The 451 Take
Hyperscaler under the Hood
The largest public cloud providers are churning out new products and services at a breakneck pace. Their smaller competitors are unable to keep up, so they have changed tactics by building products and services that incorporate the hyperscalers' own capabilities. For example, rather than trying to duplicate the functionality, 38% of service providers are integrating AWS, Microsoft Azure, Google and IBM's machine learning and artificial intelligence functions into their own offerings. This is being done to offer ML as a service and related service catalogs, in addition to incorporating AI/ML functions into their customer-care and operational use cases. This same premise applies to functions as a service (aka serverless). Rather than build their own, 36% of service providers are using AWS Lambda functions and related services from other hyperscalers under the hood of their own customer-facing applications.
Hyperscaler Hybrid Solutions
Besides the examples above about incorporating hyperscaler capabilities into their own applications, the once-competing service providers have accepted that the largest public cloud providers are a preferred destination for some enterprise workloads and data. As such, 41% of service providers have established network connectivity from their own datacenters to the hyperscaler datacenters. Many are also building and buying the software to offer hybrid cloud and multi-cloud management. By offering enterprises a one-stop shop to orchestrate and manage compute and storage resources for on-premises, hosted services, as well as network access to a variety of public cloud venues, service providers remain relevant for enterprise digital transformation opportunities.
Rackspace (with its acquisition of Datapipe) recognized an opportunity to provide enterprises with the management services for AWS, Microsoft Azure and Google Cloud, rather than trying to compete head-to-head for IaaS. Many other service providers have adopted a similar strategy. According to our Voice of the Service Provider, 41% of service providers are also offering managed public cloud services.
We expect that more service providers will incorporate additional hyperscaler services into their own products – for example, security functions, container services and data analytics. Additionally, IBM, Oracle and Alibaba will be partnership targets for the MSPs, telcos, SIs and SaaS providers looking to diversify their portfolios on a global basis and for specialized workloads – more hyperscalers as a service.
Al is responsible for 451 Research’s Voice of the Service Provider offering. He focuses on tracking and analyzing service provider adoption of emerging infrastructure, spanning compute, storage, networking and software-defined infrastructure. He regularly advises the vendor and service provider C-suite, investment bankers and enterprise CIOs on the business problems that technology attempts to solve. Al also contemplates the evolving business models leveraging OpenStack.
Jeremy Korn is a Senior Research Associate at 451 Research. He graduated from Brown University with a BA in Biology and East Asian Studies and received
Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology. Keith has been covering the intersection of communications and enterprise software for 25 years, mainly looking at how to influence and optimize the customer experience.