Sramana Mitra: As far as your own infrastructure is concerned, you’re heavily into this hosting and colocation business. What is going on on the side of the hardware vendors or the infrastructure vendors, so to speak, that you buy from? What are they providing for you? Is this a topic that you can discuss at all?
Steve Garrou: I can discuss the commercial models we have with our hardware partners. Technical specs, not so much.
We’ve seen the hardware providers react faster to the paper use and the as-you-go model. I think that they’ve done a strong job in understanding that our business paradigm has changed. We no longer buy a server from them, install it and manage it for a client, and then have that for a contracted period of three years. Our model has changed. The model for which they provide us hardware is shifting to more of an operating expense model from a capital expense model for us. So far, we’ve had really good luck with a number of the hardware vendors coming into play and saying, “We’ll help you match your expense with your revenue as it comes in on a pay-as-you-go model. It’s not nearly as granular as cloud computing is, but it’s definitely come a long way.
SM: Is your hardware provider primarily HP?
SG: HP is a strong partner of ours in the hardware space. We also use a few other companies as well.
SM: How does this work from HP’s point of view, then? HP, in its service business, also offers some of the services you provide. They’re providing you with hardware to compete with their businesses. How does that all roll out?
SG: I wouldn’t want to speak for HP. What I can explain is that the partner organizations, the channel organizations within the hardware providers are also looking to give incentives to some of their sales organizations across the board. I would say this is actually now a common practice within the hardware space to compensate their organizations when their salespeople sell cloud services through a service provider. This isn’t unique to Savvis. It’s not unique to HP. It’s a common occurrence now where the hardware vendors are recognizing that they have to enable their partners that are service providers to sell to what the market’s really looking for. At the same time, the hardware providers also are aware that many clients are looking for a hybrid model, and not just a public cloud or a private hosted cloud. They’re still looking to buy cloud capabilities and take advantage of those that remain on premises in the customer’s own data center. They have to walk this balancing act and make sure they’re covering both sides.
SG: Yes. I would think that’s right, IBM, HP, Cisco, Sun, Oracle, the larger ones on the hardware side, yes.
SM: Not so much Cisco, right? Cisco is not in the data center business. Cisco provides equipment to data centers, but they don’t have data center services of their own or cloud services.
SG: Sorry. I thought we were on the hardware conversation.
SM: No, I’m thinking about those hardware vendors that run into this complexity of conflict of interest, so to speak, are the ones that also have data center services businesses or cloud services businesses.
SG: It seems to me, in those companies you mentioned that have the hardware services side, they typically operate as separate business units with completely separate goals. I see the conflict of interest less with a hardware company that has a services business than a hardware company that is trying to enable an indirect channel as a service provider as well as enable their own sales force selling hardware. We tend to see that conflict more in the marketplace than the services and the hardware.
SM: Fair enough. I’ve got a couple of good nuggets from this discussion. Is there anything else that you want to add?
SG: No. Thank you for the time. I enjoyed it.
SM: Thank you for your time, Steve.