Is Huawei’s five mega-cloud prediction what customers need?

SUMMARY:

The Chinese giant reckons there will be five mega-clouds. But customers may be looking for other things that mega-clouds can only provide tangentially, and it is those ‘other things’ that will provide the new jobs.

The mega-cloud is a popular idea with the likes of Amazon, Microsoft and Google (and now Huawei), but is it something that users want to work with? Or would they prefer to work with a wide range of smaller, more specialist service providers which can provide as close to bespoke solutions as possible from ranges of targeted but standard process components that they have developed, both quickly and cost-effectively.

If that second interpretation holds, then  arguably the only one that might get close is Microsoft’s Azure, because it is an obvious extension of Microsoft’s existing presence in much of business management. Google can be said to get close on the same basis, but the others are primarily just providing cloud as a raw resource, and users are likely to be seeking something several levels of abstraction higher than that.

A slightly wider thought then follows: much is made about future employment prospects – and the potential paucity thereof – that may result from developments in the cloud, automation, AI and the IoT. But is there real potential for the hoped for ‘new jobs’ explosion to be found in cloud service provision and the re-intermediation of business `meta-processes’ that will need to exist through the availability of  the smaller, specialist services that will be needed help make the wheels of industry turn smoothly in a fully digitalised world?

When the precursor to the cloud – SOA (Service Oriented Architecture) – became de rigeur for every IT vendor, one of the key storylines used to demonstrate its capabilities and advantages for business was the concept of disintermediation – the removal of transaction stages between the prime manufacturer (or the primary national agent/distributor if that ideal could not be achieved) and the end customer.

Who needed shops, or the administrative complexities of their supply chains, when it was possible for an individual customer to go direct to the vendor website, pick a product, transact its purchase, and await its delivery? Database systems could cope with such workloads, and the appearance of CRM systems helped vendors keep a handle on the customers and their transactions.

You will have noticed that Sshops have not disappeared from our high streets, and in some ways they are proving themselves to still be a key part of the transaction equation – especially when it comes to issues such as customer experience. People are getting wise to the deceits skilled visual artists can make possible in the 2D presentation of 3D products and services.

They are also getting fed up with having to tailor their lives to meet the requirements of the distribution services – if you aren’t in to receive the package then it is your fault. So shops are great places to see, touch and `be with’ a possible product choice, and a good place to collect it from at a time more convenient to the customer.

What Huawei is going to offer

So where’s Huawei in all this? Its ambition was set out by the company’s Rotating CEO, Guo Ping, at the company’s Connect 2017 conference in Shanghai this week. He identified it as an example of the Matthew Effect – essentially to those that have, will come more. In cloud terms, this means those service providers that have the economies of scale will be at the centre of a convergence and centralisation of cloud resource provision.

Guo predicts there will soon be five major clouds in the world, and states that Huawei will be working with its partners to build one of them. He likens this to the three major airline alliances – SkyTeam, Star Alliance, and Oneworld – which take passengers wherever they need to go in the world. Huawei Cloud, he said, will open up the world to its users.

Zheng Yelai, President of Huawei’s Cloud BU, told the conference about what he saw as the company’s in-depth understanding of its customers’ business scenarios, whether they’re working in R&D, marketing, or sales. He is reported as saying the company keeps a close eye on the needs of its customers, and innovates accordingly.

The company announced that it is to invest $500 million in the development of cloud-based professional services, a cloud platform and the associated cloud ecosystem. In practice, of course, this will increasingly mean an understanding of subsets of its own business model – the provision of sufficient compute, storage and networking resources, coupled with some (probably third party-sourced) horizontal infrastructure and business management tools to a vast army of smaller, specialist cloud service providers.

The reason for this is fairly straight forward – and has been the reason all the major IT systems vendors built up their third-party channel partner communities as an early part of their route to market. Basically, there is no way that any one company can service the very different needs of all its end user customers, for the range of knowledge, experience and specialism required is far too diverse. It will be Huawei’s customers that will be servicing the needs of those end user businesses.

This does also leave the company’s plan to invest in professional services somewhat open to question, though some of that spend will no doubt go towards horizontal consulting tools, such as its cloud migration process consisting of four stages and 17 steps.

What do cloud user businesses actually want?

The underlying need of most cloud services end users is now ‘proximity’. From one perspective this term has a purely technical meaning – physically closer means lower latency, which means faster business results for customers. That is very definitely a key requirement in a world moving fast towards digitalisation.

But it can also be interpreted as a need for proximity in levels of understanding and experience by any service provider of the customers real needs. Understanding how to deliver low latency, high bandwidth broadband with high reliability is good, but it will only ever be secondary to understanding how to manufacture socks (or whatever it is the customer does). That is a business need, and a business model, that runs directly counter to the mega-cloud model.

There is an area of overlap however, and that is the re-intermediation of the service provision chain…..in short there is a need for millions of providers of specialist cloud services. And it will only grow.

For the mega-cloud vendors there is also a need to remember that ‘customer experience’ applies all the way through the transaction and service delivery chain, not just the final end customer. Every stage of the process has to be proactively sticky to its customers (not restrictively escape-proof).

So it is important for the likes of Huawei to understand that its customers are not the end users, but other service providers. And their most important need is likely to be not just the latencies, bandwidths and software tools available, but the ease with which they can build collaborative services with other specialist service providers, regardless of what mega-cloud it may run on.

In practice, the Huawei projection of five mega-clouds is probably about right, but from the perspective of the end users’ business needs and aspirations, that has to be seen as just one cloud. For this to actually work, it will require that old chestnut of `co-opetition’ to be dusted down and polished up anew, for this is where their business model really changes to one of shared service provision responsibility, not price-based marketshare willy-waving.

Now take the cloud analogy a bit further. Clouds can be found all over the place and some people can even find them rather pretty for their own sake – or indeed rather threatening. But they actually want them for something they can deliver – water mainly, though sometimes shade is a useful by-product. Users then have multiple uses for that water – drinking, cleaning and bathing, making beer, growing crops and other foodstuffs.

It is also essential to many industrial processes. So water is like broadband – the bandwidth, latency, connectivity and reliability that every user needs. But there are people who claim that the never drink water, so what gets mixed with, and why, becomes the important aspect.That can range from tea and coffee, through all forms of agriculture, onto the concrete used to make skyscrapers and into the highest of hi-tech areas such as the production of microprocessors and memory chips.

It is that diversity that end users need and want to interact with when using the cloud. In the same way that users do not think about `water purity’ (required to make the processor and memory chips) when using their computers, though it plays a vital part in the creation of those machines. They do not think of database systems, CRM systems, bandwidth, or software-defined anything, they are thinking of what they want or need to achieve in their world, on their terms.

That is where there is scope for new jobs, in the finer granularity of services available from which customers can select. And as more complex low-code apps development tools appear, it will no longer be necessary for staff to be rocket-scientist expert coders to build the end user tools that are needed.

To work, all they will is need proximity and connectivity to each other and the customers, plus the ability to appear to be just round the corner. They may well use hosting services that are hosted on service that are on one of the mega-clouds, but nobody will care unless that chain breaks.

My take

The cloud is at last bringing the world of IT up to the level of the rest of business and industry. There may be very big companies that between then own all the brands we use, but it is the brands, and the brand values that we buy into. So while mega-clouds might be economically sensible, on their own they will not provide what the customers need. And with the cloud, new means now exists for small, specialist service providers – millions of them around the world – to emerge and become brands in their own right.

Image credit - Huawei

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