I like to keep my own archive of my work, since companies may not always keep posts active – in fact companies are acquired and their content taken down far more often than I had known before! So here is my version of this article, and the published version should be here.
Recently, major infrastructure hardware vendors such as Hewlett Packard Enterprise Company (HPE) and Dell have launched as-a-service offerings, positioning themselves to take advantage of the cloud computing explosion. These infrastructure hardware-as-a-services (HaaS) offerings have enjoyed strong double-digit growth in the market, but still represent a minor portion of overall business for these vendors.
In fact, infrastructure HaaS accounts for only 3.5% of HPE’s $28.5B and 2.6% of Dell’s $39B in revenue. That may make infrastructure HaaS look less-than-promising, but those numbers still represent around a billion dollars for each company. That’s nothing to sneeze at, so here we’ll look at how you can take advantage of untapped potential in the infrastructure HaaS market.
Understanding Cloud Computing Requirements by Industry
Cloud computing requirements vary widely across different industries. So, to be successful in infrastructure Hardware-as-a-Service (HaaS), a targeted and industry-specific approach is crucial. By understanding industry variations, you can tailor your HaaS offerings to meet the unique needs of each industry.
Analyzing Cloud Spend and IT Metrics Across Various Segments
One key to identifying potential targets is to assess the mix of capital expenditure (capex) and operational expenditure (opex) – and where cloud spend fits in.
This includes two key metrics. First, the percentage of public cloud spend as a part of overall IT spend varies significantly across industries. This highlights the adoption of cloud technology in modern business operations, with an average cloud spend of 15% across all industries. Second, analyzing capex as a percentage of total IT spend helps gauge the suitability of as-a-service offerings. This metric exhibits wide variance, indicating diverse industry preferences. On average, 23% of IT spend can be categorized as capex across all industries.
Assessing Cloud Spend and Capex Metrics
Let’s dive a little deeper into these spending assessments.
Public Cloud Spend as a Percentage of IT Spend
Understanding public cloud spend as a percentage of overall IT spend is key in evaluating this market. The range of public cloud spend varies, from a minimum of 11% in utilities and government sectors to a maximum of 22% in software and internet publishing. These variations reflect the diverse adoption levels of cloud technology across different sectors. This metric can identify industries that exhibit higher cloud spend, indicating a greater potential for infrastructure HaaS adoption.
Capex as a Percentage of Total IT Spend
Next, the evaluating capex as a percentage of total IT spend provides insights into the fit for as-a-service offerings. Different industries allocate their IT budgets differently, with varying proportions dedicated to capex. For instance, telecommunications and utilities allocate a significant portion of their IT spend to capex (42% and 36%, respectively), while software publishing focuses less on capex (14% of total IT spend). By understanding these industry-specific preferences, you can align your offerings accordingly.
Analyzing both public cloud spend and capex metrics lets you identify industries that are more receptive to infrastructure HaaS solutions and empowers you to strategically focus your resources.
Industry Segmentation and Market Opportunity
To determine the most suitable cloud infrastructure for each industry, we grouped industries into four quadrants based on their cloud spend and capex metrics. By categorizing industries like this, you can gain a clearer understanding of which sectors are more inclined towards infrastructure HaaS adoption. Quadrant III, consisting of industries with low cloud spend and low capex, emerges as an ideal target for infrastructure HaaS:
Figure 1: Industry segmentation by Capex and Cloud Spend as a percentage of IT
Ideal Candidates for Infrastructure HaaS
According to our analysis, four industries—manufacturing, healthcare, insurance, and state/local government—present viable opportunities for vendors to gain a competitive edge with tailored infrastructure HaaS solutions. Additionally, industries adjacent to Quadrant III, such as industrial electronics, construction, chemicals, and consumer products, also present significant opportunities for infrastructure HaaS.
Figure 2: Market opportunity in the four target industries
Four Infrastructure HaaS Targets
Focusing on these four target industries, you can tap into a massive $70B market, with an estimated compound annual growth rate (CAGR) of 14%. Moreover, adjacent industries offer an additional opportunity worth over $20B. However, it is important to note that other industries currently show limited potential for infrastructure HaaS, as they are inclined towards either public cloud or traditional hardware solutions.
Critical Ingredients for Success in Infrastructure HaaS
While the opportunity for infrastructure HaaS is massive, you’ll need to plan carefully. Coordinated execution across product development, sales, marketing, IT, and admin is critical for success here. After working with several companies that have succeeded with these transformations, we’ve identified these critical ingredients for success:
Highly Tailored Value Proposition
You must develop a highly tailored value proposition. Understand specific pain points, requirements, and objectives of your target and design solutions that address their unique needs.
Value-Based Pricing for Lower Total Cost of Ownership
Value-based pricing is essential to showcase the cost-effectiveness of infrastructure HaaS compared to traditional hardware solutions. Demonstrating a lower total cost of ownership and highlighting long-term savings potential can attract organizations looking to optimize their IT infrastructure.
Intentional Land and Expand Strategy
A well-planned land and expand strategy can help expand your customer footprint beyond infrastructure HaaS and into higher-level infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) offerings.
Clear Sales Incentive Structure and Collaboration
Establishing a clear sales incentive structure and fostering collaboration between your sales and customer success teams is vital for driving adoption and ensuring customer satisfaction and retention.
Curated Channels for Penetration
Developing curated channels specific to your target industries facilitates deeper penetration into these markets. Work with industry-specific channel partners and leverage their expertise and networks to enhance market reach.
Robust Backend Capabilities for Scaling
To scale the subscription business model inherent in infrastructure HaaS, you need robust backend capabilities. This includes efficient quoting, invoicing, consumption tracking, and monthly billing systems. Invest in scalable infrastructure to accommodate growth.
Don’t Wait – Take Advantage of Infrastructure HaaS Before Your Competition
The infrastructure HaaS market holds immense potential for vendors seeking to capitalize on the growing demand for cloud computing. While major vendors like HPE and Dell have made strides in this space, there’s still room for new players. By adopting a targeted, industry-specific approach and leveraging key metrics like public cloud spend and capex, you can identify ideal candidates for tailored infrastructure HaaS solutions.
Are you ready to unlock the potential of infrastructure HaaS? Don’t wait for the market to take off without you. Take action today to position yourself for success in the evolving cloud computing landscape. Contact us today to learn how our tailored infrastructure HaaS solutions can drive your business forward.