Decoding the Percentage Fees Model for Public Cloud Management
Microsoft graduated from its rebellious, ’90s, teenage years to become an enterprise leader across some of the hottest computing domains, from software and cloud to analytics and AI.
It was a journey not without bumps, but one that has solidified Microsoft at the top of a market largely dominated by consumer-focused tech companies. Smart is the new sexy, and Microsoft has expertly played the market.
Six years ago, Abhishek Singh, vice president at the Everest Group, would not have expected Microsoft to hold the position of power it does today, he said in an interview with CIO Dive. But the company has pivoted from trying to be a dominant platform player to establishing a presence across platforms, reacting to a cloud market where customers can tap into new sources of storage, compute and platforms.
Read more in CIO Dive
The HR function faces challenges on multiple fronts, caused by talent-related issues, the need to improve the employee experience, and the high cost of operations
Enterprises that lack access to the requisite specialized skills or have limited experience with agile/DevOps principles of application development should avoid large-scale cloud native initiatives; they will be best served by running pilots for select, low-risk greenfield applications to learn and scale the practice
Key considerations to select and prioritize application candidates for cloud-native
Successful cloud native adoption requires a SMART IT operating design and model
Major digital services delivered from tier-2/3 Indian cities: social & interactive, cloud, analytics, automation, mobility, cyber security
With enterprise cloud becoming mainstream, the business case and drivers for adoption have also evolved. The initial phase of adoption focused on operational cost reduction and simplicity – what we call the “Cloud for Efficiency” paradigm. We have now entered Wave 2 of enterprise cloud adoption, where the cloud’s potential to play a critical role in influencing and driving business outcomes is being realized. We call this the “Cloud for Digital” paradigm. Indeed, cloud is now truly the bedrock for digital businesses, as we wrote about earlier.
This is good and powerful news for enterprises. However, to successfully leverage cloud as a business value enabler, the services stack needs to be designed to take advantage of all the inherent benefits “native” to the cloud model – scalability, agility, resilience, and extendibility.
Cloud Native – What Does it Mean Anyway?
Cloud native is not just selective use of cloud infrastructure and platform-based models to reduce costs. Neither is it just about building and deploying applications at pace. And it is definitely not just about adopting new age themes such as PaaS or microservices or serverless. Cloud native includes all of these, and more.
We see cloud native as a philosophy to establish a tightly integrated, scalable, agile, and resilient IT services stack that can:
- Enable rapid build, iteration, and delivery of, or access to, service features/functionalities based on business dynamics
- Autonomously and seamlessly adapt to any or all changes in business operation volumes
- Offer a superior and consistent service experience, irrespective of the point, mode, or scale of services consumption.
Achieving a true cloud native design requires the underlying philosophy to be embedded within the design of both the application and infrastructure stacks. This is key for business value creation, as lack of autonomy and agility within either layer hinders the necessary straight-through processing across the integrated stack.
In this regard, there are salient features that define an ideal cloud native IT stack:
Cloud native applications – key tenets
- Extendable architecture: Applications should be designed for minimal complexity around adding/modifying features, through build or API connections. While microservices inherently enable this, not all monolithic applications need to be ruled out from becoming components of a cloud native environment
- Operational awareness and resilience: The application should be designed to track its own health and operational performance, rather than shifting the entire onus on to the infrastructure teams. Fail-safe measures should be built in the applications to maximize service continuity
- Declarative by design: Applications should be built to trust the resilience of underlying communications and operations, based on declarative programming. This can help simplify applications by leveraging functionalities across different contexts and driving interoperability among applications.
Cloud native infrastructure – key tenets
- Services abstraction: Infrastructure services should be delivered via a unified platform that seamlessly pools discrete cloud resources and makes them available through APIs (enabling the same programs to be used in different contexts, and applications to easily consume infrastructure services)
- Infrastructure as software: IT infrastructure resources should be built, provisioned/deprovisioned, managed, and pooled/scaled based on individual application requirements. This should be completely executed using software with minimal/no human intervention
- Embedded security as code: Security for infrastructure should be codified to enable autonomous enforcement of policies across individual deploy and run scenarios. Policy changes should be tracked and managed based on version control principles as leveraged in “Infrastructure as Code” designs.
Exponential Value Comes with Increased Complexity
While cloud native has, understandably, garnered significant enterprise interest, the transition to a cloud native model is far from simple. It requires designing and managing complex architectures, and making meaningful upfront investments in people, processes, and technologies/service delivery themes.
Everest Group’s SMART enterprise framework encapsulates the comprehensive and complex set of requirements to enable a cloud native environment in its true sense.
Adopting Cloud Native? Think before You Leap
Cloud native environments are inherently complex to design and take time to scale. Consequently, the concept is not (currently) meant for all organizations, functions, or applications. Enterprises need to carefully gauge their readiness through a thorough examination of multiple organizational and technical considerations.
Our latest report titled Cloud Enablement Services – Market Trends and Services PEAK Matrix™ Assessment 2019: An Enterprise Primer for Adopting (or Intelligently Ignoring!) Cloud Native delves further into the cloud native concept. The report also provides the assessment and detailed profiles of the 24 IT service providers featured on Everest Group’s Cloud Enablement Services PEAK MatrixTM.
Feel free to reach out us to explore the cloud native concept further. We will be happy to hear your story, questions, concerns, and successes!
IBM’s $34 billion cash acquisition of Red Hat announced early this week has far-reaching implications for the IT services world. IT is modernizing, moving from a legacy world with data centers, proprietary operating systems and proprietary technologies to a digital environment with cloud, open-source software, a high degree of automation, DevOps and integration among these components. IBM’s legacy assets and capabilities are formidable, but the firm was not well positioned for IT modernization and struggled with digital operating models. The Red Hat acquisition is significant as it repositions IBM as a vital, must-have partner for enterprise customers in IT modernization and evolving digital operating models. This is a very intriguing acquisition for IBM. Let’s look at the implications for IBM and enterprise customers.
Cloud, automation and analytics lead in digital-focused outsourcing deals, which dominate outsourcing activity with a 65 percent share.
North America witnessed a significant increase in outsourcing transaction activity in Q1 2018 as compared to 4Q 2017, with 115 deals recorded as compared to 103, respectively, according to Everest Group. This increase can be attributed to an improved business sentiment in the U.S. as well as an increase in outsourcing demand across healthcare and manufacturing verticals.
For the first time, the number of new centers supporting digital skills surpassed new centers supporting only traditional services. Among global services transactions overall, digital services continued to dominate the outsourcing activity in Q1, similar to the previous quarter. The share of digital-focused transactions increased from 61 percent in Q4 2017 to 65 percent in Q1 2018 vis-à-vis the pure traditional services, which showed a decline in adoption over the past quarter.
Among all outsourcing transactions, 50 percent included cloud, 21 percent included automation, 14 percent included analytics, 13 percent included mobility, 7 percent included cyber-security and 30 percent included some other form of digital service, such as social media, Internet of Things (IoT) or blockchain.
Other key global services market trends noted for the quarter include the following:
- Global in-house center (GIC) expansions are at a seven-year high, as mature GICs added next-generation technologies (especially big data analytics, cloud and IoT capabilities) in their service delivery.
- The industry saw a secular increase in the number of new centers supporting R&D/engineering services, driven by the need for innovation and customer-centricity.
- Service providers are actively looking for partnerships with startups (as opposed to acquisitions) to leverage them for niche capabilities.
These findings and more are discussed in Everest Group’s recently released report, released Market Vista™: Q2 2018. The report discusses outsourcing transaction trends, GIC-related developments, global offshoring dynamics, location risks and opportunities, and key service provider developments.
“Outsourcing activity remained steady in Q1 as compared to the previous quarter, with a growth in information technology outsourcing as well as increases in several verticals, including retail and consumer product goods, technology and communication, and healthcare,” said H. Karthik, partner at Everest Group. “New GIC setups, which reached an all-time high in Q4 2017, declined slightly, but GIC expansions are at a seven-year high. All-in-all, Q1 was a good quarter for service providers—both global as well as offshore-heritage service providers—with most reporting sequential growth in revenue and an increase in operating margins.”
Complimentary Webinar Offers Q1 Review Plus Bonus Topic—“War for Talent: Impact on Talent Acquisition Strategies”
Everest Group hosted a webinar on May 22—Webinar Deck: Q2 2018 Market Vista™ Update and Implications on Talent Acquisition with Intensifying War on Talent—in which the findings of the “Market Vista: Q2 2018” report were reviewed. During this 45-minute webinar, Everest Group experts discussed the most impactful events in the global services industry thus far in 2018 and looked ahead to how these events likely will shape the rest of the year.
The webinar also addressed talent acquisition strategies, including the factors impacting talent models and the resulting implications and imperatives for employers. The impact of automation on transactional jobs and the redesign of the employee value proposition to reach a predominantly millennial workforce are two of the key topics covered in the discussion.
*** Watch the Webinar Replay *** (The webinar slide deck also is available for complimentary download with registration.)