The writing is on the wall, the cloud is coming to get you and there’s no hiding…

Some interesting information out of the UK is an indication of what the future holds for small local and regional hosting companies. It seems that UK.gov, the entity that created a digital marketplace for UK government technology procurement, is seeing more and more spend on Amazon Web Services. Spend through G-Cloud increased eightfold year-on-year to £16m in 2017.  Of that spend, fully £11m went to Amazon Web Services, a huge growth figure given that, in the past five years, £19m of G-Cloud spend has gone to AWS.

Which is awesome if you’re an Amazon shareholder, but potentially not so awesome if you’re a small UK provider of hosting services. Of course, the news was met with the expected hand-wringing from those in government. Labour MP Jon Tickett reportedly commented that:

It’s about time the government took a close look at the way it is handling contracts for information technology and computing. Some of these firms don’t pay a lot of tax in Britain and don’t treat their employees very well. There are plenty of excellent companies locally who could do this work, but they don’t often get a look-in.

Well, yes, there have been some questions about taxation of multi-nationals and the like, but that doesn’t change the core fact – no one can compete with the economics that the large cloud vendors (Amazon, Microsoft, and Google) offer and very few providers can offer a value proposition that is overly compelling.

Of course, there are some workloads and some customers who still need local hosting – those in highly regulated industries for example, or those who have particular requirements about latency. But the ever-increasing crescendo of news from these big players of the introduction of new regions and locations is rapidly removing that justification.

All the big vendors offer services in the UK, whereas in smaller geographies (where I live, New Zealand, for example) this is not the case. Hosting companies in these locations may well believe that they can offer a long-term point of differentiation simply based on where they are. I disagree with this perspective – the big players can do it cheaper, they can innovate faster, and most of the location-specific arguments for smaller players are evaporating rapidly.

A case in point is UK hosting company DataCentres that recently went bust, in part because its largest customer, the UK Revenue and Customs agency, pulled the pin on a service contract as it jumped ship to Amazon.

So – what’s the plan?

All of this is interesting given Microsoft’s introduction of Azure Stack, an on-premises version of its Azure public cloud offering. The smart players (a good example being UK vendor UKCloud) are jumping in with Azure Stack and seeing it not as a way to avoid the public cloud, but rather as a way to provide a service offering that combines public cloud products from one of the “big three” cloud vendors, along with some local resource for the situations where that is needed. Not, it must be noted, as a way of avoiding the public cloud, but in a realistically, justifiable way. (Also, editor’s note, more info about Azure Stack here and here).

Cloud is coming, and anyone who tried to secure their future by slowing that down in any way is doomed to failure. The smart move is to add value to your customers by helping them transition to the cloud, with all the technological and cultural hurdles that brings.

Don’t be a dinosaur left trying to survive in a post-apocalyptic world – do your work now to ensure your continued success.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

3 Comments
  • I respectfully disagree. The big players can do it cheaper because of their vast global tax evasion and that huge margin advantage feeds their ability to innovate faster, which is so often based on stealing ideas and products from smaller orgs they “disrupt”. Just imagine if they suddenly all had to pay 10% GST and 30 to 40% company tax, and a fair wage so their staff dont have to live in cars. Their prices would have to rise a lot and smaller providers that dont have the ability (or the moral vacuum) to evade like they do might just be be competitive again. We’ve all been totally conned to believe that what these multinationals practice is normal and smart business and we have spineless gutless governments that wont (or cant) stand up to them. And then there’s the gargantuan social injustice that the billions in lost tax revenue inflicts on society. Rampant tax evasion is the core fact. The “big players” doing it cheaper and innovating faster than small providers is just collateral damage.

    • Hey Tristan – I don’t disagree but (screaming leftie alert) believe that they are symptomatic of a broken economic system. I really don’t see any potential to change the status quo without a move away from rampant capitalism… (says he enjoying the benefits of being in the 1%)

  • At the core of it… innovate or be disrupted, if you can’t innovate no matter the industry, someone, somewhere will come along and gobble your market share up.

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