Service Providers

Doug.Dunbar

Enabling Service Providers to New Revenue Streams: Expect Strong Demand for Server Load Balancing-as-a-Service

by Doug.Dunbar on ‎08-08-2012 09:39 AM (15 Views)

As every service provider already knows, performance and reliability are always high priorities for enterprise IT. Add cloud computing to the mix, its importance multiplies. In this week’s blog, I continue discussing the WaveLength Market Analytics study on enterprise infrastructures service needs. Specifically, I address the market opportunity for server load balancing services in both terms of size and demand, as well as service packaging, and pricing.

Enterprises_Top_IT_priority_chart1.png

Like the market for IPv6 translation services, the market for server load balancing (SLB)-as-a-service is very large. When asked about their top three IT management priorities, the graph above shows that more than half of enterprise IT survey respondents chose improving user experience, service quality, and reliability as the top IT management priority. High performance and reliability requirements drive demand for server load balancing solutions, so if half of America’s 18,000 large organization’s outsource just one application’s server load-balancing, it’s a good-sized market.

Of course, server load balancing is not a new concept. Enterprises have been using the technology for more than a decade and as the table below shows, they use a mix of server load balancing solutions. Most organizations use an internally managed solution and about half already use a service provider for some type of server load balancing. Forty five percent of both the medium and large enterprises outsource using dedicated load balancers from a service provider. Although less mature, even 38% of medium and 20% of large enterprises say they outsource to a service provider using shared load balancers. As public and hybrid cloud acceptance grows, this shared load balancing service is expected to grow along with them.

SLB_current2.png

Where are enterprises on their willingness to buy a new variant, server load balancing-as-a-service?  What value-added features would they be willing to buy and what would they be willing to spend on them? Among the three new infrastructure services, IPv6 translation, storage area network extension, and server load balancing, server load balancing has the highest percentage of respondents who are willing to pay for services. With 86% of large enterprises, survey respondents are more likely to be willing to pay for server load-balancing services than the other two infrastructure services discussed in my previous blogs, IPv6 translation and SAN extension.

SLB_chart1.png

As to the above table shows, server load balancing services offer significant opportunity for differentiated services or to sell additional value-added services. Nearly three-quarters of large enterprises are willing to pay for all SLB capabilities included in the study. A service provider can create a service for global load balancing between two data centers as a stand-alone service and about 77% of large enterprises said they’d be willing to pay for it. A service provider can also earn extra revenue by packaging device redundancy for highly available SLB-as-a-service. This value-add can entice 45% of medium and 78% of large enterprises to part with some dollars.

So how much extra will enterprises likely pay for SLB value-added features? We asked how much extra in the form of a premium over the base service fees for SLB-as-a-service for 3 specific value-adds. On average, large enterprises are willing to pay an additional 27% for IPv6 migration support and for SSL offload, and an additional 31% for device redundancy. The more budget-constrained medium-sized enterprise segment reports they are willing to pay an approximately an additional 25% for each of the three value-adds.

The enterprise IT imperative to improve user experience, service quality and reliability, along with increasing cloud apps, create a large and growing service provider opportunity. With its many value-added features, SLB-as-a-service is potentially lucrative; it is both easily differentiated and average revenue per user (ARPU) increases with each a la carte value-added feature. Service providers should invest in their SLB-as-a-service portfolio today to take those new SLB revenue streams to the bank.