Our Competition

November 3, 2010

It doesn’t come as a big surprise to anyone when I say that I spend a lot of time thinking about the competition. I want to understand what motivates them. I need to understand how they see the marketplace evolving. What are they doing about the cloud? What about IPv6? What about the network? No surprises there.

What I do think would surprise people is that I do not think of Rackspace, Saavis or Amazon as the competition. I think that real competition is found within the small medium business or the enterprise. I don’t have any hard statistics on it, but a number of analysts seem to settle on a 25:75 split. That is, they believe that only 25% of businesses go outside the corporate walls for their hosting needs. The other 75% have their own data centers, or have servers in various closets around the organization (and I mean real closets in some cases). It is not that we don’t want to win the other 25% of the world (we obviously win our fair share of customers there), but the attraction of the rest of the marketplace for SoftLayer is apparent – the opportunity is 3x larger. And that is really exciting.

In 2004, Nicholas Carr authored a book called “Does IT Matter”. One of his central arguments was the notion that IT adoption no longer meant implicit competitive advantage, essentially because IT has become commonplace, standardized and cheaper. I agree with him to a degree, particularly when it comes to larger companies and certain types of IT deployments. For example, there is not much competitive advantage to ERP or HR systems anymore – there are very few larger organizations that don’t have something in place. The same can be said for the Internet or mobile computing – everybody has access, and everybody uses fixed and mobile email. That said, you are dead without either function in place – the lack of adoption is a definite disadvantage. I can only assume that he did not have infrastructure as a service (sounds like IT to me…) in mind when he wrote the book.

I think that there is significant advantage to a relationship with SoftLayer. The difference is that we are taking some IT burden away to give some competitive advantage, versus adding IT burden to deliver an advantage.

What competitive advantage does SoftLayer bestow that is lost when everything is kept within the walls?

  1. Cost. This one is easy. We can deliver at a price point much lower that what you can do internally. This means that resources are available for other things, perhaps product innovation or marketing innovation.
  2. Expertise. Infrastructure is our business. We are better at this than you are. We invest in systems, network and people to make sure this is always the case. Think of less downtime and better security.
  3. Technology. Our ongoing investment in technology and our commitment to innovation means that our customers have access to the cutting edge before most others do. For example, we are already native IPv6 in the network.
  4. Focus. What happens when some of that burden gets shifted externally? It means that the company can focus more of its resources on growing business, versus merely supporting the business.
  5. Automation. If something around here gets done more than twice manually, then it is time to automate. The end result is that we are efficient – no waiting for servers to be racked and stacked. Give us an order and you are up and running in less than four hours. Think of this in terms of speed to market, and speed to scale.

I think you get the point, and I think that the 75% is slowly getting the point too. We deliver a significant competitive advantage by helping to drive your business forward versus delivering as a ‘back office’ that serves to drive costs. We’re waiting for you….

-@lavosby