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Service Provider

Beating the Commoditization Curve

April 8, 2014 — by Bill Lowry0

Many Colocation, Hosting, and Cloud Providers include Infrastructure as a Service (IaaS) as part of their base offering. These Providers are under increasing pressure to deliver this basic service with high quality at the lowest possible price – while still maintaining reasonable margins for their business.

Every day I talk to Providers who face this challenge – they are required to deliver “table stakes” offerings – IaaS, “ping, power, and pipe”, managed hosting. All the while the wide availability of these services from a large number of sources is leading to a commoditization of the solution and this drives their product margins lower.

Providers are always looking to increase revenues and create competitive differentiation. One way that many choose is to offer additional services that enhance these base products. In order to succeed, these new services need to offer real value to the customer, deliver tangible benefits, and be offered at a price that insures higher margins for the Provider. And, if delivered early in the service lifecycle, allow the Provider to beat the commoditization curve.

DoS Mitigation is a service offering that holds promise for Providers

DoS attacks are increasing in frequency and headlines about attacks are everywhere. Customers are concerned and want a solution and this puts Providers in a unique position to deliver this value-added service. Most importantly, we are early in the product cycle. And, like any early market, early entrants have a chance to obtain an advantage.

Here is an example of the commoditization curve…from simplicable.com. It shows what we have learned over the last 50 years – given enough time, most technology follows a predictable path and becomes a commodity. Services like email hosting and internet access have followed the exact same path.

Commoditization-Curve

I believe for DoS mitigation services, in April 2014, we are here – not quite to the peak moment in the curve

Providers with a DoS mitigation offering have an opportunity

  • Create Differentiation – very few providers include DoS mitigation in their line card. Providers with this capability will be able to create competitive advantage.
  • Establish Leadership – by entering the market before the competition, the Provider can be seen as an innovator and will be able to claim a leadership role in the industry for some time.
  • Capture Market Share – getting to market before the rest of the pack means you have access to the market first – which allows a Provider to gain share over those who do not offer a solution
  • Earn the Early Price Premium – the earlier you are, the more you can set the market price. The longer you wait, the more you are required to fit someone else’s definition of value

I recently delivered a webinar that dives deeper into this topic – you can click here to watch – and see if you agree.

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Bill Lowry

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