Hot on the heels of Cloud Expo Europe last week, I was invited to participate in a SolidFire-sponsored dinner at London's Soho Hotel with executives from a dozen UK-based service providers including Calligo and ShapeBlue.

The intention was to facilitate an open and honest discussion around the kind of things that are keeping service providers awake at night: what are the biggest opportunities in the market around 'cloud,' especially when it comes to running more mission-critical applications; what are some of the barriers, and; what can be done to help service providers differentiate and compete in an increasingly cut-throat market?

The evening overall was a roaring success - not just because the food and wine were excellent (though that certainly helped) - but because the conversation flowed with ease, and everyone around the table actively participated; indeed, no-one was backwards in coming forwards on some of the more contentious issues.

In my introductory remarks, I highlighted some of our recent research findings that suggest end-user organizations are interested in moving more performance-sensitive workloads to the cloud, but they need help in getting there. I also compared the current state of the cloud market to the Cambrian explosion; that period in the earth's evolution where the number and variety of new species accelerated at an unprecedented rate. Any visitor to Cloud Expo could see this for themselves; the sheer number and variety of organizations offering some kind of enterprise cloud service or cloud enabling technology speaks to the extent of the opportunity for sure. But it also underscores that the high signal-to-noise ratio in the cloud ecosystem can make this a very confusing space for end users.

What follows are my takeaways on what I thought were some of the most actively debated, and interesting, themes of the evening.

Defining the opportunity
There is still no agreement among service providers on what constitutes a 'cloud;' less still on whether this really matters or not. Cloud is still mostly marketing hype, and whilst the emergence of consumer clouds such as Apple's iCloud and Dropbox has helped to popularize the notion, this isn't always helpful for providers looking to sell 'enterprise-grade' cloud services.

Persuading end users to buy into the notion of cloud can still be tough
Expectations for cloud SLAs (in terms of availability) are often unrealistically high - buyers often ask for double or even triple site redundancy, but also are not often willing to pay for it. This is partly due to the fact that there is still a strong 'server-hugging' mentality among IT managers who may feel threatened by cloud-based alternatives. There is a strong feeling that, despite the amount of hype cloud-based models have attracted, many IT organizations just don't understand the value they can derive by offloading some or all of the IT burden to a third party.

Current methods of expressing performance and meeting service levels needs overhauling
Users often don't understand the factors that impact service levels such as availability and performance. Often user 'interference' is the culprit, and dialing-in extra performance is difficult with traditional storage technologies. More widespread use of API-based provisioning will help.

Storage remains a key bottleneck
Though not the only one, it's certainly keeping more performance-centric applications from moving to the cloud. Traditional storage is also complex and expensive, facts that often get in the way of developing flexible services for customers.

Customers still think of storage performance in terms of capacity rather than IOPS                                                                                                                                                                       This is tied to the fact that traditional storage systems historically need to add in more disks to address performance. Hence, customers are often confused about why 'enterprise' storage seems so expensive relative to the cost of buying a hard drive from a retailer.

Service providers will succeed by differentiating themselves through IT services that enable business transformation
Although there seems to be a 'race to the bottom' as cloud infrastructure commodifies, this is a dangerous game for service providers to play. Pricing cannot be totally ignored, however, and providers need to be in the same ballpark as the commodity cloud providers.

Users are rarely interested in pay-as-you-go pricing
They overwhelmingly prefer to pay up-front, but with the knowledge that their experience -- and costs -- will be predictable and stable, and that there is an option to dial-up or dial down resources if required (and lots of debate over whether on-demand 'bursting' is actually viable or not).

Lots of interest in liability insurance
Insurance (eg PLI/PII in the UK and E&O in the USA) may (or may not) be impacted by the cloud, and there is interest in how service providers may be able to take advantage of this. Still early days here, but some insurance companies are starting to assess the risk profiles of different 'clouds' based on their performance, availability, etc.

Underlying hardware is a commodity
Users rarely ask about the server networking or storage hardware. However, service providers still care A LOT - the mantra is still 'you get what you pay for' and there's still perceived value in certain brands. The hypervisor is similarly commodifying, though there are real religious allegiances here as well.

The notion of the 'software-defined' datacenter is popular
Software-defined networking is already leading some providers to radically reduce their network infrastructure costs, and there is a belief that software-defined storage will follow, having a similar effect.

From my perspective, the evening helped highlight the role that smart, opinionated, and passionate service providers are playing in driving the IT industry forward. I'm looking forward to continuing the conversation at other SolidFire and industry events. One such event is The 451 Group's European Hosting and Cloud Transformation Summit , taking place in London on April 9-10. Hope to see you there!

(Note: This is a guest post by Simon Robinson, Research Vice President, 451 Research)