Gaining Altitude In The Cloud Archives - Page 4 Of 12

The Blind Side Blitz: How Business Users Impact Next-Generation IT Spend | Gaining Altitude in the Cloud

June 3, 2013

Seemingly out of nowhere, users hit enterprise IT spend on its blind side. Like a blitzing 265-pound football linebacker that the quarterback doesn’t see running up behind him to tackle him, business units and end users blitzed past the IT group and rapidly adopted cloud, mobile and other next-generation IT solutions wherever and whenever they could. Like the quarterback, enterprise management had a blind side and didn’t see or block the sudden force of the “consumerization of IT” coming to barrel through the sanctioned processes of purchasing IT. This blind side play changed the IT game in a profound way and has massive implications for all players.

In football, unblocked linebackers coming up on the blind side don’t just happen; several factors are necessary to create the right conditions for this disrupting phenomenon. The same is true for the recent blitz impacting enterprise IT spend.

Over the last few years, enterprises reacted to adverse and unpredictable economic conditions by reducing overhead wherever possible. This significantly constrained CIO budgets, forcing many IT departments to decrease their expenses year on year. The tactic reduced the IT group’s ability to drive change in the business and slowed the ability to respond to business needs.

Finally balance sheets improved and companies emerged from the belt-tightening period. Eager for growth, they now look favorably on business projects with strong ROI. However, IT is still slow to address new business needs, including the IT components of these initiatives. At the same time, business leaders and end users are exposed to, indeed inundated with, a new range of easy-to-access affordable, offerings that are readily available through channels other than their enterprise IT department. Voila — the right conditions for the blitz.

Implications

Let’s first consider the implications for the business stakeholders leading the blitz. Their new buying freedom combined with the easily accessible IT components creates refreshing and sorely needed agility and flexibility. Projects that, in the past, would have advanced slowly now race ahead at an ever-increasing pace.

Instead of detailed requirement documents and unending interdisciplinary team meetings, they can conceive, launch and evaluate pilots with minimal capital and time, allowing the business to experience the technology before making significant commitments. Business stakeholders’ perspective is that management’s forgiveness is easier than gaining up-front buying permission, and IT can work after deployment to address compliance issues.

Enterprise IT groups can’t deny the new reality and must lead, follow or get out of the way of the momentum and power of user-based IT buying. They cannot stand against the strong business cases for these business-driven initiatives. Many CIOs look the other way or add a team member to the program and claim victory.

Nevertheless, CIOs and top management eventually must address the complexity these solutions will add to the enterprise. We can only hope they start preparing for it more quickly than happened with the massive disruption caused by distributed computing, which took enterprise IT a decade to untangle.

The business users’ IT spending blitz also hit the blind side of IT providers, and the implications for providers are as significant as they are for consuming enterprises. Many traditional providers of IT and IT services are troubled by the fact that they are not reaping the significant growth opportunities resulting from the new spending on cloud, mobile and other next-gen IT products that other vendors are enjoying. Why not?

New game plan for IT providers

The enterprise IT market is obviously alive and well. But there are now two distinctly different markets for next-generation IT, so IT providers must change their marketing and sales tactics.

The first market segment accounts for 75 percent of the total spend and has all the traditional ROI buying characteristics. Value is tied to objectives such as as reducing enterprise cost.

To increase their share of the second segment (currently 25 percent of next-gen IT spend), enterprise IT providers must understand that the buyers’ perception of value has changed.

Although value is still wrapped in ROI, an important new criterion is whether the solution will meet the ROI objectives in a timely manner. In addition, the business stakeholder’s confidence in the solution’s success is more important than competitive pricing. These two characteristics drive business buyers to opt for pilots to learn more about the solution before they extend their commitment.

Clearly the ROI drivers differ for buyers in these two market segments. Therefore, IT providers seeking high growth must develop different marketing messages, pricing and delivery models for each segment.

Furthermore, as both segments often exist within an enterprise, it is unlikely that the same sales personnel can successfully sell to both markets.

IT providers that want to quickly move to capture the new opportunities in next-generation IT spend will be more successful if they fully understand buyers’ changed perception of value and approach the market in this fashion.

Call Centers in the Cloud: Offering Savings and New Operating Models | Gaining Altitude in the Cloud

May 17, 2013

Migration to a cloud-based contact center model offers the potential to drive hard total cost of ownership (TCO) reduction and the flexibility to rework existing business models. And both cost savings and business agility are very timely for the contact center space, as more businesses continue to shift from a protectionist, recession-minded framework to actively looking to invest in customer relationships and growth strategies.

Recent Everest Group client work has demonstrated that TCO savings enabled by migration to next generation contact centers can be in the 20-30 percent range for some organizations. These cost savings are realized through several structures. Approaching a contact center as software-as-a-service (SaaS) provides optimal call center capacity in a pay-as-you-drink model wherein there is a dynamic and continuous balance of capacity and utilization. Converting the physical capacity of call centers and server space to a paid service in the cloud allows enterprises to shift expense from capital to operational. The digital nature of cloud contact centers can also reduce telecommunications costs, transforming expensive long-distance routing into the more cost effective Voice over Internet Protocol (VoIP) solution. Additionally, cloud contact centers shift the weight of software maintenance and feature development to the vendor.

Call centers have long taken the spotlight for their cost savings potential. The last decade has seen the popularization of outsourcing call centers to lower-cost geographies that offer savings in wages and capital expenditures. More recently, the technology landscape has sufficiently evolved for the next iteration of call centers – the contact center – to emerge. The contact center is driven by next generation technology that, through data enablement, allows for the retention and improvement of traditional voice service while embracing popular emerging communications such as email, chat, and text. While companies such as Liveops, Echopass, and inContact are on the forefront of the technology change, a wide range of legacy players such as Genesys, AT&T, and Avaya are also offering mixed solutions that embrace the move to cloud.

Data enablement provides a platform for several of the key features that define next generation contact centers. The data-enabled platform offers managers new levels of transparency of their contact centers, from high-level aggregations down to real-time, item-by-item granularity. The enabling tools include recording, quality monitoring, workforce management, talent management, surveys, and analytics. For example, a recent Everest Group provider client used cloud-based tools to more accurately forecast call volume and better manage utilization rates for its customers, and consequently improved its SLAs.

The benefits to the contact center workforce are no less substantial: increased automation, workflow scripting, security, and compliance management all contribute to a reduction in errors, reduction in cost, and, ultimately, an increase in customer satisfaction. No small part of next generation contact centers is the enhanced integration of today’s multi-channel communication environment. The fragmentation of communication through voice, text, chat, emails, etc., are all captured by cloud-based contact centers and refocused into simple, manageable, and transparent modes of communication for the workforce. For example, a buy-side Everest Group client was highly incentivized to move to a next generation IT platform for its call centers because the new technology in a digital environment allowed for future development of several services previously unattainable.

Many of the cost savings associated with next generation contact centers are rooted in virtualization and the ascension to the cloud. Converting physical call centers into virtual enterprises allows for decentralization of the workforce, which in turn provides access to pools of employees previously unavailable. The same phenomenon even allows for workforce sourcing to swing back domestically while maintaining cost savings. A key benefit of the cloud model is scalability; erratic call volumes, seasonal spikes, and disaster recovery can all be handled dynamically without down-time or volume-ceilings, and the pay-per-use element allows costs to reflect actual usage.

There are, however, several caveats that should be taken into account before certain cost savings can be realized. The cost of data-enabling a workforce must be balanced against the cost savings of closing physical locations, as well as against the increased revenue realized only through data enablement. For example, Everest Group recently conducted research for an enterprise in which the cost of maintaining call centers in other countries was less expensive than data-enabling the entire workforce. As a result, the firm recommend a phased approach wherein select call center workers were data-enabled, allowing them full use of the company’s new cloud platform to capture a new revenue source.

So, how can you tell which enterprises should shift to a cloud contact center model? Those that meet the following general criteria may be able to reap substantial savings:

Possess numerous or expensive physical call centers
Seek potential revenue from digital-based services
Have a highly centralized workforce
Desire to convert capital expenses to operational expenses

Video: Cloud Connect Silicon Valley 2013: Private, Public, Hybrid Clouds – Neal Sample | Gaining Altitude in the Cloud

April 24, 2013

Neal Sample, CIO, Enterprise Growth, for American Express. Prior to American Express, Neal served as the CTO of X.commerce, eBay’s open development and commerce platform, and he also served as Vice President of Architecture and Platform Products at eBay. Prior to eBay, Neal was a senior executive at Yahoo! where he led the Open, Social, and Participation platforms. In this video, Neal chats with Scott Bils, Everest Group’s Next Generation IT Practice Leader, about his experience implementing private, public, and hybrid clouds at three very different companies.

Video: Scott Bils Chats with Randy Bias of Cloudscaling on Dysfunctions and Value Creation in the Cloud | Gaining Altitude in the Cloud

April 23, 2013

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.

7 Things We Learned at Cloud Connect | Gaining Altitude in the Cloud

April 9, 2013

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

How Cloud is Transforming the Call Center | Gaining Altitude in the Cloud

March 25, 2013

While the cloud is increasingly causing disruption and driving transformation in nearly all corners of today’s organizations, the call center is one of the most interesting and impactful to date.

Call center environments are comprised of a variety of systems including interactive voice response (IVRs), automatic call distributors (ACDs), and outbound dialers, conventionally provided by large technology vendors such as Avaya, Cisco, and Genesys. Traditional call center infrastructure tends to possess all the classic financial characteristics of legacy enterprise IT, e.g., significant upfront commitments, expensive customization and support, inflexibility, etc. Backend software and databases also carry the generally high price tags and requisite customization associated with standard enterprise IT platforms.

As with nearly every enterprise IT category, a new set of vendors that deliver core contact center functionality via software-as-a-service (SaaS) delivery models has emerged. These include newer market entrants such as LiveOps, EchoPass, and Five9, and legacy players, such as InContact and Siemens. Reseller agreements have also been established, e.g., Siemens resells InContact’s cloud platform.

The cost value proposition for cloud contact centers typically constitutes a no-brainer for both small and large enterprises alike. For example, usage-based pricing, movement from brick-and-mortar to work-at-home or micro call centers, altered training and retention models, and decreased capex, maintenance, and support costs all are major contributors to total cost of ownership (TCO) reduction. Moreover, in some cases cloud service providers can offer enterprises more attractive telco rates than they can obtain on their own. In addition, enterprises comfortable with voice-over-IP (VOIP) performance and reliability can unlock yet another level of value by migrating from pure voice. Taken together, cloud contact centers can reduce TCO for many enterprise call center environments by 30-50 percent.

While the cost value proposition is compelling, the most interesting part of the story is the transformative operational flexibility that cloud contact centers provide. Think agent desktop functionality provided via a browser, ease of moving agents to alternative working environments, and the relative simplicity of modifying and configuring business rules and skill profiles.

Enterprises have historically had two options: operate the call centers themselves, or outsource call center operations to a third party service provider. The cloud offers an interesting third option in which an outsourced recruitment and management model, combined with a new, cloud-based model, creates a unique combination of flexibility, control, and comparatively low non-fixed costs.

So if the cloud-based call center story is so great, why aren’t more enterprises doing it? Three big reasons:

Product cycles for call center hardware can be 10 years or longer. Thus, many enterprises are choosing to defer migration until they face an on-premise, full asset depreciation decision point. This same dynamic has slowed migration to infrastructure-as-a-service (IaaS) models in some enterprises.
No major cloud contact center provider yet provides a truly end-to-end contact center management solution. While the cloud vendors mentioned above all provide core IVR, ACD and call handling capabilities, third-party cloud provider partners must still support areas such as workforce management and scheduling. Integrating multiple cloud services may not deter early adopters, but many enterprises will prefer a more turnkey solution.
Cloud-based contact centers face the same data security and compliance questions as do other cloud services. That agents are operating in work-at-home environments where managers have less control heightens these concerns in some enterprises. While in most cases cloud vendors can address security and compliance issues, the uncertainty perceptions still exist within many buyer organizations.

Too often, the topic of cloud and enterprise transformation gets stuck in the realm of the esoteric and theoretical. Despite the above adoption inhibitors, cloud call center platforms are refreshing because they provide a clear, tangible path to real transformation.

Cloud Continues to Disrupt – VMware Announced Public IaaS Cloud | Gaining Altitude in the Cloud

March 22, 2013

After months of rumor and anticipation, VMware, the hypervisor and virtualization giant, finally made public its intent to later this year launch its vCloud® Hybrid Service, a public infrastructure-as–a-service (IaaS) cloud. To date, discussions around this expected announcement have focused on alleged competition from Amazon Web Services (AWS), the anticipated impact on VMware’s relationship with service providers such as Savvis and Terremark, and the company’s rationale behind this move, e.g., turf and client protection, stagnated growth thrust, declining market valuation, and dissatisfaction with its partner network.

Here, Everest Group is broadening the view, looking at how this move is furthering the disruption in the cloud provider landscape, and highlighting the dynamic nature of this space.

The line of demarcation between types of technology providers is increasingly blurring, and in the cloud arena at a dizzying pace. Amazon, the world’s largest online retailer, historically focused on catering to individuals and small and medium businesses, has become one of the biggest challengers to the enterprise infrastructure stalwarts such as IBM and HP. Oracle, the enterprise software and database giant, launched its acquisitions-enabled IaaS offering earlier this year. Although its primary competitor used to be SAP, its move into the cloud space places it in competition with companies such as Salesforce.com, Workday, and NetSuite. Now VMware, traditionally considered a virtualization software provider, is entering the cloud domain in an effort to protect its market share, despite the risk of antagonizing and competing with its own partners.

This rapidly evolving and “foggy” provider landscape leaves buyers confused as their options are constantly changing. In addition to cloud-related concerns such as security and compliance, existing clients must now also worry about whether they should stick with the current provider or switch to a new one. They have to evaluate their key parameters for selecting a cloud service provider, and assess the benefits and pitfalls of making a provider switch.

For example, consider the options facing current VMware plus cloud services clients:

Shift to VMware’s new cloud offering: In this scenario, the buyer will shift to VMware’s new public cloud offering, leaving its old service provider. This option gives the buyer a compelling value proposition – the entire cloud value chain is managed by one provider, and there’s full compatibility between VMware’s public and private clouds. Yet, although VMware becomes the one-stop-shop for all the buyer’s cloud-based needs, it becomes locked in with one single technology and reliance on one single provider. The buyer must also consider whether VMware will be as innovative as other IaaS providers in terms of pricing, service level agreements, termination clauses, technology advancements, etc.
Continue with the existing VMware partner provider: In this option, the buyers continue to procure cloud services from their existing VMware-based cloud partner provider. However, as different cloud service providers (especially AWS, Rackspace, and Terremark) penetrate enterprises and aggressively market their innovations, these clients are increasingly finding it difficult to defend their strategy of continuing with their existing VMware-based cloud partner, as they are perceived as a mere extension of the traditional datacenter model.
Shift to other providers/cloud technologies: VMware’s presence in client’s datacenter is undeniable. However, many buyers are adopting cloud solutions that are different than VMware, and this is threatening VMware’s broad dominance. We believe this trend will continue, as, despite significant investments in VMware for their datacenters, buyers are more than willing to deploy solutions from other cloud providers.

Everest Group nearly a year ago called out this cloud provider choice conundrum, noting that attempts to help the buyer community is actually creating greater confusion. Buyers of cloud services need to be on their highest guard to ensure that, unlike traditional datacenters, they do not end up in a complex labyrinth of technologies that make their environment even worse than what it is today.

Learn How Enterprises Are Embracing Disruption at Cloud Connect Silicon Valley 2013 | Gaining Altitude in the Cloud

March 20, 2013

2013 Enterprise Cloud Adoption Survey Thumbnail — Download the 2013 Enterprise Cloud Adoption Survey Summary Report

Saving money is nothing compared to beating your competitors to market with a better product.

This is the revelation that’s rapidly taking hold in the enterprise CIO’s office. Until very recently, most enterprise IT leaders would tell you that their primary goal in moving to cloud computing was related to cost reduction, primarily through server consolidation. Occasionally, you might find a an adventurous CIO talking about infrastructure automation and end-user provisioning.

Now, these CIOs are beginning to realize what SaaS providers figured out several years ago: the real benefit of cloud computing lies in organizational transformation, not cost compression.

This dawning realization is what’s led us to build two sessions about the practical implications of cloud disruption at Cloud Connect Silicon Valley. The event is April 2-5 at the Santa Clara Convention Center. Register with the priority code DISPEAKER for 25 percent off.

In the first of the two sessions, we will look at the tools and techniques driving the cloud disruption in the enterprise. A panel of enterprise IT leaders and cloud thought leaders will survey the tools and techniques enterprises are embracing to accelerate their time to value in cloud deployments while improving the ability of user communities to drive new streams of competitive differentiation by developing, testing, deploying and iterating applications faster than ever before.

Rather than looking at edge cases and exciting but unproven technologies, the panel will focus on cloud technologies and tools that are available, proven in production environments and ready to deploy. Randy Bias of Cloudscaling will talk about the disruption of open source projects, while Keith Shinn from Fidelity will give an example of his organization’s transformation through implementation of OpenStack. Niall Dalton from Calxeda, will talk about disruptive hardware innovations such as ARM processors.

Our goal in this first part is to give participants a high-level understanding of which tools are solid choices for their enterprise cloud deployments.

In the second of our two disruption-focused session, we’ll present new business models and case studies from enterprises who have used cloud to accomplish goals that were impossible with traditional IT organizations. We’ll take a closer look at specific examples of organizations that have embraced cloud technology AND new IT organizational protocols to unleash the creative potential of their internal users to build, launch and iterate new apps faster than ever before.

Enterprise executives who have done this will share their stories, and 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. We’ve asked Anand Palanisamy of PayPal to talk about the increased agility and development cycle compression that have helped make his company more responsive to customer needs and competitive threats.

Building sustainable competitive advantage through a transformation in business model assumptions is the real benefit goal of cloud migration. That’s why we built two sessions dedicated to the topic. Come, and hear about it for yourself, or watch for a mid-April summary of what the speakers shared about using cloud technology to align the IT service delivery process and help their organizations launch flexible new business models that drive new revenues and profitability.

A Timeout to Evaluate Our Progress on the Road to Cloud and Transformation | Gaining Altitude in the Cloud

February 11, 2013

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 2^nd 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.

Five Mistakes that Enterprise Cloud Service Providers are Making | Gaining Altitude in the Cloud

January 23, 2013

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.

Announcing our inaugural conference: Everest Group Engage, The Pragmatic Edge: Designing Your Future. Learn more.

Category: Gaining Altitude in the Cloud

The Blind Side Blitz: How Business Users Impact Next-Generation IT Spend | Gaining Altitude in the Cloud

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