Hosting companies providing dedicated servers, managed services and cloud-based services are not seeing themselves ditch dedicated and managed services to turn into pure cloud providers any time soon, despite customers deploying more and more applications on various types of cloud infrastructure.

The managed services portions of their portfolios will have to evolve, however, to reflect a new reality cloud computing has created. Daniel Patton, VP and general manager of cloud services at CenturyLink’s Savvis, says clients now want managed services for both cloud and physical environments.

“Regardless of the underlying environment, customers want the infrastructure, OS (operating system) and application managed by the service provider,” Patton says.

Matthew Porter, CEO of Contegix, agrees. A managed-services provider’s ability to step in and help the customer drive cloud adoption is paramount if the customer is to derive unique value out of cloud solutions. This means that “managed services will remain a core part of hosting companies”.

“Yet, our definition of managed services will be drastically different,” Porter says. Managed services have historically been closely tied to the physical IT infrastructure they are delivering, contracted and managed in customized ways.

With cloud, managed services will have to evolve to a point where the physical infrastructure management piece is heavily automated, while the provider focuses on extending their services deeper into the application stack, Porter says. “We see a future where managed service providers, like Contegix, embrace the automation of core IT delivery.”

Jason Carolan, CTO at ViaWest, says traditional managed services themselves will have more and more cloud elements. For example, they will have to be able to provide elastic capacity, so it fluctuates with customer demand, as opposed to the traditional approach where they set up a client’s infrastructure and leave it running as is for three-to-five years.

This evolution will, of course, drive need for more skills in the provider’s tool box. “This will place more demands on services engineers to understand automation and continuous deployment techniques, DevOps, and the effects of dynamic networks,” Carolan says.

Dedicated services will remain

The dedicated server will not die as managed services evolve together with the cloud market. “Many applications cannot run on virtualized environments, or even if they can, it’s often better to run them on physical environments for performance or compliance reasons,” Savvis’ Patton says. In his experience, this is actually the case with most applications today. For applications that can run on virtual servers, the compliance issue can usually be addressed by a dedicated private cloud environment, he says.

But compliance-conscious customers, like financial-services and pharmaceuticals, will still elect either a dedicated-cloud solution or traditional dedicated servers, according to Patton.

ViaWest’s Carolan says there are also applications where the 3-4% extra latency that virtualization may tack onto the app’s performance is unacceptable. That field, however, is narrowing.

Cutting managed services not an option

While it would be easier and potentially less expensive for a provider to operate as solely a cloud-services provider, getting rid of dedicated hosting and traditional managed services would be cutting themselves out of a market that is still very much in place. The sweet spot is to have both, as customers increasingly prefer to mix and match.

“As a service provider, it is important that we offer both types of environments and assist our customers as they move into this hybrid world,” Patton says.

Porter says that when Contegix makes as big a change as eliminating an offering from its portfolio, it has to consider its customers’ interests as well as its own. Rules for such changes at Contegix are simple: do not take existing customer benefits away, and, if you cut cost as a result of a change, make sure to share that cost reduction with the customer.

The application is king

While dedicated and managed services retain their place in the market, cloud services, without a doubt, empower customers’ IT beyond what has been previously seen, Nathan Keller, director of business development at Contegix, says. “The customer will utilize these to build and emphasize their unique value in ways nearly impossible five years ago.”

Yet, most customers come to Contegix without fully understanding this power and flexibility, Keller says, blaming the miseducation on advertising and the media. So another new role of today’s hosting company is dispelling the myths and educating the market about actual benefits of cloud computing, as opposed to those highlighted by the hype.

As Patton notes, it is more about the specific application and its needs and not about whether one type of data center environment is better than another. A web-centric application with demand fluctuations, for example, will benefit from the flexibility public cloud can provide, while a business-critical database environment still needs a dedicated managed hosting environment.

“When you look at all of the types of applications that a customer has and how many of them need to work together, it becomes very apparent that there is a strong need for hybrid computing,” Patton says. “We believe that most of our customers will need to operate in a hybrid fashion for many years to come.”

A version of this article firs appeared in issue 28 of the DatacenterDynamics FOCUS magazine. Visit the FOCUS subscription page to read the entire issue.