloud makes them less important.

Because its attractiveness lies in the rapid provision of IT, almost without know-how. Especially the easy-to-use SaaS applications (Software as a Service) have become widespread. For example, office packages: They do not require the typical installation effort for locally used software on the workstations. In addition, the functions are updated more frequently and innovations do not have to be laboriously reinstalled. This eliminates software distribution, security updates and license management.

But servers and developer platforms are also sourced from the cloud, because the same principle applies here: they are ready at the click of a mouse within minutes. For IT, the high and costly workload for the provision of hardware is a thing of the past. In addition, investment costs are reduced in companies, which do not have to procure their own servers or rent expensive root servers in hosting data centers.

IT service providers under pressure

Services such as Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) have become everyday phenomena in companies. As a result, the complexity of internal IT is reduced. SaaS tools, in particular, can in most cases be administered quite simply and uncomplicatedly by employees in the specialist departments. This is a positive development for enterprise customers, as the IT cost center is shrinking considerably in some cases.

Less enthusiastic are smaller, often only regionally operating IT service providers. They are put under pressure by the development. Because on the one hand there is the cloud, and on the other there are huge service providers who offer almost every solution and every business segment. A small provider, on the other hand, who serves the trades and the SME sector, can hardly score with IT services that he provides himself. They can't compete with the cost advantages of the big players.

Many service providers try consulting or managed services. The spread of the cloud has led to companies having less and less internal IT know-how. Nevertheless, they still want to increase their efficiency and lower their IT costs. That's why they like to book a Managed Service Provider (MSP). It offers all-round carefree packages comprising network services, storage, applications and security.

Reseller Programs from Cloud Providers

The disadvantage: The IT service provider shares the customer with the cloud provider as the actual provider of the services. In the long term, from the customer's point of view, he could appear to be only the henchman of a large provider. The service provider has a high risk of softening its own brand. He should therefore choose the opposite strategy, strengthen his own brand and become a cloud provider.

This is easier than it sounds, because each of the major providers has its own program for sales partners. The partner company can obtain cloud services via a standardized interface and offer them on its own domain as an apparently self-operated service. But these services are not suitable for every IT service provider. On the one hand the sales partners have to guarantee a minimum turnover, on the other hand complex (and expensive) trainings and certifications become necessary.

But the biggest disadvantage is the return of an old acquaintance: A vendor lock-in threatens their own customers. Every provider offers convenient but proprietary features that make it difficult and expensive to switch to another public cloud at a later date.

Become Cloud Providers with White Label Solution

The infrastructure provider gridscale provides a solution for resellers with its virtual data center. This resembles a traditional data center, but is completely in the cloud. Highly automated features support the system house in administration. In addition, all resources can be scaled.

For IT service providers on their way to becoming cloud providers, gridscale offers two solutions: Grey Label and White Label. The Grey Label solution consists of a subdomain for the respective reseller and uses a standardized user interface. The white label solution includes an adaptable design so that it can be adapted to the corporate design. For end customers, it looks as if it offers a usage-based cloud service with a self-developed administration interface, just like the major providers.

 

"The service provider has a high risk that his own brand will be softened. He should therefore choose the opposite strategy, strengthen his own brand and become a cloud provider."

Henrik Hasenkamp, gridscale

 

The resulting business model can be described as Data Center as a Managed Service. IT service providers can also reach small and medium-sized companies without a great deal of IT know-how when it comes to reselling.

About the author:

As CEO of gridscale, Henrik Hasenkamp is responsible for the strategy and orientation of the European infrastructure and platform as a service provider gridscale, which creates the basis for sophisticated cloud solutions with its innovative technology.

Even before he co-founded gridscale in 2014, he was at home in the hosting business. He gained experience at PlusServer AG, the IaaS provider ProfitBricks, the Vodafone business division Cloud & Hosting Germany and the Host Europe Group.

The authors themselves are responsible for the content and accuracy of their contributions. The opinions expressed are those of the authors and do not necessarily correspond to those of ComputerWeekly.de.

The original article in german can be found here.

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