The Service Provider of Tomorrow, part 6: the Public Cloud SLA

As described in Part 4 of this series, the service levels delivered by public cloud providers – such as Amazon Web Services and Rackspace Cloud – line up with the Dedicated Hosting market in terms of how far up the IaaS stack the service provider goes. To the extent public cloud providers offer an SLA to their customers, they look a lot like Dedicated Hosting SLAs with the key difference being virtual vs. dedicated infrastructure.

Clearly, cloud service providers are working hard to continue climbing the service level stack, and Cloud SLAs will continue to catch up with the SLAs used by traditional IaaS providers. But that road isn’t easy or simple.

Think about it. How many Dedicated Hosting companies have successfully moved up market into Managed Hosting? Not many. Will the task be any easier for cloud service providers? Probably not. Why? Complexity.

Running a hosting business is complex. Hosting companies are the systems integrators of the future. Hosting is about integrating IT infrastructure systems into a centralized multi-tenant environment, with as many shared components as possible while providing individual customers with the performance and security they require. There are a lot of moving parts in the hosting model, and even after more than a dozen years of refinement the model remains tough to execute. Few do it well. Adding to the degree of difficulty, the demand for hosting continues to boom. For years, hosters have been trying to refine and improve their operating models while growing at breakneck speed. This has proven to be almost as hard as re-engineering an aircraft while in flight.

Against this backdrop, hosting providers are now rushing to deploy public cloud, private cloud, and hybrid cloud solutions for customers. These products are more complex than traditional hosting products, mostly because individual billing units are no longer associated with discrete infrastructure devices.

One silver lining is that cloud solutions are so complex that few will attempt to offer these solutions without a foundation of operations automation in place. So cloud service providers and their customers will be partially protected from an unfortunate tendency of human nature that has caused its share of pain the hosting industry thus far … scaling first and automating later.

But, by the same token, the degree to which cloud service providers can climb up the infrastructure stack will be throttled by automation. The current providers of public cloud services have mastered automated provisioning, metering and billing of virtual server instances across a shared computing environment … hence the current service levels reflected in the chart above. But going further up stack will require automating the provisioning, metering, billing and support of the next layers of the IT infrastructure stack. In an integrated fashion. This is – categorically – a more difficult challenge.

Meanwhile, demand for public cloud services is growing even faster than demand for traditional hosting. For Rackspace, Opsource and other hosters who have launched public clouds, their cloud products are their fastest-growing sources of new revenue.

There is a large gap between the current service levels delivered by public cloud providers and the Enterprise Hosting SLA. The problem is not market demand; the demand is there. The problem is the degree of difficulty in delivering the full IT infrastructure stack, fully automated, on a fully virtualized platform. How can cloud service providers bridge this gap? How long will it take? Please tune in for our next installment.

This is part 6 in a running series of posts by Gray Hall, CEO of Alert Logic on the future of the Service Provider industry. Gray’s experience and background give him a unique vantage point to comment and help lead what the Service Provider of Tomorrow has to do in order to be successful. Parts 1, 2, 3, 4 and 5 are also available here on Secure Cloud Review.