Michael Keegan, Head of EMEIA Product Business and Chairman Fujitsu UK & Ireland, looks at what Scandinavia can teach us about the future of the data center
Wouldn’t it be helpful if we could occasionally jump into the future to learn what’s coming our way next? Back in the present, we’d be able to prepare ourselves for important changes, get ahead of our competition and smooth the growth path for our businesses.
When it comes to data center service provision, we actually can do just that. We don’t need to travel in time, just go to Scandinavia. In fact, across the entire Nordic region, 80 percent of data center capacity is already in the cloud, making the end of on-premise operations a distinct possibility. That’s light years ahead of other markets, such as the UK, Germany and the US, where more than a third of workloads are still running on-premises. Consequently, a highly experienced breed of service providers has emerged in Scandinavia – and they are now in their third or fourth generation of outsourcing, and indigenous to very high SLA demands and well-defined expectations of costs.
The drivers of cloud adoption are the same in Scandinavia as everywhere else: end customers are pursuing digital transformation to adapt to dynamic and disrupted markets. And the result has been a shift in the traditional reseller and service provider business models – migrating from the channel partner’s core business of providing, installing or outsourcing technology, to service integration. For partners, the most important implication of this change is the shift in financing options – with customers moving towards pay-to-consume instead of the traditional model of paying upfront.
We can take these insights from Scandinavia and map on to other geographical markets. There are still massive opportunities for service providers in the years to come, but also some risks. There is big competition out there from the hyper-scaler cloud providers. In Scandinavia, about 20 percent of the outsourced market is now held by global cloud providers such as Amazon, and about 10 percent by outsourcers from India.
These market dynamics are putting pressure on Nordic service providers’ own data centers and further emphasizing the significance of tailored services, as well as new financing models for partners.
It’s hardly surprising that end customers are embracing the shift in financing models and moving away from the old “fork lift” upgrade where you pay upfront for capital equipment, which then depreciates over a fixed period. Instead, organizations can take expensive IT systems off their fixed asset list in favor of a pay-as-you consume model. If you need more, you pay more, but equally, in a quiet month, there’s no need to pay for something you’re not using. What’s more, you’re less likely to end up with obsolete hardware, or find yourself locked in to a specific technology. This usage-based charging model means IT becomes more of a service, and a lot more flexible.
For our service provider partners to respond to this market shift, they need the infrastructure in place – which is why we’re introducing innovative new financing models which enable our partners to extend pay-as-you-consume models to their customers.
Forward-thinking Nordic service providers want to shift their business models to reflect the digital transformation needs of their end customers. Flexible financing is a key differentiator against the hyper-scalers and gives providers a way forwards from the now dwindling traditional reseller business model – moving from the core business of providing and installing technology to offering additional services and solutions, with new finance models, and focused on service integration.
Fujitsu’s new Service Provider Program
Our crystal ball has given Fujitsu the opportunity to think hard about how it works today with service providers across the EMEIA region, and to consider how we want to work with them in the future. The result is our newly-modeled Service Provider Program. This provides resellers and service providers with both infrastructure and services from Fujitsu – including channel-ready service offerings and a new pay-as-you-consume approach for our partners’ end customers. Service Providers can incorporate into their own service offering capabilities or offer them separately to their customers.
In co-designing the program, our partners also told us about the strong desire to de-risk growth. We have responded to accommodate different business models. Our new Service Provider Program is structured with flexible commercial approaches based on shared-risk partnerships and aligned to customer service level agreements (SLAs). Together these enable partners to build and successfully grow their service businesses. All-in-all it’s a framework for XSPs to evolve into the new service integration model that will dominate future market opportunities, growth and profit.
The program is based on three propositions:
- De-risking growth, to help improve gross margin and competitive pricing;
- High-performance technology, sometimes rather jealously described by our competitors as ‘boringly reliable’, and
- Solutions tailored to partner and their end customers’ needs, based on service offerings from Fujitsu, our partners and pre-tested solutions, as well as flexible financing options.
Let me give you a couple of examples to show you the power of what’s on offer here. Fujitsu does not put any capacity constraints on either its software licenses or its services. So, when you buy a base unit, it comes with a solution contract including all the competitively priced software. When a partner adds new disks, there is no hidden trap of further per terabyte costs for software or services licensing. Think about that: it means partners now have the opportunity to pass on some fantastic deals to their customers.
The second example springs from the high performance of our systems. You’d expect me to say that, of course, but think about this. Let’s imagine you take a storage system that gives you a specific level of performance. When, over time, you add more disks, then the performance response time does not deteriorate, but remains the same – which is actually not always the case. Working through the implications, when choosing Fujitsu, there is no need to over-specify upfront to cover future growth plans. Just take an entry-level system and just add shelves as needed to get higher performance and enjoy significant overall savings.
The power of pooled experience
One question that came up quite frequently is whether Fujitsu is a competitor to service providers in this market. Yes, Fujitsu is also a service provider, but we are also the only true end-to-end IT company left in the market today, giving us access to a solution portfolio and implementation experience that adds real value to partners who are on the journey to annuity-based revenues, as well as to established service providers.
I think this end-to-end capability is something that massively enhances the value we bring to our service provider partners. Not only can we provide flexible pay-per-use technology platforms to underpin our partners’ services, but also, we can open new routes to market for both them and ourselves, with tried and tested channel-ready service offerings that leverage our existing investments and capability.
How does that translate in the field? Fujitsu’s service provider experts are working with partners to co-create solutions and adapt them to their end-customers’ requirements. Partners benefit from this tailored expert support while Fujitsu’s sales and marketing teams help promote the sales of those co-created services.
What Fujitsu has taken from a long hard look at the future is that service providers must offer their customers a highly personal and differentiated service to compete – and that means we need to provide just that to our partners. Fujitsu’s new Service Provider Program creates the solid infrastructure base on which resellers and service providers can accelerate their transition to a service integration model, with innovative technology at its heart. By taking a co-creation approach and melding our expertise with that of our partners, we are introducing a flexible model that gives them the power to focus on how to give their end customers the best possible service.