Welcome to the Country Club Cloud

Country Club Cloud
Credit: Tord Sollie

Membership-based clouds are exploding across the IT services sector. Traditionally asset-light providers are quickly building proprietary, multitenant clouds for their clientele, hoping to capture the next generation of ITIL-based managed services. But is it too late to catch up to the explosive growth of the public cloud?

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What do you think of when you hear the term “country club”? For me, member and exclusive are top of mind. Golf also makes the list. However, I tend to agree with Mark Twain who said, “Golf is a good walk spoiled,” so let’s just focus on the membership and exclusivity angle of this visualization.

The genesis of this concept goes back to a conversation I had with a client in 2014. This buyer was evaluating various cloud proposals, including public cloud and potentially building a private cloud. He was also evaluating what he dubbed a “country club cloud.” When I asked him to describe the characteristics of the service he was evaluating, it became clear he had created the perfect analogy for this emerging delivery model.

Here’s why.

You can’t simply walk into a country club. You'll need to be a member, which is typically codified with a contract. You'll also need to pay an annual fee for a certain tier of membership benefits. The base fee is usually paid monthly, spread across an entire year. Your membership tier gives you access to a set of shared resources, like the clubhouse, pool and gym — and maybe even the restaurant. You’ll also need to pay additional fees for benefits that are not included in your membership tier, like renting a golf cart or attending a social event.

What makes the country club analogy so apt is that it perfectly describes the characteristics of the country club cloud:

  • Standard, enterprise-aligned master services agreement
  • Commitment required, typically annual
  • Fixed monthly cost with value-added services at an additional charge
  • Tiered, ITIL-based services
  • Standardized, shared technology architecture

So, who’s selling country club clouds? These days, it’s becoming a who’s who of the services industry. It’s no surprise that IBM’s Cloud Managed Services and HP’s Virtual Private Cloud are in the mix, given that these providers have a heritage of building infrastructure systems based on their massive hardware and software businesses. What’s really interesting about this trend is that a number of traditional outsourcing and systems integration firms are building them as well. CSC’s BizCloud and T-Systems’ Dynamic Services are well-established country club clouds, and a number of other firms in this category are building them as well.

It’s the latter set of providers that signal a sea change in the our industry. Traditionally, these providers have built or hosted what customers wanted them to — but creating a shared, multi-tenant cloud service based on a standardized reference architecture before clients’ request it is something different altogether.

There are three primary factors driving providers to the country club model:

  1. Apps transformed: Seventy percent of business systems still run on COBOL, which means there is a mountain of application-transformation work required during the next decade. These providers are banking on the fact that they can use their application-transformation chops to drive high-margin project-based work that will then lead to recurring revenue as the transformed app runs on their country club cloud, albeit at a much lower margin.
  2. Apps anew: Demand for mobile apps is exploding. These providers are also betting that their newly launched digital transformation businesses will drive application hosting to their proprietary cloud. The value proposition is compelling to non-IT organizations: We’ll not only build it for you, but we’ll host it for you as well.
  3. The rise of public cloud: The public cloud is projected to grow at an explosive 23 percent compounded annual growth rate. Country club cloud providers recognize that if they don’t have an alternative to the public cloud, they risk having their traditional managed services business evaporate. Hosting a bunch of boxes will no longer cut it with enterprise buyers, so they need an alternative — one that feels like public cloud but offers more (perceived) security and (real) ITIL-based management services. This is the hook of the country club cloud — it’s exclusive to our members.

Country club clouds will begin to emerge as an increasingly viable option for enterprises. As buyers start to move away from the tower-based outsourcing model and start to embrace an application-centric model whereby the workload runs on the most appropriate delivery model, they’ll need a platform that gives them a degree of the flexibility of public cloud but also is supported by ITIL-based support services.

So while actual country club membership has been in steady decline for the past decade, country club clouds have yet to be market-tested. In theory, these services hit the sweet spot for today’s IT buyer: commercially flexible contracts blended with ITIL-aligned support services for security-minded enterprise clientele, all based on a shared, multi-tenant platform that is always current.

However, the lure of the public cloud is strong, and private clouds continue to be built at a very healthy clip. Is there a place for country club clouds along the delivery model continuum? Absolutely. Is it enough of a market to offset the revenue pressure many of these providers are facing?

One word: Fore!

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