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Service Providers – The Threat and Opportunity in the New World


Guest Post: Anoop Kumar Ravindranath, Portfolio and Strategy Sales Leader for HPE Helion

Declining ARPU, OTT Threats, Threat from the large Public Cloud providers, and need for consolidation.... this has become a broken record that's in the first slide of any vendor's presentation to a Service Provider customer. One of the items that does not get mentioned however, is the real and imminent threat that SaaS brings to the table for Service Providers. There was a time when SaaS was considered 'unsecured' and most companies had in-house development teams for common applications like HR, CRM, Pipeline management; standard Office tools like Word, Excel etc. were deployed locally.   In today's era of SaaS, however, most organizations are trying to get away from locally managed systems for traditional workloads and leveraging SaaS providers like Salesforce, Workday, Office 365 etc.  What's even more interesting is that this movement is not restricted to SMB/small enterprises, most large Fortune 100 companies have already moved to or are already in the transition phase.  This movement will eventually broaden to all enterprises.


This can be a real threat for Service Providers, more specifically Managed Service Providers who usually hosted many of these applications for their customers. This will force Service Providers to think about transformation for their business,  and the opportunity can be 3 fold:

1) Opportunity of Syndication of Services: This could be the most basic and probably the easiest for Service Providers. Essentially, the Service Providers would just slap in a marketplace portal and syndicate all of the SaaS services via that portal. It's a good opportunity for SPs to keep their existing customer base, probably provide a bit of value added services on top. The biggest disadvantage however is that the margins are almost always single digits (if any) and there is a risk that the SaaS provider could bypass the SP and directly reach out to the customers.

2) Opportunity of Hosted SaaS: This is refined version of (1) where the Service Provider decides to host the SaaS services on-premises. The advantage is that the margins are much higher, in the double digits,  and the SP has absolute control over the customer. In addition the SP is also able to sell value added services, connectivity options, VPN etc which can add to their top line and bottom line. Also, there is the great option to localize with local ISVs and Software vendors to reach the local markets and protect data sovereignty. The disadvantage of this model is that there is a 'real' commitment needed from the service provider, a large CapEx involved and also the operation of the data center and the transformation of the sales force to sell the new services. This is not a lip service offer, it's a true transformation and shows the commitment of the Service Provider to transform.

3) Opportunity for Partnerships, M&A and increased penetration: This is an opportunity for Service provider to offer both (1) and (2). This is also an opportunity where the service provider could potentially participate in strategic M&A with the ISVs that will drive a higher customer base and it's also an opportunity for Service Providers to create bundled offerings that will give them the ability to reach out to newer markets, such as industry specific markets. 

4) Opportunity to participate in customer innovation: It's important for Service Providers to understand in the first place why their customers are moving to a SaaS model. It gives them better leverage on their resources to focus on the core business and focus on innovation. In today's day and age, innovation is truly defined by digital. This also means that the customers will require a lab and resources where they can build a Minimum Viable Product quickly and test waters. Service Providers today are positioned in the best place where they not only have the customer base of mobile users but also have the opportunity to directly work with their customers to host their lab environment and also provide additional services like big data analytics that connects directly to the SPs and the Enterprises' customers. It's also an opportunity to do joint innovation with the customer that could be a win/win for both, especially in the digital and IoT space. It's a value add that only the SPs can provide to customers,  Amazon or any other public cloud vendor cannot. 

For most Service Providers, it's not a question of 'when' but really 'how' to engage in transformation.  Considerations include:  their top lines are highly dependent on their traditional sales, their sales teams are not equipped in selling the 'new world',  and their operations teams are not trained in operating and managing the 'new environments'. It's a vicious cycle that can eventually lead to the death of a Service Provider if they don't get out of it soon......

Innovate or Die! That's the mantra that every SP has to eventually confront.

HPE’s strategy with service providers is really a multi stack, multi-platform approach that enables service providers with a strong joint go to market. In essence, there are 4 elements that we need to look at:

  • Platform: HPE’s offering for platform can range from HPE Helion CloudSystem to provide Managed Cloud services, to partnering with companies like ODIN + HPE Helion Openstack to provide both syndicated and hosted SaaS model.
  • Services: HPE has a wide range of ISVs that have been validated on our platform to scale. It can range from simple options such as Backup as a Service, DR as a Service to offerings such as VDI as a Service, SAP HANA as a Service.
  • Commercial Models: This is probably the most important element for a small service provider. HPE financial services offers options such as pay as you grow model, deferred payment model, subscription model to make all hardware and software into a subscription based service or even flex capacity services where HPE can offer additional capacity for the service provider that Service provider pays only if it’s used.
  • Go to Market: HPE can help service providers with strong programs such as the Partner Ready for Service Provider program to help drive joint business plans, help sell service provider services to HPE’s customers who need consume offerings and even help connect with the hundreds of thousands of resellers who can help resell the service provider cloud services.

Listen to my podcast  ……… 

Senior Manager, Cloud Online Marketing
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About the Author


I manage the HPE Helion social media and website teams promoting the enterprise cloud solutions at HPE for hybrid, public, and private clouds. I was previously at Dell promoting their Cloud solutions and was the open source community manager for OpenStack and at Rackspace and Citrix Systems. While at Citrix Systems, I founded the Citrix Developer Network, developed global alliance and licensing programs, and even once added audio to the DOS ICA client with assembler. Follow me at @SpectorID

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