Claranet, a European managed services provider, recently published research that revealed that the managed service provider industry needs to increase the level of support and transparency it gives its customers.
Claranet said that although cloud computing is now in the mainstream, there are still reservations about the costs and risks of using managed services.
CBR spoke to Martin Saunders, newly appointed Corporate Development Director at Claranet, to see what he thought about the issue of transparency in the cloud services world, and what he thinks service provisioners need to do to keep up with major players such as Amazon, Microsoft and Google.
Claranet recently conducted research into how end users feel about cloud and, in particular, if they trust providers. What would you say on the issue of transparency?
I think the transparency bit is really interesting. It’s something in the last couple of years that we’ve really started to understand the value of. We have a strategy focusing on building customer trust. For us, trust has four major elements in it. It’s about being expert, being reliable, being financially strong, and being transparent.
We act as a virtual member of the IT department. That’s not to say we’re replacing IT members but because we’re working on their behalf they really need to know what is going on. As IT gets more complex, in particular with the use of public clouds like Azure and Amazon coming along, you really need to have complete transparency as to what you’re using and how you’re using it and how that works so your customers have a good understanding of basically what’s going on in the background.
But I think it’s probably fair to say that transparency isn’t something that really comes naturally to the service provision industry. I don’t know whether it’s a case that service providers feel nervous that if you’re overly transparent you’re maybe exposing your hand to your customers or whether it comes from nervousness that perhaps if you’re overly transparent then you become too easy to replace.
But in the end, if you’re going to offer a good level of service you need to be very clear about what’s going on in the background.
Sometimes transparency can be taken too far, and certainly it’s blighted the service provider industry in the past. If something goes wrong then we’re all too quick to blame whoever it is in the background. If there’s a network outage then you blame the network carrier rather than taking responsibility for yourself. In the end transparency is key if you’re going to get the trust of customers.
What business models are Claranet using to compete with the Big Three: Amazon Web Services, Microsoft Azure and Google Cloud?
We see the big three as an opportunity rather than a threat, and that’s to do with Claranet’s history. Claranet has never been an asset-heavy service provider. We’ve obviously had to have had some assets, but the data centres we have apart from one with the Star acquisition, are all suites of space within much larger purpose built facilities.
Partially that’s come out of necessity. We haven’t had the cash to go and build massive data centres. But actually now this puts us in a really strong position because we are asset-light, it actually makes a huge amount of sense for us to go and use Amazon or Azure or Google Cloud and not fight against it. That’s what is now very much driving the partnerships and the acquisitions that we’re looking to do going forwards. Because we have this asset-light position it’s actually a very natural conversation to have with Amazon or Microsoft or Google and say we’re very keen to use your public cloud services and we are a managed services company that can be a natural partner to them when they’re talking to organisations and they need to have a greater level of managed service that they can’t do themselves.
The market as whole is going to have quite a transformation over the next year or two. Hosting companies that really put their bet in asset-heavy builds in data centres and infrastructure are going to really struggle. They will either have to get acquired by one of the Big Three, or they’ll end up having to fairly drastically change their company direction. And they’ll find that hard because if they’ve got 15 years of data centre that they’ve got to right off, that’s not something that can be financially done very easily. There’s going to be a lot of consolidation and acquisitions happening over the next couple of years and we hope Claranet is going to be leading that from the Western Europe point of view.
What plans do you have to keep up with the constant price slashing of the bigger players?
It’s a challenge, definitely. Thankfully for us we derive a certain amount of our income from infrastructure but it’s not the be all and end all for us. The managed service piece is the most important thing. It does make it difference though, and it’s a competitive marketplace and it’s not like it’s the first time this has happened. We’ve had exactly the same thing happening for us on our network portfolio over the last five years. If you think back ten years ago, how much it would cost to get a 2MB leased line in London we were looking at 20-30 grand. You’re looking at 100MB for five-six grand now. Infrastructure will always consolidate and commoditise, but if you’re adding a good level of value and service on top and you don’t wear yourself down by making big bets on infrastructure that only last for three or four years then you’ll be okay and that’s basically what we’ve done.
Public clouds are great but they still only focus on one particular type of application and there’s an awful lot of IT workload that still isn’t that well suited to be hosted on Azure and Amazon. One of Claranet’s continued strategies is about making sure that we have what we call differentiated infrastructure. So be it higher availability, or more local services, or greater levels of transparency. There’s still a lot service providers can do to differentiate their infrastructure. But as every day and every week goes by that is getting harder. You’ve really got to fall back on the service to be your main point of differentiation.