It’s not all roses and sunshine in the cloud. There’s cloudwashing. Vendors don’t always deliver what the customer thought they were promised. Deployment fail. People get fired. Randy Bias, cloud iconoclast and Co-Founder & CTO of Cloudscaling, moderated the True Stories from the Cloud session at Cloud Connect Silicon Valley in April 2013. Neal Sample, CIO, Enterprise Growth at American Express, and Thomas Barton, Global Enterprise Architect at Novartis Pharmaceuticals shared with the audience their experiences with moving their organizations toward transformation through cloud technologies. In this video, Randy talks to Everest Group’s Scott Bils about challenges and value creation in the cloud.
Originally posted on Leverhawk
It was an interesting week last week at Cloud Connect Silicon Valley. In addition to the keynotes and track sessions, we also saw the release of the summary results of the latest joint Cloud Connect / Everest Group survey on enterprise cloud adoption. Here are the seven things we took away from the conference, the survey results, and the discussions we had:
- The power shift from IT to business is real – one of the key findings from the adoption survey was that outside of dev test environments, disaster recovery (DR) and email / collaboration, business stakeholders are the primary drivers of enterprise cloud adoption. Anecdotal conversations with practitioners and vendors alike reinforced this idea that the cloud is permanently changing buying behaviors in the enterprise. This is bad news for many of the legacy enterprise IT players, who struggle with transitioning from a CIO-centric sales model to one focused on emerging business buyers.
- OpenStack is on a roll – one of the common themes in both the sessions and side conversations is that OpenStack appears to be gaining steam not just with the Foundation members but with enterprises as well. In fact one leading financial services player we met there has the target of moving half of their production workloads to OpenStack by the end of the year. We heard countless more examples of deployments that were in fact more than just pilots, and indications that OpenStack is starting to gain serious momentum.
- Cloudwashing is contagious – many legacy enterprise IT vendors have a lot to lose as their customer base migrates to the cloud. It’s probably not surprising that many of them are happy to have their customers mistakenly believe that virtualized environments = private clouds. As a result we have the unfortunate phenomena of organizations claiming and believing that they’re migrating to private cloud models, when in fact they’re really not.
- Cloud infrastructure can create competitive advantage – while applications, analytics and data are commonly seen as the source of IT-enabled competitive differentiation, we heard about how some enterprises are actually seeking cloud infrastructure as potential sources of business advantage. We heard from one other major financial services firm that the speed and agility benefits being provided by the combination of cloud and open source was in fact creating competitive business advantage in the marketplace.
- Shadow IT doesn’t always mean happy customers – a growing trend that we heard a bit about was the “lose / lose” dynamic that was being created in some organizations by shadow IT. The scenario goes like this: business buyer asks corporate IT for on-demand infrastructure services, with requirements that are perhaps a bit unrealistic. Unhappy with the response they hear, business buyer instead goes to a public cloud IaaS provider, but quickly realize requirements aren’t met there either, but for different reasons. The result is one unhappy customer and two unhappy service providers. While this is the exception not the norm today with shadow IT, it is a trend worth watching. Note to business buyers: with freedom comes responsibility, certainly at least to understand your real requirements.
- Compliance isn’t stopping adoption – conventional wisdom suggests that highly regulated verticals will be adoption laggards due to security and compliance concerns. A series of sessions with IT executives at Novartis, American Express and Fidelity proves that’s not the case. While in the most case they’re focus is on private cloud models, the motivation is still around business drivers – providing faster, cheaper and more effective applications and capabilities. The initiatives they’re driving are global in nature, and far from the ubiquitous proof-of-concepts that everyone seemed to be discussing last year.
- The tipping point is near – if it’s not here already, we’re close to the point where cloud becomes accepted as the primary IT delivery model going forward. The conference survey showed that the majority of enterprises now expect migration to some type of cloud model (public, private hybrid or other) across all major workload types. This isn’t to say that everything will migrate tomorrow, or that it will make sense to migrate everything to cloud models (it won’t), but it does say that market conversation around whether cloud makes sense for the enterprise may be close to over.
Interested in reading more about how cloud is driving enterprise transformation? Check out our recent post on how JP Morgan Chase is using PaaS to transform internal application development. Also read our guide on understanding the Great Tech War being fought across cloud, mobile, digital content and big data.
Photo Credit: Cloud Connect
Cloud Connect Silicon Valley is just around the corner. Once again we’re assembling a group of enterprise IT leaders and top thinkers in cloud to deliver current, unvarnished and useful information for companies mapping their strategies for organizational transformation through agile business models empowered by cloud computing.
And speaking of maps, this year’s theme for the Organizational Readiness and Business Cases track is “Time to pull over and check the map.” On our road to the cloud, enterprises have taken wrong turns, one-way streets and paid some hefty tolls. After all this exhausting traveling, where are we? So, we’re going to safely pull off to the service plaza and check the map.
The first session (Wednesday, April 3 at 9:00 am) will feature a keynote address from the IT leadership at a Fortune 500 enterprise that has made aggressive moves to push much of its workload portfolio to cloud infrastructure. Participants will learn how this enterprise made the business case for organizational transformation to cloud; what assumptions it made in building its strategy for migration; and where the organization is seeing early successes — and warning signs.
Session two (Wednesday at 3:45 pm) is called the “Cloud Witness Protection Program.” We’ll hear entertaining but serious insights from an enterprise IT executive whose identity we’re concealing. He (or she) will share with the audience hard-learned lessons and strategies for avoiding the same mistakes. A quiz session from a panel of experts will follow, digging deeper for keys as to what to look for in a cloud vendor; tough questions to ask before the contract is signed; and what terms to insist on — or walk.
The third session (Thursday at 2:30) is titled, “Disruptive Innovation in Cloud Technology and Tools.” Experts from technology providers, open source projects and enterprises will give participants a tour of new cloud technologies and tools that are available, proven in production environments and ready to deploy. Participants will leave the session armed with an understanding of which tools are the best choices for their enterprise cloud deployments.
The final session (Friday at 10:15) looks at disruption from a business models standpoint. I’ll lead a discussion with two enterprise executives who have used cloud to fundamentally disrupt organizational business models. Participants will hear how these leaders helped their organizations first understand and then embrace the agility, flexibility and dramatic time-to-market compression that cloud enables. Building sustainable competitive advantage through a transformation in business model assumptions is the goal of cloud, and this session will give participants new insights on how to help their organizations get there.
At last year’s Cloud Connect Chicago, we unveiled the results of the inaugural Enterprise Cloud Adoption Survey. Building on the success of that effort, we have launched the 2nd Annual Cloud Adoption Survey. The survey will help us track year-to-year adoption trends and drivers. Tell us about your journey to the cloud, and you could win a complimentary conference pass to Cloud Connect Silicon Valley. Take the survey now.
Hope to see you at this year’s Cloud Connect! Register using priority code DISPEAKER for 25% off.
A wide array of players is aggressively attacking the enterprise cloud infrastructure services market. The competitive landscape includes providers from a variety of backgrounds, including hosting companies such as Rackspace, GoGrid, and Tier3; telcos such as AT&T, Verizon, Telstra, and BT; and legacy enterprise IT service providers such as IBM, HP, CSC, and Dell. They’re all pursuing the same prize – providing CIOs of large enterprises a range of cloud-enabled, next generation infrastructure platforms, from managed or hosted private clouds to public cloud IaaS.
Although the market opportunity is undeniably large and growing, the problem is that many IT services players are not achieving their revenue and growth aspirations for enterprise cloud services. They’re finding it difficult to migrate existing customers to cloud platforms, expand cloud adoption beyond limited use cases, and use cloud services to win new customer logos. Why is growth falling short of expectations? While not exhaustive, following is a set of five issues and mistakes Everest Group commonly sees in the service provider community:
Underestimating Amazon: Enterprise providers almost universally discount Amazon AWS as not being “enterprise ready.” This is despite the fact that AWS is now forecasted to generate nearly US$4 billion in 2013 revenue and that enterprise customers will be driving a significant part of this revenue. While AWS enterprise use cases today are focused primarily on dev / test environments, web apps, and websites, AWS has recently rolled out a variety of enterprise offerings. These include everything from Redshift and data pipeline services targeting business intelligence (BI) and data warehousing, to vertical specific clouds including GovCloud and FinQloud. In fact, this iterative, incremental approach is part of its strategy for attacking the enterprise, with many competitors running the risk of becoming the proverbial “boiled frog.” The reality is, many service providers need to think hard about whether they are going to be able to compete in the enterprise public cloud IaaS space. Using AWS instead of continuing to invest in a native public cloud IaaS offering may be a better strategy for many of them over time.
Neglecting change management: While providers expect customers to make the cloud paradigm shift, many haven’t done so internally. Instead, a “build it and they will come” mentality tends to be pervasive. The expectation is that once the offers hit the market, customers will be clamoring to get on board. Unfortunately, experience is showing that’s not the case. Customers need help understanding the benefits, risks, and costs of cloud models, and where they make sense. Although helping customers understand the implications of cloud models is critical, many providers have dramatically underinvested in vital areas such as sales training. Too often, sales and marketing groups position and message cloud services in a legacy paradigm, which isn’t connecting with customers. While many providers are frustrated that sales teams aren’t making cloud quotas, they need to take a step back to make sure their go-to market teams are positioned and trained for success. To achieve sales effectiveness, they need to structurally change their incentive mechanism, account strategy, and planning exercises.
Selling sole-source: many providers are selling next generation infrastructure platforms – the ability to provide customers anything from dedicated or managed hosting to public cloud services. The problem is that’s not how enterprise customers are buying cloud today. They’re seeking to use the flexibility of the model to deploy specific use cases, and different use cases may require different platforms. Too many providers are trying to sell the “big bang,” sole source IT transformation story and telling CIOs they can provide all of their next generation platform needs. While there are CIOs driving cloud-enabled IT transformation, there aren’t enough of these opportunities yet to support the number of providers chasing them. In fact, many providers would likely be better off selling incremental or even transformational stories to business buyers.
Omitting SaaS and PaaS: Cloud infrastructure service providers have little incentive to migrate customers to public cloud SaaS offerings such as Salesforce.com or Workday. For many customers, migrating legacy apps to SaaS models will be the right answer. Many enterprise cloud service providers conveniently omit this lever from their transformation story and lose customer credibility as a result. The fact is these providers need a better answer for SaaS migration and integration. Moreover, very few cloud IaaS providers are investing in creating an effective PaaS strategy. Enterprise buyers require flexible platforms hosted in an agile infrastructure environment to develop applications for the future. Service provider transformation stories need to closely integrate application development platforms with a cohesive IaaS offering.
Failing to differentiate: Many vendors position themselves as providing managed services that make cloud models ”enterprise ready.” The problem is that every other vendor is saying the exact same thing. Enterprise cloud service providers need to think harder about what their distinctive customer value proposition really is. Too many providers are trying to sell horizontal cloud technology platforms with little thought given to customers’ unique business drivers and how cloud can be used to drive business transformation. But there are plenty of potential opportunities to differentiate by vertical, use case, geography, target community, and other dimensions.
While all of these issues are fixable, they also are non-trivial. The good news for the provider community is that no one has truly yet cracked the code on enterprise and cloud infrastructure services.
As the market for cloud services expands, the providers at each level of the stack are realizing various opportunities beyond their core solutions. They are also realizing that scale is absolutely critical for the success of cloud services. As a result, they’re starting to enter each others’ domain. Let’s take a look.
Platform-as-a-Service (PaaS) Providers
Large PaaS providers such as Microsoft and Google are moving down the stack to create Infrastructure-as-a-Service (IaaS) offerings. This may indicate not only that standalone PaaS is a difficult business to scale but also that IaaS is required to create a broader cloud footprint and higher degree of acceptance, as evidenced by Amazon’s runaway success with AWS. At the current stage of cloud adoption, PaaS may appear to be too futuristic, and many organizations may be unwilling to bet on it for the long term. Therefore, it makes sense for PaaS providers to offer IaaS solutions to their clients.
Most PaaS providers, and their respective platforms – think CloudBees, dotCloud, Salesforce.com’s Force.com and Heroku, Google Apps Engine, IBM SmartCloud Application Services, Iron Foundry Web Fabric, LongJump, Microsoft Windows Azure, Morphlabs, OutSystems, RedHat OpenShift, and VMware CloudFoundry – have preferred programming languages, e.g., .Net for Microsoft Windows Azure, Java for CloudBees, Python for Google Apps, and Ruby for EngineYards. These preferences bind clients to a specific platform offering, as they believe that a PaaS solution typically works best with its preferred or native language. However, to scale their business and appeal to a broader set of application developers, these providers are beginning to widely support multiple programming technologies.
Infrastructure-as-a-Service (IaaS) Providers
IaaS providers are desperately claiming agnosticism in running any application on their infrastructure. They believe as their offerings are pure infrastructure, developers are free to choose any programming mechanism and build applications. However, they also realize that the developer community finds value in a PaaS solution as it reduces their burden of handling various time consuming, nitty-gritty application development tasks. Therefore, many IaaS providers are moving up the stack and creating PaaS solutions on top of their infrastructure offerings, in partnership with leading cloud platform providers such as Iron Foundry or LongJump.
Indeed, many cloud infrastructure players are also partnering with cloud database companies and calling themselves PaaS providers. They are unable to decide whether they truly want to embrace the cloud or just rehash their existing offerings and cloud-wash them with marketing buzz. Regardless, their attempts are to at least make some noise around IaaS, SaaS, and PaaS and position themselves as “integrated” cloud providers.
Software-as-a-Service (SaaS) Providers
Large SaaS providers, such as Salesforce.com and NetSuite, have created their own versions of PaaS, and Workday partnered with Force.com to offer customers a platform on which to customize its solution. These moves not only allow extension of these companies’ basic offerings and integration with other applications; they are smart strategies to convert clients to their platforms. Therefore, these PaaS solutions end up being the “relationship builder” between a technology provider and the client.
Clearly, IaaS providers are realizing that cloud infrastructure is a low-profit, commoditized business and that they must move up the value chain. PaaS providers understand that they need to scale their offerings and that may require them to enter the IaaS market either organically or through partnerships. And SaaS players are already creating PaaS solutions to provide value added services.
The reality is…not all cloud service providers will be able to endure, and many will get consolidated or go belly up. The survivors, who aspire to be big, will be those that offer services across different cloud layers, either through in-house offerings or partnerships.