For many cloud industry watchers, there is no greater guilty pleasure than watching from the sidelines as service providers battle it out for cloud supremacy. There is nothing dreadfully wrong with blind ambition especially when it keeps every single cloud provider on the edge. PacNet recently displayed its cloud ambitions with the opening of its Sydney datacenter and its chief executive boldly stated that the datacenter is part of PacNet's goal of becoming the region's third largest datacenter or cloud player by 2019. This followed the opening of its datacenter facilities in Singapore and Hong Kong over the last 18 months. The first phase of the Sydney datacenter covers approximately 4,500 sq ft and when finished, it will be able to scale up to 41,000 sq ft. Currently, PacNet leases about 100,000 sq ft of datacenter space in the region but its long-term plans are to own the datacenters facilities outright. It is also specifically targeting the SMB space for both public and virtual private cloud services. In another development, Savvis announced that it was partnering with Bharti Airtel in India in an arrangement that will enable Savvis to sell its cloud services and a whole range of managed IT services via Bharti's large datacenters in India. This partnership specifically targets enterprises that are expanding into India. These services will be rolled out through the Bangaluru datacenter in early 2011 with expansion into other datacenters located in Delhi and Pune.Both announcements are precursors to what IDC believes will be expected from service providers over the next 24 months in the region. However, blind ambition can often lead to blind folly and the endless building up of datacenter footprint across the region can be one of them, especially since pure cloud and hosting services are not sustainable long-term models. Therefore, IDC believes that the Bharti and Savvis alliance is particularly interesting for a number of reasons.
Managed services is an important part of the evolving cloud story. The public (including virtual private) cloud market is approximately US$1.8 billion in 2011, which pales in comparison to the US$36 billion ICT outsourcing and managed services market. Cloud services by itself will not sustain any service provider, unless volume and streamlined delivery can drive profitability, potentially possible in the SMB space, this is the unvarnished truth. The challenge and goal for service providers are to provide intelligent infrastructure solutions and managed services with a cloud solution. IDC believes that there is a wealth of opportunities in this area as cloud services have brought in a new set of ICT management complexities as organizations struggle to manage a hybrid mix of services that include on-premise cloud environment and public cloud. The Bharti and Savvis combination is clearly targeted towards providing enterprises that are expanding into India with a comprehensive range of ICT managed and cloud services with Savvis leveraging Bharti datacenters in India. IDC expects more service providers across the region to see better value from peering opportunities and hence announce partnerships of this nature that will strengthen their positioning in key markets.
Next step will see service providers tie up with system integrators. IDC believes that system integrators have everything to gain by partnering with service providers. The Savvis and Bharti partnership shows how two entities can come together to provide a holistic cloud and managed services solution. Currently, adoption in the region is limited because of the uncertainty surrounding risks and rewards of cloud services. System integrators and IT vendors have a role to play by educating the highly skeptical CIOs who are looking for a safe path to cloud computing that will address the potential risks associated with security, availability, performance and can demonstrate the return of investment. Leading system integrators can step in and provide the consulting services that many CIOs are looking out for and IDC believes that few service providers have the deep capabilities in house. Service providers should realize immediately that system integrators can provide an excellent channel to market for their cloud services and have to understand that these system integrators can provide a much higher level of consultancy services that they ever can. Currently, IDC has not seen any service provider in the region who has actively reached out to system integrators. IDC believes this could potentially be the best weapon or trump card that service providers can use to flatten its competitors.
A rush to build datacenters without a broader innovative and long-term roadmap will lead to profitability disaster for the service providers. PacNet's announcement of its new datacenter followed Macquarie Telecom's Sydney datacenter launch in early 2011. While its ambition to be the third largest datacenter player in the region by 2019 is admirable, without a more cohesive strategy and vision, this ambition can really be discredited and it is cataclysmically tantamount to nothing in the long run. The worst thing about it is that it is a capex heavy extravagance that sells services whose margins are fast eroding. This is the danger not only for PacNet but for service providers across Asia who has so far showed little clarity as to how they can fully exploit cloud beyond the basic service that it provides. It is in many ways still early days in cloud and service providers are still finding their way to make and sustain profitability. However, inertia is never a luxury afforded to anyone in ICT and service providers really need to shape up before the industry moves on or they will find themselves sitting very uncomfortably in the sidelines as nothing more than supporting players. Service providers are attracted to cloud because it is essentially about delivering ICT services over the network, something they do best. However, they also need to be reminded constantly that its true potential lies beyond that and it's really everything that has been discussed here. Being relegated to supporting players in this industry will be the most ironic perverse outcome of them all.
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