Cloud computing - the age of the middleman

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The age of the small, cloud-based service provider may be numbered but, to coin a phrase, “the king is dead, long live the king”! The time may have come for these businesses to take a long hard look at where they can really add value and become the middlemen (or women) that hold the fabric of cloud supply and user demand together.

In 1776, the economist and moral philosopher, Adam Smith, described the pin manufacturing process in his book The Wealth of Nations. He claimed that one pin maker working alone would be unlikely to produce a single pin in a day. But, ten workers could produce more than 48,000 pins daily. How? Because each had one or two particular skills and, when these were combined, the whole manufacturing process was transformed.

A lot has happened since Smith first mulled over these ideas, but the principle remains the same and, taking a more modern approach, a combination of expertise can significantly improve productivity and return on investment.

So how does this apply to the cloud? I used to have a rule of thumb that the speed of IT change was like measuring ‘dog years’ (seven to one human year). Now, with the massive innovations being driven by the web, the dog has been replaced by a hamster, with each IT year being the equivalent of 20 years of an IT manager’s life.

The reality is, that keeping up with such pace of change requires not just 10 people, but hundreds of highly skilled individuals who can manage the complexity and develop and run the systems needed to meet the demand. Given that there are a finite number of people with these skills, and only so much money to invest in them, it is becoming increasingly clear that only the largest organisations are capable of keeping up, staying reliable and making a profit.

When it comes to developing and supporting cloud-based servers and systems, the likes of Amazon, Google, Microsoft and RackSpace are best placed to maintain the cloud infrastructure, with a Formula One-class team to look after it and mediate the massive risks involved.

The implications of this brave new world are that the smaller cloud providers have to find a role or be swallowed up by the giants. It is increasingly clear that the small guys – the £1m to 5m turnover companies, renting server space and hosting facilities from the big guys – are on borrowed time.

However, all is not lost if these small businesses can work out what they’re really good at and become specialist middlemen. Generally, middlemen get a bad press; perceived as getting in the way, causing more problems than they solve and only interested in taking their cut. But, when it comes to the cloud, these companies have the opportunity to be the catalysts that bring the component parts of the industry together.

Rather than struggling to keep up, they can leave the generic development of the white-labelled goods to the giants; instead, filling the role of both IT manager’s and system supplier’s friend. Their specialist knowledge gives them a foot in both camps: sourcing, implementing and enhancing the right solution for the user, while advising the suppliers of the best developments to maximise their returns.

The opportunity for these companies to become trusted advisors is better than ever and now is the time for them to embrace their new position in the cloud. If they don’t, I wouldn’t give two pins for their chances of competing with the collosuses of the cloud.

Peter Chadha, is managing director of DrPete Ltd, an independent strategic technology adviser. Peter has been identified by IBM as one of the top 50 IT commentators in the UK, and is a regular commentator on TV and in the press.