In the last week of March many major cloud service providers (CSPs) in Asia Pacific dropped their prices for core services dramatically. Analyst group IDC believes this will make it very difficult for smaller CSPs to remain in business if they continue to rely on provision of basic, undifferentiated services.

“If the smaller CSPs are strong enough with decent customer bases, they will be acquired by larger providers. If not, then they're road-kill. In any case, both of the above will drive consolidation amongst the cloud vendors,” says IDC’s Chris Morris the firm;s lead analyst for cloud services and technologies in the region.

Morris says that Cisco's announcement of its InterCloud partnerships with several major CSPs is based on differentiated Infrastructure-as-a-Service (IaaS). “It is differentiated by way of linkage of the Cisco hardware and software technology layers to provide a network service that aims to be the most efficient in terms of cost and flexibility in reacting to different workload demands.

“With its partners, Cisco will build out cloud services based on its reference architectures for different industries, including transportation and manufacturing. And that will become industry Platform-as-a-Service (PaaS) or iPaaS.”

Morris says Cisco’s partners can then leverage this robust platform to build and deploy solutions for the verticals. “This will, in turn, lead a drive for the app developers, both new and old.

“With Google getting serious about the enterprise and beginning to capitalise on its huge developer partner ecosystem, the whole partner landscape could get bloody as service providers including AWS, Google, Microsoft, Cisco, Oracle and HP all vie for the same partners.”

One key factor, says Morris, is that most of the vendors' customers are already aligned with a particular vendor, but it is the owners of the intellectual property (IP) related to a specific industry or business process that will be most sought after - their IP will enable the valuable apps to be built.

“Line-of-business managers are funding about half the cloud spend. If cloud providers want to generate sales volumes to maintain economies of scale, they will need these business-oriented apps as they will drive consumption of the basic, low-margin services and trigger growth in adjacent markets.”