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Providers see revenue opportunity with cloud load balancer technology

Providers are interested in cloud load balancers -- and partnering with vendors can lead to recurring revenue opportunities.

Cloud load balancers are not only becoming necessary within a provider's data center for internal operations, but the technology could also serve as another recurring revenue stream for providers as customers ask for dedicated load balancing functionality.

Cloud providers are realizing that network services will need to be a bigger area of focus as cloud uptake increases, said Andre Kindness, senior analyst with Cambridge, Mass.-based Forrester Research Inc.

"Customers are asking for more sophistication in these cloud platforms, and cloud and service providers have had to make changes to their infrastructure, which is pushing application delivery controller (ADC) vendors to make load balancer technology that could better serve a cloud environment," he said.

Providers typically design their data centers using servers from the same vendor, connected by static links configured in a very "cookie-cutter" way, Kindness said.

"Cloud providers haven't always thought about networking, and their infrastructure didn't necessarily need load balancing," he said.

Cloud load balancing services offer new revenue opportunity

Cloud providers are augmenting their infrastructure design as customers demand more sophisticated services that involve the network. Array Networks, a Milpitas, Calif.-based ADC vendor, noticed a visible uptick in interest for its ADC product line from cloud and service providers -- up 20% in the first quarter of the year, said Paul Andersen, marketing manager for Array.

As providers show more interest in buying cloud load balancers, there is an opportunity for ADC vendors like Array to partner with providers.

"Providers are becoming customers/partners/resellers," Anderson said. "Providers can buy our ADCs for their environment, or if their customers want to purchase dedicated load balancing or physical appliances as a part of a private cloud offering, they are buying our ADC technology through the provider."

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SoftLayer Technologies Inc., IBM's Infrastructure as a Service and managed hosting business, works in partnership with Array to resell the company's load balancers as dedicated appliances to its enterprise customers who prefer more control over their environments, said Will Tharp, lead network support engineer at SoftLayer. It also uses Array's technology to offer cloud load balancing capabilities as a standard feature of cloud services for small- to medium-sized businesses.

Because SoftLayer sells its ADC hardware, which it purchased from Array, the provider gains an additional recurring revenue stream. And features such as load balancing can act as a "gateway service" to open the door for customers to purchase more cloud services with their provider, Tharp said.

In addition to working with ADC vendors, some cloud and service providers have also begun developing their own ADC or load balancing functionalities as their infrastructure changes to sell to customers.

"Some providers are trying to tailor to their own needs, meet their own production cycles, and tune into their exact requirements," Array's Anderson said.

Licensed-based load balancing changing the ADC market

Partnerships between cloud providers and vendors are altering the networking market as vendors are realizing they must adjust their own pricing models to better match the cloud business model.

"Vendors are used to selling a product once, but cloud providers want to be able to license it out to their customers because it's not very cost-effective for providers to have technology going unused," Forrester's Kindness said.

Providers are pushing vendors into developing pay-per-use or pay-per-instance pricing models. While software offerings are easier to license, even vendors with a hardware focus -- like F5 -- are working to develop a method of licensing out its hardware to providers, Kindness said.

By partnering with vendors, providers can get more out of technology they've already invested in to create a new revenue stream while avoiding licensing issues with vendors, Anderson said.

"Our provider customers can charge their customers for the functionality, and then they pay us. It's a model that can help providers manage their upfront costs and [it] gives them an opportunity to drive new revenue."

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

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