Looking back on the HostingCon 2014 sessions, keynotes and panels it is clear to me there is concern throughout the industry about how to compete with the large vendors like Amazon, Google and Microsoft. As an attendee, I thought I’d share my thoughts on what service provider differentiators are and are not worth pursuing. Not on Price, Performance, or Features Let me tell you this: the competition will not focus on beating the big fish with lower prices. I came to this conclusion while listening to Kenny Li from Cloud Spectators present his session, “Standardizing Performance in the Public Cloud Arena.” Did you know that Amazon has dropped their prices 42 times since 2006? Furthermore, their cost of an Amazon EC2 instance has decreased 56% in just the past two years. Amazon is not the cheapest nor is it the most expensive. They are just below the average, according to Cloud Spectators, but their behavior suggests that they will continue to pass savings on to their customers – and small vendors can’t cover their costs if they attempt to match such low prices. It will not be on performance. I say this not because the big guys are out-performing everyone else. I say this because the pace of performance improvements demonstrates that significant capital investments will be required more frequently by smaller providers if they are to keep pace with these larger vendors. It will not be with features. During a panel discussion on tools used to build clouds, one panelist mentioned that Amazon released 240 new features in 2013 and has already released 180 new features this year. This clearly demonstrates Amazon’s continued commitment to expand and improve their cloud offering. Google and Microsoft continue to improve their services as well. This breakneck pace and huge investment in development makes it difficult for everyone, even the largest of providers, to compete on feature set.
How then? Specialization and Service So how do service providers differentiate themselves from the large vendors? Well, the new reality is that infrastructure has become less and less important. The general consensus of HostingCon 2014 attendees seems to be that service providers must differentiate themselves by offering specialized services and delivering them with incredible customer service. During “Ask the Analyst,” it was suggested that specializing in a given vertical or technology is one way to achieve this competitive differentiation. Whether it is WordPress hosting or healthcare solutions, learning everything you can about a technology or vertical makes you far more valuable to a customer. It also allows you to keep costs down because the service can take advantage of commodity services like infrastructure as a service (IaaS). And, as the service provider moves into the role of trusted advisor, they can influence infrastructure decisions like using AWS or some other solution. A CEO that participated in the “CEO Panel” session indicated that specialization was one of the key drivers for their growth. When asked to share a few plays from their competitive playbooks, several of the CEOs mentioned moving up the stack as one of their top plays to beat Amazon. The other top play: customer service!