I spent the last week on holiday in the Wine Region of Western Australia’s South West. I’ve been holidaying down south since I was a teenager and I’ve seen the region transform over the years…I can’t speak for the years prior to my time spent around Margaret River, Dunsborough and Yallingup, but I had a thought as I was visiting one of the newer Wineries/Breweries that, in some ways… the Wine Industry down south shares similar traits to the Hosting/Service Provider Industry.

Winaries of the South West View Larger Map

Cloud Hosting Providers of Perth View Larger Map

So what has wine and tourism got to do with Hosting and Cloud?

I remember a conversation with a local Microsoft SPLA guy (those in Australia know there is only really one guy who fits that bill…@PhileMeAU) during a Hosting Partners dinner at TechEd 2010 where by the group was talking about the possible impact of BPOS/Office365 and what it meant for traditional hosters. Out of that conversation the strong advice given at the time was that we had to Differentiate, or Die…That was to say, there was really no future in hosting vanilla applications like Exchange or MSCRM because commodity based public clouds will eventually swallow all before them. Three years on and the same could be said for those doing IaaS and the thought that traditional Virtual Machine hosting is now the realm of the bigger players.

In some ways the rise of AWS, Azure and other public clouds has shifted the industry closer to a Demolition Man style Taco Bell monopoly. But there are enough alternative Service Providers competing against the big guns and winning that proves that, for all the marketing money aimed at perpetuating FUD…somewhere along the lines those smaller players are doing something right? Have they taken on the differentiation threat? Or is something else responsible for their continued existence and success?

Back to the Wine Industry example, going back 20-30+ years there might have been 5-10 Wineries that dominated the industry until the smaller players starting buying up land and producing their own vintages. Pretty soon the market became flooded with Margaret River wines and competition was at it’s peak. For those wineries lucky enough to be not too far off the Caves Road (the main road running parallel to the coast) there was a guarantee of a steady stream of customers…What I have seen over the last 5 years or so is a number of Wineries trying to differentiate themselves from the others by bringing out more exotic vintages and even branching off into brewing of Beers and Spirits. The region was trying to become as famous for it’s liqueur’s as it’s vino’s.

With that going on, its still the more established wineries that attract the majority of the tourist dollar…this is as much due to reputation, and market muscle as it is for the quality of their product. Differentiation hasn’t worked…at the end of the day, people visiting will find their ways to the bigger players and the smaller players will continue to exist to serve their own particular market niche.

The same can be said for the Hosting and Cloud industry…lots of service providers have tried to differentiate their services so as to try and ward off the threat from an AWS, or an Azure…but in doing that I’ve seen (and been part of) companies loosing focus on getting the simple things right. Being a jack of all trades and a master of none is dangerous in the Service Provider industry…unless you have a bottomless pit of resources (both money and people based) there is no way you can achieve an excellent standard across a number of product sets. You also risk not focusing on the key areas of automation and process that goes hand in hand with a successful product set.

Small to Medium Service Providers can still thrive if they stick to core competencies and strive to excel within those narrower, but focused areas. The key that I’ve found of late (and am of the strong belief) is that you just have to keep it simple and do what you do well. That is to say…pick a course and stick with it. If you do IaaS well, why try to offer Platforms or Applications? If your strength lies in Hosting .NET…why try to branch out to a LAMP platform? All that’s achieved in my experiences in a thinning out of the quality of service leading to a situation where brand name is impacted.

As with the wineries down south Service Providers need to be wary of trying to keep up with the big boys…just because Winery BXT has released an updated blend why try to match that? Similarly core focus will be lost if Service Providers try to keep up with “new/justfixesforpoorinitialrelease” features AWS and Azure and others seem to be releasing every month or so to keep on looking like they are adding value add…when really all they are really doing is filling gaps.

So, take away here is to not take the differentiate or die message literally…Service Providers should focus on being excellent at what made them strong in the first place…the differentiate message may have been perpetuated by those that would want to see SP’s lose focus and die…a slow death!