Passive service providers will ultimately lose the cloud battle

Until now there's been an inherent problem with the way many service providers have tackled their move to cloud. When they look back at this decade they will realise it was a make or break period for them: they could either thrive, survive or at worse fall over. So why are so few service providers being aggressive with their cloud services when the strategies they adopt today could shape their ultimate success?

Apathy is rife in the sector. Despite predictions that public cloud services will grow by 23.5 per cent annually to reach $107 billion by 2017, according to IDC, only a few service providers are taking a proactive offensive approach to building cloud services.

These service providers recognise what customers want and identify which new services can deliver against these needs. They follow this by rapidly creating and launching these focused services to gain and secure new customer revenue. However, it is critical that service providers in this category are able to turn innovative ideas into commercial products as quickly and easily as possible.

The weakness of alternatives

The first alternative to being proactive is for service providers to follow a 'passive model' where they take no action to build out true cloud services. Often this is because they want to grow their existing healthy business or because they believe that there is no need to take action at this particular point in time. However, this approach does not recognise the seismic shift that is underway in the industry, or the level of investment others are making to secure a stronghold in the current, and future, cloud services market that could prove difficult to break into as the market matures. The passive approach is likely to end in lock-out from the fastest growing IT services market.

Alternatively, some service providers are in a 'me too' situation, where they are replicating basic services in an effort to compete against AWS. Again this appears a defensive action: in order to compete against the giants in the cloud services market, and differentiate against each other, service providers need to lead through innovation.

The final model is one of product federation. But while uniting to share resources may fit other industries, such as parcel delivery, perfectly, service providers need to be competitive. Federation should never form the core of any long term business value creation. Without competition, specialisms and differentiation, the cloud services market runs the risk of becoming commoditised, lowering margins for service providers and stifling innovation.

Offensive differentiation

It's clear that there's a battle facing service providers who need to get ahead - or above - the cloud. Those that will have a greater understanding of markets and customers than others and then create services that deliver greater benefits.

Today's service provider arsenal must include customisable orchestration solutions to help them develop innovative and differentiated cloud services based on their existing business, faster than their competitors. Whether it's speed to market, generating more revenue or accelerating growth – service providers must become more flexible. By adopting extensible, customisable, flexible solutions, service providers can adapt to changing cloud demands, providing limitless opportunities. This can help them successfully commercialise the cloud quickly and grow without limits to stay competitive, no matter the environment.

Service providers today have a choice to make: to sit back and be passive or to lead the market with a model based on innovation and differentiation. A model based on differentiation, simplified uplift to commercialisation, and growth through resellers and the channel, is an offensive strategy for accelerated growth that will help service providers thrive.

George Knox is the CEO of Flexiant.