Public cloud service providers will need to adopt a flexible approach that includes offering products from their competitors if they’re to survive in the long term, says a new report by 451 Research Inc.

The research firm says in its “Managed Infrastructure Market Overview 2016” report that with users increasingly adopting a multi-cloud approach to service procurement, cloud companies will need to offer access to third-party services if they don’t want to lose customers. Therefore, a number of cloud service providers would be better off repositioning themselves as “cloud brokers” that can assist customers in multi-cloud management.

“Almost without exception, service providers of all kinds – including the hyperscalers – are now offering access to third-party services as well as their own,” wrote Carl Brooks, the author of the report. “They are becoming brokers of cloud services and must, if they want to win, keep and grow customer relationships without the customer needing to go elsewhere.”

Brooks notes that this strategy has been gathering pace for a while. Examples include Rackspace Inc.’s decision to offer services aimed at helping companies manage their Amazon Web Services and Microsoft Azure deployments, and a similar partnership between VMware Inc. and AWS.

In a second report, 451 Research expands on this idea by outlining a new “AWS+1” operating principle companies are using to build their cloud strategies, to ensure they can’t be locked into a single provider later on down the line. That report also predicts a sharp rise in the number of cloud companies transforming themselves into cloud brokers.

“Enterprises are seeking suppliers that can unburden their load and bring expertise in running specific workloads or application tasks, whether it is SaaS, managed applications or hosted business processes,” the research firm’s “2017 Trends in Cloud Transformation” report said. “This is why the majority of the cloud opportunity for providers will be in the delivery of value-added services on top of whatever underlying infrastructure choice they make.”

451 Research believes that cloud providers will be forced to expand their offerings in 2017 to include “higher-value” services from third parties. It warns that those who fail to do so, and continue to pitch themselves as just a provider of cheap, powerful or feature-rich virtual machines will not be able to win any additional market share. Such an approach is also unlikely to deliver any substantial revenue growth, as companies like AWS and Microsoft continue to reduce their pricing for virtual machines.

“Higher gross margins from value-added services can compensate for falling virtual prices,” the report said. “In other words, providers should race to the top of integrated, managed services rather than racing to offer the cheapest virtual machines in the market.”

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