Scale Computing Offers 2024 Service Provider Predictions

As 2024 begins, it's time to take stock of the year that was and look ahead to what the new year might look like. To aid in our prognostications, we've brought together some of our resident product experts and technical evangelists here at Scale Computing to share their insights and offer their forecasts on what trends might shape the edge computing, hyperconverged infrastructure and virtualization solutions for the service provider market in the year ahead.

Uncertainty Around VMware Pricing Pushes Partners and Resellers Toward Significant Market Shifts

As the service provider market heads into 2024, a shift is occurring, largely driven by uncertainties around Broadcom/VMware's business direction and pricing strategies. This shift could have profound implications for partners and resellers, who have traditionally relied on VMware as a critical component in their service offerings.

The heart of this transformation lies in the changing approach of VMware, particularly after its acquisition by Broadcom. There's a strategic pivot toward prioritizing top-tier customers, leaving lower-tier customers grappling with increased resell prices. This change isn't just a pricing issue; it's a catalyst for a fundamental re-evaluation of service models across the market.

For managed service providers (MSPs), the increased cost of VMware solutions presents a significant challenge, financially and operationally. These providers aim to create comprehensive offerings that effectively serve their customers' needs. However, MSPs will be compelled to consider alternatives if incorporating VMware solutions becomes financially unviable. Cost concerns and operational issues, such as the recent channel confusion and quote delays stemming from headcount reductions at VMware following the Broadcom acquisition, will drive the need for change. Partners are concerned about losing established contacts at VMware, which could impact their ability to swiftly provide pricing to customers and resolve issues. In response, MSPs might start exploring other options, maintaining their commitment to delivering quality service, regardless of the technology involved.

This trend indicates a market shift, given VMware's extensive usage. Service providers could reassess where and how they run their applications. Many applications, previously tethered to on-premises infrastructure, are viable candidates for cloud migration. This transition is about more than just moving to the cloud; it's about “rightsizing” — ensuring optimum use for on-premises resources for applications that demand low latency and other specific requirements.

Furthermore, this shift acts as a catalyst for service providers to evaluate their on-premises applications. They're now asking critical questions: Does it make sense to continue running certain applications on-premises? Should they refactor and move applications to the cloud? Each application is being scrutinized, with decisions being made based on unique drivers and requirements.

In essence, the uncertainty around VMware's pricing isn't just altering the cost structure for service providers; it's reshaping their operational and strategic landscapes. As 2024 progresses, we can expect to see an acceleration of cloud migration, a diversification of technology solutions, and a strategic re-evaluation of service offerings across the service provider market. We believe that this period of transformation, while challenging, may also present new opportunities for innovation and growth for service providers and their customers.

NUC Finds New Life in 2024 at the Edge

In a surprising turn of events that shook the mini-PC market, Intel announced the discontinuation of its NUC (Next Unit of Computing) series in the summer of 2023. This decision marked the end of a decade-long era where Intel's NUC series reigned as a powerhouse in the mini-PC market. Interestingly, this move wasn't motivated by a lack of demand. Instead, Intel opted to step back from a segment it no longer deemed central to its core business strategy.

However, the story of the NUC didn't end there. In a strategic pivot, Intel handed over the reins to its trusted partners, granting a non-exclusive license to Asus, enabling that company to continue the legacy of the NUC product line. This license encompassed the production and sale of systems ranging from the 10^th- to 13^th-gen NUC products, as well as the development of future designs. Since this transition, the small form factor (SFF) market has witnessed a surge in innovation and diversity. Leading players such as HP have introduced compelling new designs, revitalizing the landscape of mini-PCs.

Looking ahead to 2024, we anticipate that some forward-thinking service providers will tap the potential of this market in some unexpected ways. While the focus of the NUC series initially targeted consumer enthusiasts, we believe there's a significant and growing opportunity for NUC-like devices across the edge computing landscape. The retail industry and the remote office/back office (ROBO) markets stand out as prime candidates for the next generation of compact, powerful systems, as they often lack the physical space and IT expertise to manage traditional server racks.

Service providers with experience at the edge will be well-positioned to harness these small yet robust systems to deliver high-efficiency and easy-to-use edge computing solutions. The applications are manifold — from powering point-of-sale systems in retail to managing data-intensive tasks in remote offices. The compact form factor of next-generation NUCs combined with intuitive user experience of modern hyperconverged solutions should whet the appetites of service providers and their customers in the year ahead.

Service Providers Will Adopt Edge to Boost Profitability

As the service provider market faces an uncertain economic outlook in 2024, they will likely continue to face increasing pressure to find creative ways to grow their business and improve their net margins. This challenge will only be intensified by the ongoing IT labor shortage, compelling service providers to seek out new strategies to maintain, if not improve, their service levels.

One way service providers will likely seek to differentiate themselves is via the adoption of edge-based automation strategies such as zero-touch provisioning and infrastructure as code (IaC), which enables an administrator at a centralized location to remotely deploy, administer and update remote systems. Furthermore, IaC facilitates state-based, idempotent infrastructure management, which is crucial in standardizing large, distributed deployments. Such an approach allows service providers to manage multiple customer networks more efficiently, reducing the need for extensive manual intervention and thus mitigating the impact of the IT labor shortage. By automating routine tasks and simplifying complex processes, service providers can better allocate their scarce human resources to more critical, high-value tasks, thereby optimizing their workforce utilization.

Moreover, MSPs are recognizing the importance of standardizing infrastructure to improve service and support margins. Standardization streamlines operational processes, reduces complexity, and minimizes the chances of error, leading to a more consistent and reliable service offering. This approach not only enhances the quality of service but also drives down costs associated with customized solutions and the time often required for deployment and maintenance.

As 2024 progresses, we can expect to see the adoption of edge computing solutions will play a significant role in this evolution, enabling MSPs to deliver faster, more efficient services that are in closer proximity to the end user. This shift will not only help MSPs in sustaining their growth but also in creating a more resilient and scalable business model that can withstand the challenges of an uncertain economic landscape.

MSPs Will Lead the 'Edge-as-a-Service' Revolution

Edge-as-a-service (EaaS) refers to a model by which edge computing capabilities are delivered as a service by vendors to end-user organizations. For MSPs, the ability to provide EaaS represents a unique strategic opportunity to enhance their current service offerings, improve operational efficiency and meet the evolving needs of their customers — especially those who generate significant volumes of data but are unable to process it effectively due to the latency limitations of the public cloud.

This is especially true for the industrial sector, where estimates suggest there will be more than 75 billion IoT devices in use by 2025. Every connected thing, be it an environmental sensor connected to a piece of equipment or a surveillance camera, generates troves of real-time data that needs to be processed and analyzed promptly to make timely decisions. By leveraging EaaS, MSPs can facilitate edge computing solutions that process this data near its source, significantly reducing latency compared with sending this data to an upstream cloud provider.

We believe MSPs are ideally suited to deliver EaaS given their extensive expertise across a broad range of technologies, alongside their established relationships with the vendor ecosystem. Additionally, MSPs' deep understanding of security and compliance ensures that EaaS implementations meet industry standards, a critical aspect given the sensitive nature of data being processed at the edge. Moreover, the ability of MSPs to provide customized service offerings sets them apart in delivering EaaS as they can design tailored solutions specific to the unique demands of various industries, such as health care, manufacturing and retail.

Their experience in providing ongoing support and maintenance should also prove vital for the continuous operation and success of EaaS, encompassing everything from routine monitoring and troubleshooting to more strategic architectural decisions. This comprehensive support, coupled with their commitment to innovation and staying abreast of technological advancements, positions MSPs not just as service providers, but as strategic partners who can help their clients future-proof their operations in the edge computing era.