Nearshore Americas

Alsbridge CEO on Cloud: Large Providers Will Lose Market Share This Year

When talking about Cloud computing, how do you separate the hype from the information your business needs to get ahead? We wanted an insider perspective from a cloud expert, so we sat down with Ben Trowbridge, CEO of Alsbridge Inc, and asked him whether cloud is really all it’s made out to be. According to him, many large providers are trying to cash in by offering faux-cloud solutions, but they’re not what companies are looking for. Read on for more.

What are the key advantages that Cloud offers in terms of optimizing IT outsourcing?

Trowbridge: The main thing is the ability to rapidly and without any human intervention, scale IT up and down to meet exact requirements. There are no people running around a data center plugging in wires or sitting at consoles anymore.

Until now, the offshore industry was driven predominantly by labor supply, English proficiency and most importantly, cost. It’s cheaper to do the work in a location outside the US, and that’s the fundamental economic lever that’s been pulled for the last ten years. What’s happening now is we’re pulling on another lever – and it’s not labor cost – so the providers and clients can’t comprehend it because they’re trained to think about labor cost differentials. It’s about optimization of hardware and software, and being able to sell little chunks of it automatically and seamlessly, making the whole thing massively cheaper.

If you do a good cloud business case, you can come up with unit costs between what the client was paying earlier, and what he’ll be paying through cloud – and it’s 75-80% cheaper. Cloud providers can charge less because they’re getting 100% usage of their equipment and software 24 hours a day. In the old world of servers in a data center, even with large providers like HP and IBM, only an average 20% was being used. Though cloud, we’re using the software so much more efficiently.

What we’re hearing is that Cloud is often just a bandwagon that providers are jumping on, mainly because every client is asking for a cloud strategy. But the technology to really optimize it has not been fully developed. Would you agree?


Trowbridge: Yes. The best way to represent it would be to think of the Gold Rush years in California. Whatever peoples’ skills were – tailors, grocers, miners – everyone wanted to be a part of it, and said they could do it. Which wasn’t true, but everybody lied mainly because there was a lot of money on the table. Cloud is that way. There are a lot of savings on the table for the client, and there’s a lot of revenue displacement that’s going to go on. So all the providers are screaming that they can do it, but you get very different answers on what each of them means by ‘cloud’.

To really optimize cloud, you need to have automation. Most of the cloud providers today don’t have it, but still claim they can hit those low price points. When you look behind the scenes you realize that they’re still using old school data centers and applications. The ugly secret is that the historical large providers can’t do cloud automation yet. They can make more noise in the market because of their size, but Amazon, Google and Microsoft Azure at their price points today would crush those large providers. The providers will not get to a fully automated environment until sometime in 2012.

So those large providers are going to lose a lot of market share between now and then.


Trowbridge: Absolutely. The pure cloud providers today who have that automation have thousands of customers already, and that base is going to keep growing. We’re already seeing them peel off market share from large vendors who don’t.

What are the risks of cloud? What obstacles need to be overcome for the trend to continue?


Trowbridge: It’s still security and data integrity. And I’d say the second biggest issue is how to integrate cloud capability with existing systems.

In terms of the main reasons why companies choose cloud, 20% of the CIOs we surveyed said it’s about cost savings and 24% said it’s about enhancing agility and flexibility. But the thing is that everyone is still in the very early stages – 53% of the CIOs said they’re still investigating cloud, and less than 6% of CIOs were using cloud for five or more applications. And what was significant is that almost no one had a dedicated cloud strategy yet. It tells you a lot about how new this market is.

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What are some aspects of cloud that are being overlooked in the market today? What is slipping under companies’ radars?


Trowbridge: The main thing is that clients are getting drawn into conversations with individual providers based on prior relationships, and that can lead them down a bad path in their cloud architecture. If you talk to a specific software vendor about being your cloud strategist, realize that the vendor only wants to talk about private cloud. That may be part of the answer, but you should be considering many more options than that.

In my opinion the best results come when clients can mix that private and public cloud together, to optimize the technologies that they need. And what’s lacking today is the advice and information to help them choose what the right option is.

Tarun George

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