Are PaaS providers more likely to succeed?

Cloud providers struggling in the IaaS market may have no other choice than to morph into PaaS providers and focus on more advanced cloud services.

The competition in Infrastructure as a Service is tough. The combination of low margins and high competition is even nudging some providers -- such as, which quietly closed its IaaS business -- out of the market.

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Cloud providers that are struggling in the IaaS market today may have no other choice than to morph into Platform as a Service (PaaS) providers and focus on more advanced cloud services.

Listen in as site editor Jessica Scarpati and news writer Gina Narcisi discuss this and more in this week-in-review podcast for the week of Nov. 19, 2012:

The following is a transcript of the podcast.

Jessica Scarpati: You're listening to CloudCast Weekly, a podcast by I'm Jessica Scarpati, site editor of, and here with me, as usual, is Gina Narcisi, our news writer. And we were here to slow jam the news last week, but not really sure what we should do this week. What do you think, Gina?

Gina Narcisi: This week I think we should just break it down, yeah, real nice and simple.

Scarpati: Sounds good. So as always we're here to give you a round-up of everything that's new on the site this week. Gina, why don't you start off by telling us about your news today?

Narcisi: So my news this week was actually … It actually spun up from a story I did on service providers a couple of weeks ago. And I thought this was kind of just a timely story and something that I've been hearing a lot about lately. So basically, it was about how to not fail out of the cloud. And essentially, there's been a couple of service providers recently, who recently decided to quietly sort of leave the cloud business and they killed off their cloud servers, which was an Infrastructure as a Service offering. And it was only a little under a year of service and basically, they weren't making enough money off of it and it was the same thing that actually can happen to many service providers if they sort of just jump into the cloud hastily. And so I talked to Tom Nolle, and this is something that he's been telling me about for a while so I was glad that I was finally able to incorporate it into a story.

Scarpati: Right.

Narcisi: He has an idea that Platform as a Service is the next level of services that cloud providers should look to offer, as well as service providers who are looking to get into the cloud. And this isn't something I've just heard from Tom. I feel like everyone's starting to maybe catch onto this business, it might be fair to say. Even Amazon is starting to move into Platform as a Service as more of their long-term strategy. So basically, my story talked about how moving up in the stack can sort of help providers stand out. It's something that's easy enough to do. It's just something that has maybe a smaller client base at first because everyone has to be using the same platform, like Linux. So I think providers may be a little bit afraid because it's not something like Infrastructure of the Service that anybody could take advantage of, really. This is a little different. And so only a smaller percentage - only 55% of service providers are currently offering Platform as a Service compared to 95%, which is what I heard from another analyst.

So basically, aside from offering mixed-level kind of services, pricing is also something that service providers have to really look at if they want to overcome that competition. And it's hard right now, especially when you have companies like Amazon. They keep dropping their prices, and they can do it, because they're a giant, but not every provider's going to have that luxury. So I spoke with one analyst about how the pricing model can be kind of daunting for a lot of beginner cloud providers, if you will. So basically, the moral here was sort of if you can try to stay ahead of that curve, look to see what Amazon is doing -- they're kind of the leader in this space -- so if they're looking at Platform as a Service as their long-term strategy, maybe you should be as well.

Scarpati: Isn't that funny? Amazon has become the leader in things higher up than Infrastructure as a Service.

Narcisi: They're starting to, yeah, they're starting to build their strategies around Platform as a Service, yeah.

Scarpati: Yeah, because that's something I heard, too. Like a couple of the experts that we work with have said that, yeah, it's just becoming like a commodity. Which, for a lot of providers, especially those that kind of come from the telecom side and saw bandwidth become a commodity. And they sort of stopped making money off of it. I think they're having, like, post-traumatic stress disorder.

Narcisi: Yeah.

Scarpati: So yeah, it sounds like a lot of them should be moving kind of "up the stack." But I'd heard, too, about the platform wars that are going on. It seems like it'll depend on the developers and sort of which platform they develop the applications for and what they favor and that's going to be the one that'll push it up, right?

Narcisi: Oh, yeah, it definitely seems to be customers as well as providers. And just in general, I think that Infrastructure as a Service, everyone just thought it was easy to do because it's kind of like hosting and it's just kind of . . . and let's face it, a lot of providers say they have something that's cloud that maybe technically isn't exactly cloud.

Scarpati: Right.

Narcisi: But with Infrastructure as a Service, that's obviously a little easier to hide. So definitely, I feel like maybe as the cloud market just progresses in general, maybe people are becoming a little bit more sophisticated in what they think of when they think of the cloud. And maybe offering something like Platform as a Service, you're telling customers that we're really offering cloud and can't really fool you guys anymore.

Scarpati: So obviously, there are a lot of sort of, like, advantages here, but the people you spoke to, did they mention, like, any challenges at all, kind of like, what's the catch?

Narcisi: It just seems to be kind of hard to start because it just, first of all, what I talked about earlier, just the idea of this is an actual cloud offering. It's not hosting. It's not anything that can sort of be mistaken. But just in general, I guess just that operating system and trying to package it in such a way that you know your customers are going to be able to use, but once you have that in place, the analyst I was speaking to did say that it's sort of … it is easier for the provider to actually manage than Infrastructure as a Service, cause everyone's using the same operating system. You can kind of treat customers like they're applications sort of and everyone's sort of doing the same thing, so it's easier to manage once you get the ball rolling with it.

Scarpati: Mm-hmm. All right, Gina. Thanks for breaking it down with us. We appreciate it.

Narcisi: Thank you, Jessica.

Scarpati: We've been hearing for a while now that Infrastructure as a Service may not be the path to profitability. Gina just talked about this in her news story. But we also have some other content this week that explores the issue a little more in-depth. It turns out that the cloud of today is merely a faint echo of what the cloud of tomorrow could be, according to our resident cloud expert, Tom Nolle. Tom says there are three critical technologies cloud providers must embrace to build the cloud of the future. 1. A more distributed approach to software-oriented architecture or SOA. 2. An expanded role for software to find networking, or SDN, and 3. A take-no-prisoners approach to cloud federation. Check out Tom's article and video blog on this, "New vision of cloud calls for new cloud architecture design," and "Why providers must rethink their concept of cloud computing." These two pieces of content discuss in more detail how providers must rethink their strategies and architecture to really fulfill this new vision of cloud.

According to the retail world, Christmas started right after Halloween. We know, we know: It's insane. But if you are looking for an interesting geek gift for the holiday, there's a cool book out from Cisco Press and Prentice Hall, called "The Art of the Data Center." The book gives you a tour of some of the world's most innovative data centers, including one that seems to be inspired by James Bond villains' hideout, although there aren't any shark tanks or giant lasers concealed in islands, well, that we're aware of at least. We caught up with author Doug Eldridge to discuss some of the awesome data centers he discovered that support cloud services. So check out our Q & A and look at the world's most innovative cloud data center designs. We also got our hands on a chapter excerpt that you can check out as well. Just search our site for the title, "Service provider data center architects share innovations and design," or find it in our news section.

Well, that is all that we have for this week. Be sure to check all the articles we talked about and more at Next week, at least here in the States, is Thanksgiving so we will be off. But we will see you first week December. Thanks for listening.

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