Uncommon Wisdom

Mar 16 2011   2:58PM GMT

Vendors/operators weighing necessary cloud strategies

Tom Nolle Tom Nolle Profile: Tom Nolle

HP’s CEO is promising a more cloud-engaged HP, which seems a smart move given that it’s clear that cloud computing will in some way be the driver of virtually all data-center-centralized IT consumed in the next five years.

I’m not suggesting everything migrates to public clouds with Google hosting banking applications or something. What’s going to happen is a gradual hybridization of private and public cloud architectures. That means any company with server aspirations better get on board, and HP has had a good set of tools and no blueprints. Of course, the same can be said for most network vendors, even about Oracle.  Microsoft and IBM get top marks for having a cloud strategy for both enterprises and service providers, and Cisco still wins among the network vendors.

XO is getting into the cloud services business too, hardly the first carrier to do that, and it says it will be focusing on the SMB space. That’s a much more ticklish proposition than most are willing to admit. My surveys show that SMBs are likely to cloud source a larger portion of their total IT spending (compared to large enterprises). The problems are: 1) Total SMB IT spending is smaller than that of large enterprises, and 2) the cost of sales and support for SMB customers is much higher

 My model says that companies like XO can sell services to their current base, but it will be difficult for them to expand beyond that. With a relatively small target audience, it’s then a question of whether XO can gain enough economy of scale to be an effective cloud player.

XO’s situation is reflective of the cloud market overall — you either are a big player or you’re an inefficient and therefore marginal player.

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