Published: June 6th, 2014

Cloud giants such as Amazon and Google may be locked in a tumultuous cloud services price war, but despite predictions that industry startups could be crushed in the clash some smaller cloud players are holding their own.

Just a few months ago Google slashed prices for its cloud service by 30 per cent to 85 per cent. This was followed a day later by an announcement from Amazon that it was cutting its prices by 10 per cent to 65 per cent.

Smaller cloud providers taking the same route, however, will find slashing prices will cut into their margins. That’s a big concern because they do not have deep pockets like Microsoft, Google and Amazon.

Those focusing on providing boutique-style cloud services to mainly small and medium sized businesses that are just transitioning to the cloud are reporting better results.

Mike Chase
Mike Chase

Cuts cover shortcomings

One such company is dinCloud, a California-based cloud service provider that targets commercial and public sector organizations migrating to the cloud. Through a channel base of value added resellers and managed service providers, the company provides hosted virtual desktops, hosted virtual servers and cloud storage services which customers can control through dinCloud’s dinManage web-based management tool.

Mike Chase, chief technology offer of dinCloud, said customers should be wary of price cuts and investigate if they really provide a benefit.

“Past research shows that the number one reason to get into the cloud was cost, while the number one reason to stay out of the cloud was security,” he told CDN. “Price shifts in the cloud are often a cover up for the lack of effort to increase security, to eliminate smaller players and attract new business.”

For instance, he said, Amazon by default does not encrypt data but bills customers extra to do this. By contrast, dinCloud encrypts all customer data for free.

Smaller providers are often quicker to provide customers value-added services. For example, Chase said dinCloud, through its partnership with IP reputation firm ThreatSTOP, takes a snap shot of all its customer data every four hours and this snapshot is kept for one week. This enables dinCloud to offer customers free data restore services, while larger providers will typically charge a steep fee for.

He said the most significant cuts are being made in cloud storage “because once you move someone’s data to the cloud, it’s much easier to sell them hosted servers, desktops and everything else…”

“But what customers find is that once these larger companies have their business it’s hard to get further support and services,” said Chase. “We are a full-service cloud migration firm. We’re there, to help plan and map out a strategy and advice and support customers in implementation.”

Software-as-a-service is a growing market that offers a lot of opportunities for smaller cloud providers and channel partner. Juniper Research predicts that worldwide SaaS revenues will reach US$53 billion by 2018 or 59 per cent of the enterprise public cloud computing market.

Customized service

Large cloud providers are typically unable to provide customized service than many newcomers to cloud computing desperately need, according to Andy Papadopoulos, president of Navantis Inc., a Toronto-based enterprise infrastructure boutique that is one of Canada’s leading application platform Microsoft partners. Navantis also runs OnCloud, its own cloud computing managed services.

Andy Papadopoulos
Andy Papadopoulos

“One of concerns I frequently hear from businesses who look at the likes of Google and Amazon is that they are overwhelmed,” he said. “Many clients who are just getting into the cloud are not 100 per cent sure of what they need and they are often intimidated by list of services and fees they are presented.”

He said many business operators feel that larger providers are more focused on selling the technology rather than serving their customer’s business needs. In many instances, customers are left to fend for themselves when looking for value-added features and services.

Navantis, through its OnCloud managed service, breaks down the cloud in smaller pieces for customer to easily digest. The sweet spot for OnCloud is the SMB space.

“We take the time to understand our clients’ needs, help customers understand the cloud, and build a road map for them that is appropriate for their business plans,” Papadopoulos said. “Canadian clients are also assured that their data will remain inside the Canadian border.”

Not surprisingly the big three money makers for Navantis are areas where many large providers are absent: managed desktop; managed applications; and support and maintenance.

Hand holding badly needed

Small providers will likely be “crushed” is they attempt to compete in price against the bigger cloud players, according to Mark Schrutt, director of IDC Canada’s services and enterprise applications research unit.

Mark Schrutt
Mark Schrutt

“Where they might be thriving is under the managed services wrapper,” he said.

In Canada, SaaS revenue is on track to reach $1.39 billion by 2016, according to analyst firm IDC Canada. IDC also said that managed services and consulting are strong growth cloud markets for channel players.

Many customers simply want help in migrating to the cloud and guidance on how to maximize usage of cloud offerings.

For example, Microsoft’s Azure is largely a self-serve cloud computing platform which some businesses might find daunting to operate and manage, according to Schrutt.

“Many Canadian businesses at this point don’t want to deal directly with the likes of Azure or AWS because they think they’re too complicated,” he said. “What these businesses need is some hand holding as they move to the cloud.”

Some large Canadian companies like SunGuard and Rogers Communications are already in the cloud hosting and managed services business, but there is still room for smaller players, according to Schrutt.