By Wouter Belmans, Senior Manager, and Uwe Lambrette, Director, Cisco Internet Business Solutions Group

As cloud computing matures and hype becomes reality, uptake among small and medium-sized businesses (SMBs) and large enterprises is increasing. And although the cloud is still in its infancy, the Cisco Internet Business Solutions Group (IBSG) believes it is an appropriate time to ask: “How is the cloud value chain taking shape, and where are the battlefields I need to be concerned about?”

Cisco IBSG has found that major disruptions are taking place on six battlefields across the value chain:

1. SaaS Will Further Disrupt the Independent Software Vendor (ISV) Landscape

• Barriers to new entrants continue to decrease due to IaaS, PaaS, and cloud brokers.
• ISV incumbents are slowed down by cannibalization.
• The SaaS paradigm is already disruptive in approximately 25 percent of the software market.
• Mobile application access is accelerating SaaS adoption in additional software segments.

2. PaaS: Development Platforms Will Be at the Core of the Cloud

• The advantages of automation are increasing, while the drawbacks of lock-in are being addressed.
• PaaS is winning the hearts of web developers, with enterprise development close behind.
• In just five years, PaaS could be the cloud delivery model that generates the most revenues for cloud service providers.

3. IaaS: Web-Grade and Enterprise-Grade Infrastructure Services Continue To Battle Each Other

• The battle of web- versus enterprise-grade services rages on across hosted and internal IaaS.
• Maturing web-grade cloud enablers will accelerate the entry of more than 30,000 hosting companies.
• Despite the head start of web-grade services, Cisco IBSG expects strong growth for enterprise-grade IaaS.
• The battle of data center (DC) architectures will continue with massively scalable DCs (web) versus vertically integrated DCs (enterprise) co-existing for the foreseeable future.

4. Facility and Infrastructure Strategies Are Often-Forgotten Fundamentals

• Two facility strategies are on the rise, and often compete with each other:

1) On-net cloud delivers the value of WAN / IT integration.
2) Mega-exchanges deliver the value of an ecosystem of players that host services together.

• Cloud computing enhances IT infrastructure buying power and sophistication. This means ICT infrastructure original equipment manufacturers (OEMs) must rapidly innovate to avoid commoditization.

5. Commercial Activity Channels Are Being Disrupted by Cloud Brokers

• Everybody wants to be a cloud broker, but only a few companies will attract the required ecosystem to succeed.
• Players that can grow from the core will be more successful in the cloud market.

6. Professional Services Require a Shift to Activities that Add More Business Value

• In the short term, cloud migration services are the main opportunity.
• Longer term, professional services companies must shift their focus to activities that add more business value.
• As the focus shifts to business value, deep industry expertise will become increasingly important.

Network service providers (NSPs) must be aware of these value-chain dynamics when determining their go-to-market strategies, which include:

• Commodity infrastructure services with PaaS support
• Enterprise-grade infrastructure services with developer enablement
• Telco-centric SaaS, including communications, collaboration, and security
• Vertical business process services, with a platform ready for business process as a service
• Network as a service (enriched network to better support the cloud)
• Cloud aggregation and brokerage linked to telco-centric managed services

Across the various go-to-market strategies, NSPs need to make a clear choice about how to address professional service requirements—either by building internally, partnering, or acquiring a company with the needed skill sets. Commercial success will often be greater and occur faster (with less risk) where new cloud business models can be layered on top of existing services. Companies that grow from the core can reuse existing capabilities, including customer relationships and sales channels. For telecommunications companies, it often makes sense to grow a cloud portfolio from a base of hosted communications and collaboration products.

• Cloudwashing the Cloud Brokerage