When enterprise customers transition to cloud computing, they expect it to be seamless, reliable, and secure. However, the reality is that enterprise cloud environments are becoming increasingly complex. Customers need guidance on how to establish or transform their IT architecture. They want their IT strategy to impact their bottom line, and they need to see a clear return on investment.
According to Global Interconnection Index Volume 4 (GXI Vol.4), a market study by Equinix, enterprises and service providers are building new value and participating in ecosystems, using interconnection to support evolving business models. Service providers show the highest growth rate forecast, with an incredible 5x increase between 2019 and 2023, driven by greater demands from enterprises at the edge.
How then can service providers help enterprises balance the “three Cs”—customers, clouds, and connectivity—in this increasingly challenging and competitive IT environment, and make money while doing it?
I was part of a panel of experts that include Song Toh, VP of Global Network Services at Tata Communications, where we shared our views on this topic.
Monetizing the 3 Cs: Customers, Clouds and Connectivity
In this Equinix Expert Panel, key industry leaders explore how service providers can help enterprises balance the 'three Cs' of customers, clouds and connectivity in an increasingly challenging and competitive IT environment—and still make money from delivering it.Watch now
Embracing an ecosystem of cloud partners
When the COVID-19 pandemic struck, businesses came to realize that digital business integration is the key to weathering the accompanying challenges. Enterprises reacted quickly to ensure their users could work from home. Most found that parts of their operations could be shifted to the cloud, but some legacy systems still needed to run in-house. This created a hybrid situation that added a great deal of cost and complexity.
It also made enterprises realize that the future of IT is not about a single location, but rather an ecosystem of partners. Enterprises no longer want to be bound by long and rigid contracts, and CIOs are evolving their role from managing and maintaining applications to orchestrating and governing leaders within their organizations.
Within this model, a partner ecosystem is critical to meeting the needs of customers because it offers customers with a variety of options when it comes to scalability, agility, security, and innovation. To help customers achieve their goals according to their budget and timeframe, it is important to connect them to a partner-rich ecosystem that can seamlessly integrate the capabilities these partners bring to the table.
With IT moving to the cloud, service providers are in the perfect position to help secure the ecosystem, deliver an optimized customer experience, and reduce complexity, all while providing the added value customers are looking for. Other service providers like telcos are also evolving their proposition by offering more advanced services over their networks.
The critical value added by service providers
Despite the benefits, managing a cloud architecture is not without challenges. It can be highly complex, especially in hybrid setups that involve connections into the corporate network, multiple technology layers, and different types of connectivity. Piecing together the services and contributions of different vendors is challenging, as is managing security posture across all these endpoints. If it falls to the corporate IT manager to contact each vendor separately to work out an issue, there can be significant risk and time costs.
While some enterprise CIOs are outsourcing infrastructure management, including the underlying hardware and connectivity, to Information, Advice and Support (IAS) partners to get one single service level agreement (SLA) with a partner rather than multiple SLAs with a series of cloud providers. There are others who wish to maintain their partner relationships and are seeking help to manage this ecosystem. According to the panelists, what service providers bring are the right tools to examine hardware limitations and measure discrepancies, enabling them to come back with clear answers and provide a better overall cloud experience.
There is also an urgent need to place security controls throughout the framework, through a distributed security strategy. As IT continues to become more distributed, security can no longer sit in a single location. We are seeing a model emerge through an SD-WAN-based access to multiple security offerings, rather than any single security vendor. Key management has also become critical as keys are deployed outside a given cloud to enable users to continue encrypting data across multiple clouds. A service provider with broad visibility across the partner ecosystem is in the perfect position to manage a company’s security posture.
The interconnection difference
As IT moves away from in-house development towards real-time data exchange through a cloud ecosystem, and as applications become increasingly latency-sensitive, digital leaders are moving closer to the edge – to where users are – in order to deliver the best user experience. They are exchanging traffic privately with their ecosystem partners on a localized and secure basis. This is interconnection – the private data exchange between companies.
The proof is in the numbers. According to the GXI Vol.4, it is predicted that global enterprises are transforming infrastructures to match service providers’ best practices, accelerating growth over the next four years, reaching over a 50% year-on-year growth rate in 2023. Enterprises are scaling up to ensure sufficient network availability, while service providers are ramping up to build even greater resilience. The growth of interconnection bandwidth is only going to accelerate further, as government, education, and healthcare sectors rapidly digitalize in response to acceleration in digital services, telemedicine, remote learning, and more.
The big question – return on investment
Enterprise customers expect cloud computing to be cheaper, but on the face of it, upfront costs can be high. However, when you start consolidating overhead costs like electricity, manpower, and physical security, the move to the cloud – be it a hybrid or multi-cloud strategy – becomes a more attractive proposition. The fact is that returns cannot be assessed on a per-component basis.
An independent study conducted by Forrester on the Total Economic Impact of Equinix addresses the question of how to think about returns from IT investments. It outlines a powerful methodology for considering the overall value add through an assessment of the cost risks and returns. The study found that companies were realizing 60 to 70% cost reductions on network and cloud connectivity, far exceeding what they were spending on data centers. Companies also saw a 30% latency reduction, translating to a better user experience.
What service providers offer is a new way for enterprises to achieve their goals with scalability and agility in mind. All these need to be factored into the conversations regarding return on investments. The question should not be only focusing on how we are saving on costs, but also how we are enabling businesses to grow. That is the value offered by service providers.
To watch the on-demand webinar on Monetizing the Trinity of Customers, Clouds and Connectivity, click here.