Smart customers squeeze cloud comrades

Paul Furber
By Paul Furber, ITWeb contributor
Johannesburg, 05 Feb 2013
Barry Hatfield, Internet Solutions.
Barry Hatfield, Internet Solutions.

How can a local service provider hope to compete with Amazon, Rackspace or any one of a number of advanced cloud providers around the world? Local vendor representatives say they're doing well by concentrating on things that overseas Web sites cannot do: local touch, focused delivery and learning from the mistakes of others. For Richard Vester, director of cloud services at EOH, he's seeing success from the basics.

"The biggest reason we're starting to get it right is we're reducing the cost and changing the dynamic of how traditional services have always been delivered out of data centres."

Christelle Hicklin, customer experience manager at Mimecast, says her company is successful because it was always focused on the cloud.

"We're getting it right because we built something from the ground up for cloud. We haven't taken something and adapted it; it was engineered from the beginning to be scalable and cost-effective. And it's locally-based, for local customers."

Johannes Kanis, server and tools business group lead for Microsoft SA's marketing and operations division, says freedom of choice has helped Microsoft's customers.

"Customers want to go to the cloud on their own terms, at their own pace. So what we're doing is offering them an end-to-end solution, private cloud locally and then Azure and Office 365 via overseas data centres."

Sean Wainer,Citrix.
Sean Wainer,Citrix.

And the fact that we lag global trends somewhat is actually an advantage, says Barry Hatfield, business development manager for cloud services at IS.

"As a country, we've been able to learn from some of the mistakes made by the global pioneers. So our initial offerings have been the equivalent of a version two. We've been able to see the pain points where local customers have been using global competitors and when we launch, it's minus the pain points."

Some vendors are ramping up their capabilities based on customer demand.

Disappearing acts

Are there some aspects of ICT that will disappear because of the rise of cloud? IBM's Chris Lucier believes infrastructure decisions will disappear.
"There will be no need for IT departments to make infrastructure decisions. Businesses will need services and some analytics and they won't need to know whether they're running on Sun or Linux or IBM's cloud or some other cloud."
Sean Wainer of Citrix thinks end-point dependencies will vanish.
"It won't matter what devices people are using in the future."
Global Micro's JJ Milner says it'll be software licensing as it is today.
"I don't mean that paying for a piece of intellectual property will disappear," he explains. "But the concept that you're simply paying for software you install is a dinosaur. In the future, there will be a component you install and a component you pay for as a service."
Adobe SA's Grant O'Connor agrees.
"I think perpetual licensing of software only has another two or three years left."
Scott Orton of Triple4 also thinks licensing has to change.
"It won't die, but it will certainly have to evolve. It's become much more a service delivery model than before."
EOH's Richard Vester believes companies will use the cloud to focus more. "Instead of spending money on IT, cloud will let them do more with their core competencies."
Barry Hatfield of IS says nothing will disappear.
"The idea that cloud is a silver bullet is ridiculous. There will always be a need for some kind of dedicated solution."
Dell's Ockert Cameron is convinced the industry won't shrink, but will, in fact, explode because of cloud. "Every new technology creates jobs. For every new idea there are three or four jobs being created," he says.

"Partners don't really want to engage in infrastructure as a service because their clients are requesting test beds to see what cloud can offer them," says Johann Els, open source specialise at Suse. "A lot of clients are looking at their financials to see whether they're going to go the cloud or the capex route."

Deon Scheepers, regional business development manager for Africa at Interactive Intelligence, says the company is getting it right all over the world except in South Africa.

"We specialise in new-style applications and call centre services, so our challenge in South Africa and Africa is that as soon as you throw in multimedia, it becomes too expensive. We're watching the market, but in Africa, it's a wait-and-see approach."

Lourens Swanepoel, director of technology infrastructure at Avanade, also says his company is getting it more right globally than locally. "But it's a bit premature to judge how well we're doing against the public cloud services like Azure and Amazon. I think our ability to compete effectively will come from optimising our own platform internally and leveraging public cloud with it."


There's a new urgency for any provider even remotely connected with cloud services, and it's being pushed by customers who are used to consumer-based cloud services and want the same thing for their businesses. JJ Milner, MD of Global Micro, says customer maturity has brought accountability to vendors.

"If you look at what we sold as subscription services and bureau services, we knew what we were selling. The difference now is that customers know what they want. When an end-user comes to you and wants services, mail, backup or security and they want to pay for it on a monthly basis, they understand what it means. They want it to scale up and down at will and they want the same certainty of provision as a Hotmail account without worrying whether it will work or not. Cloud is now a level of accountability for the user experience that customers hold you to. You can't fake things anymore."

Ockert Cameron, cloud architect at Dell SA, agrees.

"We're not successful because the technology is new; we're successful because our customers really understand what they need."

Sean Wainer, country manager for Citrix SA, concurs.

All of us know there's little to no margin left in internal IT.

"Success is driven by demand, and at the moment, demand is not coming from IT but from users. That's a big change."

Scott Orton says the effect of consumer services cannot be underestimated.

Craig Albertson, Accenture.
Craig Albertson, Accenture.

"Cloud is definitely being driven by customers and they will force the industry to go there. They ask, if Facebook or Gmail can do something, why can't their business do it?"

Stefan Jacobs, senior cloud architect at Cybernest, believes it's about services.

"It's all about the services and not the definitions of cloud that we throw around. I want to be able to plug in and get a service anywhere. I want to be able to access systems and financial services no matter where I am."

It's about perspective.

That means considerable change is on the cards for some traditional businesses. Jan Dry, chief of technology consulting at Datacentrix, says the customer conversations are different.

The global effect

Different global regulations about data have advantages and disadvantages for South African providers. Locally, there are more and more challenges about where customer data resides, who is protecting it, and understanding what laws like the Protection of Personal Information Act means for company data. However, some overseas laws work to our advantage, notes Barry Hatfield of IS.
"I think it's short-sighted to think only of the South African context," he says. "The reality is that although we're competing with global players, we're also competing on the global market. What we've seen on our platforms is significant overseas investment in local platforms and significant local investment in overseas platforms. We have the local guys saying they can go get a chunk of that US pie, and the US guys looking at things like the Patriot Act and deciding to keep their data overseas."
Whether South African providers can be globally competitive depends on how relevant they stay, says JJ Milner of Global Micro.
"Historically, South Africa has been successful against international players for three reasons: they weren't interested in our market, they weren't talking to our customer, and the bandwidth was so poor that local customers had no choice but to go local. Over time, all of those things will disappear, and the only way that local vendors will continue to be able to compete against international brands is to stay relevant. That relevancy could be in vertical markets, but it also needs to be everything else that goes along with delivering a service in this country: billing, providing connectivity, visiting the customer's premises. That's why we've been successful so far ? we've been lucky in a sense ? but the standard that we're held to will increase because the competition will just get stiffer."

"We have a traditional outsourcing, hosting and managed services business and the conversation we have with those customers is very different from the one we have with a cloud customer. Firstly, managed services contracts are long-running and lumpy and talk about technology three years from now. That doesn't happen in a cloud conversation. It's purely about services delivered to any device."

Dry says the reason for cloud success is the enormous push by the leading vendors.

"I think there are several things contributing to the success of cloud services, but one of them is that the major vendors have invested a huge amount in them over the past few years. Also, we all understand at a better level what customers want and how we can make things work for them."

Craig Albertson, head of cloud services at Accenture SA, agrees.

"Talking to a large enterprise is a very different conversation. At the moment, the cost of moving to cloud for a large organisation outweighs the like-for-like utility model. If they do an internal cost exercise and compare it to cloud, then yes, there's an operational difference. But the cost of getting there is preventing that transition. The interesting thing is that all of us involved in outsourcing know there is little or no margin left to be squeezed out of internal IT. So the executives are being forced to look at ways of getting better delivery and better economies of scale. And that means they will be forced to go cloud eventually."

Local customers also tend to bring expectations of overseas service levels with them, notes Chris Lucier, managed services leader for MEA at IBM South Africa.

"I think the South African market is more advanced because of what it has seen outside of South Africa. They're coming in with smarter requirements and the customers know what they want: they don't care about the technology, they just want to be given what they ask for."

Mark Smissen, GM of Symantec SA, says the cost is also a major factor.

"It's been coming for a long time. The barrier to entry for customers is very low. The cost is much lower than it was five to 10 years ago, or even last week. A SaaS model that used to cost R25 000 now costs R500, and it opens up a lot of avenues that weren't there in the past."

That's good for SMEs, says Fabio Taddei, architect: services at Fujitsu.

Christelle Hicklin, Mimecast.
Christelle Hicklin, Mimecast.

"It's about perspective. Assuming that cloud is defined as a service accessible from anywhere in a utility model, it elevates SMEs to a level where they could never play before. From the perspective of an enterprise, cloud scares the living daylights out of them, but their customers are demanding those kinds of services."

So what's next? Mimecast's Hicklin predicts even more sophistication.

"As customers become more sophisticated, they want more value and that pushes us as vendors. They don't want some dusty archive sitting in the cloud somewhere. Rather, they want value out of it: how can they access it; how do their users access it; what data do they really have? That is the next step for us."