The Cloud Boom and the Rise of Hybrid Solution Providers

As megavendors build datacenters to support their cloud visions, they're wooing solution providers that can connect customers' on-premises systems to the new cloud platforms.

The global buildout of datacenters by technology giants in support of their public cloud visions shows no signs of slowing down. Amazon Web Services (AWS) is working to open a new datacenter in Beijing. Google Inc. just brought a new Singapore datacenter online in December. Microsoft bought more land in Quincy, Wash., to expand its datacenter footprint there.

Recent IDC research about the server market shows just how monumental an impact all these capital projects are having on worldwide server sales.

IDC has created a term for servers purchased for such datacenters: "density-optimized servers." The IDC description of the entities buying those servers is also telling: "large homogeneous hyperscale datacenters."

For Q4 2013 -- the most recent data available -- the overall server market was down 4.4 percent by revenue and up by 8.2 percent in shipments. Amid those weak numbers, the density-optimized server category stands in sharp contrast. Revenues were up 70 percent year-over-year, and unit shipments boomed by 65 percent.

That growth puts these density-optimized servers at more than 15 percent of all server shipments for the quarter. By the numbers, specialized servers going to these hyperscale datacenters accounted for 382,000 of the 2.5 million total servers shipped.

In a statement, Kuba Stolarski, research manager for servers at IDC, put the numbers into perspective. "Blades and density-optimized servers account for a quarter of server market revenue, up from one-fifth a year ago," Stolarski said. "That's further evidence that the shift toward public cloud hyperscale deployments on one hand, and private clouds on integrated systems on the other, is real and significant. [Because] a large portion of hyperscale is still deployed on rack-mounted servers, the potential for modular design growth in the near future is substantial."

Just as the buying decisions of the big vendors are changing the server landscape, the cloud computing options the new datacenters deliver are reshaping the industry's reality.

Customers are shifting their purchasing decisions toward the cloud services offered in those datacenters, analysts believe. In a recently updated forecast for 2014 IT spending, Richard Gordon, the managing vice president at Gartner Inc., explained one change in the numbers: "We're seeing CIOs increasingly reconsidering [their own] datacenter build-out and instead planning faster-than-expected moves to cloud computing."

Even if customers are switching gears to cloud quickly, the megavendors building the cloud services still need partners more than ever to help customers with the complex decisions required to make the transition.

Those partners need a specialized skill set that includes the ability to:

  • Point customers to the right environment, be it on-premises, Platform as a Service (PaaS), Infrastructure as a Service (IaaS) or Software as a Service (SaaS), for each application.

  • Migrate data and applications from one environment to another, and possibly back.

  • Help customers manage the ever-changing location and mix of on-premises, cloud infrastructure and SaaS applications in the hybrid world.

  • Navigate the regulatory and backup/recovery complexities of multiple environments.
Modular units like these in Microsoft's Quincy, Wash., facility helped spur a massive market for specialized "density-optimized servers." (Source: Microsoft)

At a recent press dinner hosted by Microsoft, Tiffani Bova, a channel-focused analyst and vice president at Gartner, suggested the market needs solution provider capacity in three buckets. One set of partners must be able to set up solutions in the cloud for customers. Another practice area is hybrid capacity, the ability to effectively connect cloud solutions to on-premises infrastructure and applications. The final area is on-premises expertise for applications and solutions that still must be deployed on-site.

Bova also acknowledged the temptation for partners not to move. Gartner's own figures show that about 95 percent of all IT equipment is still bought and sold the old-fashioned, non-cloud way. Yet Bova, an influential voice among senior channel executives at big vendor companies, recommends that solution providers get on the cloud bandwagon sooner rather than later and that they partner with cloud-focused partners if they can't build practices quickly enough themselves.

The Microsoft Dublin datacenter and other facilities like it are altering more than the physical landscape -- they're changing the face of the server market. (Source: Microsoft)

As the major cloud vendors rapidly build out massive datacenters to support the public cloud businesses they envision, they're aggressively wooing infrastructure solution providers that can help customers integrate their environments with the megavendors' offerings.

In recent months, major vendors including Microsoft, AWS, Google and IBM have seriously tinkered with, or outright overhauled, their cloud partner programs in an effort to attract and develop the partner capacity they need.

Amazon Web Services
AWS owns the pre-eminent cloud infrastructure platform, and enjoys top-of-mind status among Silicon Valley startups and other entrepreneurs. But the company's platform has room to grow among established businesses with existing infrastructure that needs to be integrated, and AWS is increasingly looking to partners to help.

The AWS ecosystem consists of the AWS Partner Network (APN) for technology and consulting partners and the AWS Marketplace for software products optimized for the AWS Cloud. APN has about 8,000 partners and the AWS Marketplace boasts more than 1,100 software products.

AWS took steps in November at its AWS re:Invent conference to make its APN more robust. One significant step was the doubling of the number of APN Competencies from three to six. Previously, AWS offered competencies for Big Data, for data work at any scale; Managed Service Provider, for partners who completely manage their customers' AWS Cloud-based assets; and SharePoint, for partners specializing in Microsoft SharePoint installations atop the AWS Cloud.

AWS went back to the Microsoft infrastructure well for one of the new competencies -- Exchange. The other two new competencies cover SAP and Oracle workloads on the AWS Cloud.

Terry Wise, director of the AWS Worldwide Partner Ecosystem, recognized in a statement that AWS needs partners if it's going to keep growing: "Our partners are critical to helping customers run their applications on AWS, and we will continue to invest in delivering the programs, tools and training to help our partners grow their cloud businesses, differentiate their offerings, and drive success for our joint customers."

Wise and AWS laid out a series of other improvements that would be coming to AWS throughout 2014. One of the major new benefits for APN partners will be an upper tier called the APN Advanced Channel Partner designation, which comes with expanded technical support. Other 2014 APN benefits will include partner leads, business development training, market development funds and reference implementations.

Microsoft Windows Azure
Microsoft has a broad range of solution deployment options, ranging from on-premises servers to Windows Azure as IaaS to Windows Azure as PaaS, making it a rich territory for hybrid implementation partners.

Redmond has been tinkering with its lengthy list of competencies, as well as its subscriptions, such as the Microsoft Action Pack, to find the right way to encourage partners to deploy in the cloud.

Julie Bennani, general manager of the Microsoft Partner Network, positions the Action Pack as a strong option for partners looking to get their feet wet with a cloud infrastructure practice. The $475-a-year Action Pack includes $100 in monthly Windows Azure credits, among other internal software use rights that can give partners a way to test potential implementations before offering them to customers.

"The minute you go up as [a] silver or gold [competency partner], we're making a big statement to the field, to customers and to other partners. In a world of transformation, if you're trying a new business mode, [Action Pack] is a place where you can surface it safely before maybe you're ready," Bennani says.

For partners with gold or silver competencies, February also saw Microsoft integrating Windows Azure and other cloud credits into the competency benefits. The change eliminated the need for those partners to go through a separate process to get online benefits and, in Microsoft's view, should encourage more competency partners to get experience using Windows Azure and other cloud products.

Microsoft has been active in other ways, as well, launching an eight-part series of Windows Azure training for partners, which runs through the end of April.

There's some uncertainty about Microsoft's plans for competencies overall in the near future, and particularly for how Windows Azure and other cloud products will fit into them. While Microsoft added cloud licenses and Windows Azure credits to all of its competencies, several competencies were scheduled to get Windows Azure-based tracks in January 2014. Confusion about how those tracks would work and what partners would need to do to earn them prompted Microsoft to delay the changes.

Google Cloud Platform
Google started reaching out to partners for its Google Cloud Platform in July 2012, when it launched a formal partner program around its cloud infrastructure platform. The initial program was built around two types of partners, Service Partners and Technology Partners.

In the year and a half since starting the program, Google picked up about 160 partners. Google used the occasion of its Google Partner Summit in March to enhance the program.

"We're expanding our Partner Program in order to recognize our top service and technology partners and provide the means for any company to qualify as a Registered Company," Mark Hodgson, head of Global Partner Programs for Google, wrote in a blog post on March 6.

Google is layering on three tiers -- Registered Company, Authorized Partner and Premier Partner. Registered is the entry level and includes access to online resources and training with no revenue commitment. Authorized Partners have a revenue requirement of $12,000 a year and become eligible for benefits such as co-funding of lead-generation events, resale margins, advanced training, sales leads and NDA product roadmap briefings. The highest level, Premier Partners, have a revenue requirement of $120,000 a year and get quarterly meetings with Google executives, among other exclusive benefits.

"These tiers are the first steps of many to further develop our partner community so we can provide the best possible experiences for everyone out there while working hand in hand with those companies that make it possible," Hodgson said.

IBM might not have made headlines for datacenter construction the way Microsoft, AWS and Google have, but Big Blue refuses to be counted out of the cloud race. In fact, in her letter to shareholders this year, IBM Chairman, President and CEO Virginia M. Rometty staked out an ambitious position for IBM in the cloud.

"IBM today is the leader in enterprise cloud, a position we've enhanced through investments of $7 billion on 15 acquisitions, most notably SoftLayer in 2013. We provide the full spectrum of cloud delivery models -- infrastructure as a service, platform as a service, software as a service and business process as a service. IBM's cloud capabilities are built on 1,500 cloud patents and supported by thousands of cloud experts," Rometty wrote.

Given the company's systems legacy and deep business heritage, it's not surprising when, later in the letter, Rometty gets into hybrid territory. "[One] analyst predicts that by 2017, nearly 50 percent of large enterprises will use hybrid cloud environments that are part public, part private and integrated with back-end systems. It's also why a new class of `cloud middleware services' is emerging to manage these complex environments."

While IBM has its own huge services arm, the scale of its ambitions mean there will be plenty of room for partners.

At IBM PartnerWorld in Las Vegas in February, IBM specifically pitched business partners on the cloud opportunities surrounding its platforms. IBM released training to encourage partners to develop consulting and design skills for different cloud architectures, and the company also released a PartnerWorld Cloud Benefit Guide, cataloging IBM's myriad and sundry cloud offerings and benefits.

Expect the tweaking of partner programs to continue by these four and others, such as Rackspace Inc., Hewlett-Packard Co. and VMware Inc., as the vendors work to make themselves appealing to skilled hybrid solution providers.