How to Choose the Right Service Provider for Your Needs - Part One
February 27, 2012

Antonio Piraino

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As more and more companies choose to take advantage of the benefits of cloud computing, they are also increasingly considering outsourcing the hosting and management of their data center and cloud infrastructures to a third party. Benefits range from leveraging the economies of scale that service providers enjoy, to the dedicated specialists that private IT companies may not be able to justify hiring.

Yet the world of service providers can be a complex one to the uninitiated, especially as cloud computing is changing that world significantly. I wrote this post – the first in a three-part series – to help shed some light on the types of providers that exist today and how they are evolving.

What Are the Types of Service Providers?

There are numerous service providers in the world today doing a phenomenal job of making IT work for the average business. And, since we’re still early in the IT outsourcing lifecycle that continues to boom with the advent of cloud computing, there are plenty more business advantages to be gained by using them.

However, not all service providers are necessarily providing pure cloud computing services. Some focus on data center operations, which means they offer Colocation Services (such as those offered by Equinix and Coresite) to large enterprises, the Federal government, and even to other managed service providers (MSPs).

The compelling advantage of using these providers is being able to turn capital expenses (CapEx - ordinarily spent on having to build large data centers at a cost of up to $2,000 per square foot these days) into monthly Operational Expenses (OpEx). The appeal here is far more financial than anything else, with the kicker of having tremendous power and connectivity density that no individual company could ordinarily expect to have from its own facility.

Dedicated Hosting Providers

Within many of these data centers are the Hosting Providers that are customers themselves to the colocation providers. Dedicated Hosting Providers (like Serverbeach and Softlayer) have increasingly found themselves under competitive threat from the Infrastructure-as-a-Service (IaaS) providers like Amazon Web Services (AWS). In that spirit, there has been a mass migration to virtualization and cloud infrastructure services taking place over the past five years.

Public cloud providers offer more discriminatory pricing for IT infrastructure based upon resource allocation per workload. More importantly though, for developers and independent software vendors (ISVs), this is an optimal place to finally test and develop those applications that would have otherwise remained hidden, underfunded and unattended. On the periphery to these IaaS providers, are the increasingly competitive Platform-as-a-Service (PaaS) providers (such as and Google AppEngine) offering a framework for developers to drop code in a convenient to use environment, with access into an ecosystem of pre-created code/apps.

Shared and Managed Hosting Providers

Shared hosters (like GoDaddy and eNom), typically offer SMBs the ability to register domain names, and host the baseline web pages on shared infrastructure, which has had huge appeal to the SMB sector who otherwise don’t know how to write code, let alone access the virtual environment through an API such as those offered by the PaaS providers.

At the high end of the scale, are the Managed Hosting Providers (MHPs), who also offer the CapEx to OpEx advantage in that they amortize the cost of the servers and operating systems too, but more importantly, they add a layer of support and management expertise to the mix. This alleviates the need for mid-sized and large businesses to hire more engineers to administer their entire IT infrastructure. This also frees up businesses to focus their attention on their core expertise. Even as MHPs (such as Datapipe and Peak10) have moved to the IaaS model, it is the support services and in-house expertise that are key to their advantage.

Managed Service Providers

Even though the term MSP is used interchangeably with hosting providers, the MSPs indulge in on-premise and off-premise management as necessary, providing support for specific applications or entire IT infrastructure that may be too complex or expensive for a business to run themselves. Examples range from companies like ePlus, providing everything from best infrastructure deployment and operations practices to equipment financing, to specific applications such as video conferencing management through MSPs like Providea.

More generally however, the real talking point among enterprise businesses is the need to have a flexible platform for development, staging and full production that is managed on a virtual private cloud. It is the agility, flexibility and speed to deployment that is most compelling to IT administrators and business units – including sales teams, marketing teams or even HR – who want to rapidly set up applications on the fly.

Telecom Cloud Providers

For the past few decades the term “cloud” was generally used to simplify the Internet backbone represented by the various Telco interconnections. Not to be confused with “cloud computing”, a specific usage of IT infrastructure within that cloud environment, many of today’s telecom providers have moved beyond the pushing of voice minutes and bots around networks, and are offering a mix of all of the above services. They do so hand in hand with their traditional networking and communications services too, but oftentimes, hand in hand with some of the experts in cloud computing solutions.

SaaS Providers

As an overlay to all of these facility and infrastructure providers are the ISVs and apps development teams that have moved to offering Software-as-a-Service (SaaS) on top of this convenient to consume IT infrastructure. In essence, many of the MSPs and hosting providers above are toying with variations of SaaS offerings, and more and more apps bazaars and apps catalogs are making their way into the lexicon of the average third-party service provider. SaaS remains the fastest growing segment of the cloud market.

With these broad definitions in mind, my next write-up will discuss how the size and form of the business should help companies determine what managed services to use.

Related Links:

How to Choose the Right Service Provider for Your Needs - Part Two

How to Choose the Right Service Provider for Your Needs - Part Three

Antonio Piraino is CTO of ScienceLogic
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