Since we introduced the notion of aggregators as the fastest growing customer segment for technology vendors, we have looked at a broad range of players who fall into this category. Telecity provides co-location services by aggregating high grade space, servers, storage and communications and some security. Joyent, Softlayer, and Equinix provide infrastructure-as-a-service spanning the spectrum of business sizes. Logicalis and T-Systems are expanding from traditional service provision to include aggregator-style services and we niche players like GoBalto combine function and content to provide specific business services. Top three in our current tally are:
- Engagement – enterprise customers are accustomed to collating specification, validating scope and inviting shortlisted providers to bid. With services purchased from aggregators, the specification has been at a higher level, and the ability to experiment with a few subscriptions means validation is a more practical process. Returns are being achieved immediately and progressively, leading to new approaches to business case development. In many cases, overall spending on IT enabled services has increased, leading to an expansion to the addressable market.
- Risk – with projects, there was clear expectation that in return for managing risk, the systems integrator was paid a fee. With outsourcing managed services, customers expect their service provider to recover high transition costs over the life of the contract. In both cases, new functionality is an additional cost borne by customers. With aggregators, risk is embedded in the ongoing cost of service. The basis of competition in the aggregator market is new functionality, and customers perceive access to new functions as an important added bonus.
- Service versus capability. Also known as separation of church from state. For far too long, the link between capacity and quality of service have been highly correlated. Sizing in an integration engagement and scale in an outsourcing arrangement have been linked to forecast consumption needs. In recent years, outsourcing players have moved towards consolidating delivery centres for greater efficiencies, but transition has been slow. Aggregators on the other hand approach capacity through industrial lenses. The decision to invest is based on expected cumulative demand, not attributable to any single customer. This allows engineers to built capacity by focusing on performance and effectiveness, not just cost efficiency.
For suppliers aspiring to be successful with aggregators, this means re-positioning to address infrastructure management as a core competency. Some suppliers may no longer remember how to do that, an this lapse has creates space in the market for performance enthusiasts like Nicira. Understanding the changing mix matters. Tt will help re-allocate marketing and sales resources to address the faster growth in spending by aggregators, and adjusting expectations of future revenue from enterprise customers as qualifying demand is satisfied through this new type of service provider.
Image credit: Laser microscopy of plant embryos by Fernan Federici