Service providers wooed by cloud opportunity, unsure of starting point

Traditional service providers are enticed by growing cloud opportunity, and are turning to established cloud providers for help entering the market.

As cloud services pervade the technology industry, traditional IT and telecommunications service providers are hotly pursuing their own cloud opportunities.

With customers looking to the cloud for solutions that these service providers once delivered, they know that offering their own cloud services will help them retain those customers. But getting into the cloud market can be intimidating without the right resources. Some traditional service providers have begun partnering with cloud providers to jumpstart their cloud businesses.

The cloud opportunity: Providers helping providers

The cloud can be a great opportunity for traditional systems integrators, IT outsourcers, data center managers and telecommunication companies. But it poses a threat at the same time, said Art Landro, CEO of Cordys, a Netherlands-based cloud platform software provider.

"If these service providers do not view the cloud as something that is going to enhance their stickiness with customers and start looking at ways to bring cloud capabilities into their traditional offerings, they will start to lose business and the opportunity for growth," he said.

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PaaS: Room for growth for cloud providers

Cordys helps traditional service providers enter the cloud market with its cloud provisioning, integration and orchestration offerings, as well as its Enterprise Cloud Platform -- a Platform as a Service (PaaS) that providers can use to build and market their own services to customers.

Fujitsu, a Tokyo-based IT services and software provider, had an established managed services and IT outsourcing business, but it recognized the need to add cloud services to its portfolio, noted Scott Harrison, vice president of software business for Fujitsu North America.

The company built six global data centers where customers could purchase compute, storage and network resources in an on-demand model. Fujitsu then worked with Cordys on developing its Interstage Business Operations Platform -- a Web-based business and IT management offering -- based on the Cordys Business Operations Platform.

The partnership with Cordys has allowed Fujitsu to implement cloud offerings much quicker. "The Cordys middleware is very flexible and easy to code in anything missing," Harrison said. "Working with Cordys has definitely gotten us into more customer conversations based on the cloud capabilities we might not have had before."

Transforming into a cloud provider: Evaluate existing recourses

Just as enterprises evaluate their IT resources before investing in new hardware or software, so should service providers when adding cloud to their portfolio.

For many providers, Infrastructure as a Service (IaaS) is an easy and natural entry point into cloud services since they already have the data centers, said Sam Barnett, directing analyst for data center and cloud at Campbell, Calif.-based Infonetics Research Inc. Offering PaaS or Software as a Service (SaaS) requires a different set of expertise. Ninety-five percent of telecom service providers and colocation data center operators surveyed by Infonetics said they are now offering IaaS. Seventy-five percent of traditional telcos are using their existing networks to offer SaaS, and are also beginning to offer basic IaaS, according to Infonetics.

Hosting companies are very familiar with IaaS, noted James Staten, vice president and principal analyst for Cambridge, Mass.-based Forrester Research Inc. "IaaS doesn't require providers to have a deep understanding of automation. If [a service provider] is going to get into cloud services, it's simple because it's the closest to the business they are already in," he said.

"It's really about the level of comfort and expertise of these traditional service providers," Barnett said.

And when those service providers need help, they often turn to established cloud providers for help creating new models of services, he said.

Verizon initially tried building its own cloud business before acquiring an established cloud provider, Terremark. "Like so many service providers who think they are missing the boat, Verizon involved a cloud provider [Terremark]. Verizon is now leveraging its own network, and Terremark's expertise and data center services to offer cloud options to its customers," Barnett said.

But service providers must look at their own expertise before asking for help, Forrester's Staten said. It is more cost-effective for providers to first use the resources they already have.

"If they don't have these capabilities and skills however, they don't have a choice -- they have to turn to other cloud providers," he said.

Let us know what you think about the story; email: Gina Narcisi, news writer and follow @GeeNarcisi on Twitter.

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