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From Servers to Service?

Should Enterprise Vendors consider becoming Service Providers? When Rich Rogers of HDS  tweeted this and my initial response was

This got me thinking, why does everyone think that Enterprise Vendors shouldn’t become Service Providers? Is this a reasonable response or just a knee-jerk, get out of my space and stick to doing what you are ‘good’ at.

It is often suggested that you should not compete with your customers; if Enterprise Vendors move into the Service Provider space, they compete with some of their largest customers, the Service Providers and potentially all of their customers; the Enterprise IT departments.

But the Service Providers are already beginning to compete with the Enterprise Vendors, more and more of them are looking at moving to a commodity model and not buying everything from the Enterprise Vendors; larger IT departments are thinking the same. Some of this is due to cost but much of it is that they feel that they can do a better job of meeting their business requirements by engineering solutions internally.

If the Enterprise Vendors find themselves squeezed by this; is it really fair that they should stay in their little box and watch their revenues dwindle away? They can compete in different ways, they can compete by moving their own products to more of a commodity model, many are already beginning to do so; they could compete by building a Service Provider model and move into that space.

Many of the Enterprise Vendors have substantial internal IT functions; some have large services organisations; some already play in the hosting/outsourcing space.  So why shouldn’t they move into the Service Provider space? Why not leverage the skills that they already have?

Yes, they change their business model; they will have to be careful that they ensure that they compete on a level playing field and look very carefully that they are not utilising their internal influence on pricing and development to drive an unfair competitive advantage. But if they feel that they can do a better job than the existing Service Providers; driving down costs and improving capability in this space….more power to them.

If an online bookstore can do it; why shouldn’t they? I don’t fear their entry into the market, history suggests that they have made a bit of a hash of it so far…but guys fill your boots.

And potentially, it improves things for us all; as the vendors try to manage their kit at scale, as they try to maintain service availability, as they try to deploy and develop an agile service; we all get to benefit from the improvements…Service Providers, Enterprise Vendors, End-Users…everyone.



  1. In the future, as a consumer of IT you’re either going to be :

    a) Keeping complete control and buying everything yourself
    b) trusting the cloud

    (or a combination of A and B)

    So Hardware / Software Vendors need to either focus on supplying customers (for option A), supplying service providers (for option B), or supplying both customers and service providers (both A and B) or in other words, “being the Service providers Service Provider”

    Only those vendors that can provide the complete infrastructure or partner with those who fill the gaps will be able to offer A and B. So, if you’re a vendor that doesn’t have one or more of the following [Servers, Storage, Networking, Security, Management] it makes sense to spread FUD that you shouldn’t compete with your service provider partners.

    The majority of large vendors rely on the value added reseller channel. Vendors can help provide some VAR’s the “white label” Cloud service they need to offer there customers.

    This is why IBM / Dell / Oracle / HP / others; have made acquisitions to fill those gaps .. Its why HDS has so many partnerships > < Vendors partner or acquire if they're missing a key technology to address particular customers.

    Its why Microsoft, Google, Amazon, Rackspace, Savvis, etc have relationships with all the above.

    just my $0.02

    I do not speak on behalf of my employer, Hewlett Packard..

  2. Chris P says:

    Business cases are out of my wheelhouse, but that seems to be where Amazon has excelled. Massive scale w/ razor thin margins. How long that model holds, who knows. Being the first mover means they will have their position for a long while.

    That aside, I am not sure how successful I would rate them at moving into another vertical far outside books. Their service orientation is beyond terrible both from a technical standpoint (performance consistency and uptime/failure modes), and customer service. It isn’t hard to find overwhelming examples.

    So is Amazon successful? As long as commodity at a massive scale, razor margins and the expectations that go with that, then yes. If your expectation is service equivalent to a decently run IT dept, then no.. not even close.

    I see the movement of all the above as a mirage of potential opportunity. No one wants to let someone run away with the lion’s share of the market (largely) uncontested. Google in search, VMware in virtualization and Amazon in cloud (up until a couple years ago).

    So how big is the pie? No, no.. how big is it really?

    If it comes down to it, when I have a cavity, I want my dentist to help me out, not my landscaper.

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