Over the recent past, we have started to see some movement of the ISPs to be more conscious of the Cloud Application and Content Providers as companies to merge with. I think this is interesting as maybe now we can get rid of the notion that the ISPs are going to have some great competitive advantage in the world of The Cloud. Many analysts and planners that I know have thought that the ISPs would be able to set up special business arrangements to help them improve their pricing and help their margins. This has not been proven to be true and in a phrase: I told you so.
Why is this? Well, the other two communities don’t want it to happen and they are Customers and Application Providers. Customers, even business customers, have to evaluate whether they want to have a special arrangement when they push applications into The Cloud. Those special arrangements can be problematic and generally the answer is no. Why is that? Because these arrangements (at least today) are one off. Each ISP does its own thing with a specific application or cloud provider. That means that customers would have to worry about lock-in to that vendor set for what can be a mission critical part of their IT infrastructure. This can be very problematic in a Disaster Recovery scenario. It can also be a problem because there is no assurance that the service will continue forever. If a service turns out not to be popular one side or the other can simply turn off the service. If you bet your company on that functionality, then you would be in real trouble. If you are setting up such an arrangement for a run of the mill application, then you have wasted a lot of money.
From the application provider, there is a similar story. Most every application out there wants to be available to as many businesses and consumers as possible. That means having a special deal with one provider greatly limits the market for their application. Unless there is a specific reason to do so, then why would you do it? So application providers generally make their service work on generic Internet service.
Let me give you a counterexample out of my own background. At Edgewave, we replaced an Internet connection with an Ethernet connection from Headquarters to the nearest Data Center (in that case San Jose). There was a technical advantage in that we could then tell whether a data center connection issue was related to the Internet in general or was specific to us. There was, in that case, a cost advantage as well. But we could use the Internet connection if the Ethernet connection was no longer available.
The result of this is that special connections have had a declining usage and value for The Cloud. So, ISPs are now trying to find a way to be more relevant in the data center, content and application parts of the market. Well, better late than never.
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