Successful Cloud Native Adoption Requires a SMART IT Operating Design and Model | Market Insights™
Successful cloud native adoption requires a SMART IT operating design and model
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 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:
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
Cloud native infrastructure – key tenets
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.
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:
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.)
I attended the Amazon Web Services (AWS) Summit in Mumbai earlier this month, and two things about the event itself really stood out. First, regardless of the fact that the Summit was held in India, it was organized on a global scale with global flavor, which ensured that attendees heard about AWS’ global aspirations and strategy. Second, although the company’s leadership rightly spoke about their great services portfolio and how and why it is the best, they never ridiculed or demeaned any competitor. This is a mark of a great company that’s in it for the very long haul.
Not surprisingly, the key message I could sense was that enterprises should not own their infrastructure, but instead leave it to cloud vendors – read, AWS – that will make sure it runs smoothly without the need for any second thoughts. In short, make infrastructure irrelevant.
Here are my three key take-aways from the content at the Summit.
AWS has always positioned itself as a partner-friendly cloud vendor. At the Summit, its focus on succeeding with partners was very evident through the services it demonstrated and the messages it delivered. However, AWS’ current mindset is about building great services that enterprises would want to consume through pull demand, rather than through extensive leverage of channel partners. Thus, while partners today may not be as important as AWS may want them to think, they will be increasingly vital as AWS further expands to enterprise-class customers. This means it will be in AWS’ best interest to nurture its relationships with its partners.
AWS is a smart company that realizes there will always be a case for certain enterprise workloads to remain on-premise. The Summit sponsor was VMware, the king of on-premise. With its “VMware on AWS” offering becoming available globally, VMWare and AWS need each other. Though AWS largely stayed away from embracing “hybrid is the model of future,” it did reluctantly admit that all enterprise data centers aren’t going anywhere. However, AWS plans to make enterprises’ journey to the cloud simple and seamless. Its strong partnership with VMware is a testimony to that.
From DynamoDB to serverless to AI/ML services, AWS shined a spotlight on everything new. While most of its new services are witnessing massive double – even up to 5X – growth, they aren’t yet meaningfully contributing to AWS’ US$18 billion top line. Most of its business continues to be the traditional EC2, S3, and similar services. Talking to AWS clients and partners made me believe that most of them have grand plans for adopting these new services. And almost all of them appreciate the hand holding AWS has provided to make their journey less painful.
Though AWS never admitted it, it was apparent that it realizes the vast potential in this market. Out of its 125+ services, very few are consumed at a massive scale. This implies there is a lot of headroom for AWS, despite that it’s already clocking a run rate of US$20 billion. This is very similar to its online business which, despite its size, is only ~4 percent of U.S. retail. Given such potential, it is no surprise that Amazon is investing heavily in AWS. Indeed, most of Amazon’s operating profits in recent quarters have been from AWS.
The cloud market is in flux, and with the first and second generations of DR/back/email migrations now over, the next battlefield is the business process and AI/ML workloads. AWS has strong plans to lead this market as well. It will be interesting to observe how it shapes the cloud world. Can it influence it the way it did online retail? AWS certainly has the vision, capability, and aspirations. Only time will tell.
Cloud, blockchain, AI, automation among technologies driving digital disruption of capital markets buy-side, sell-side and intermediaries.
Global capital markets firms are facing unprecedented challenges that collectively are forcing a digital technology-driven reimagination of the capital markets industry, according to Everest Group.
Key trends in the capital markets industry include:
According to Everest Group, these challenges have forced capital markets enterprises to revisit their business models, launch innovative products, invest in emerging technology, and redefine the way they interact with customers and other ecosystem players, including service providers.
“A common impetus for digital disruption across the capital markets value chain—impacting buy-side, sell-side and intermediaries alike—is the shift to a customer-centric focus,” said Ronak Doshi, practice director at Everest Group. “Digital technologies ranging from machine learning to blockchain and from cloud to deep learning are being used to deliver an enhanced customer experience. This can take the form of data-driven insights that enable personalized offerings, the provision of seamless services across channels, and even ‘humanizing’ the design process so that product and service offerings are more empathetic to the unique needs of individual customers.”
Everest Group has released a set of research reports which address the unique challenges, priorities and trends in the digital adoption journey of each segment of the capital markets industry—buy-side, sell-side and market intermediaries. Each report also details the implications these findings have for enterprise buyers and IT service providers.
As a result, buy-side firms are making digital technology investments to target customers, meet compliance standards, and generate patterns from historical data to optimize the system. Artificial intelligence (AI) and automation of core functions is a key focus of investment, as it will enable firms to free up resources to work on core business activities. Buy-side firms are also investing in digital technology to provide the seamless digital experience that their customers demand.
***Download a complimentary abstract of Part 1.***
Partnerships within the ecosystem—with FinTechs, for example—are critical for the sell-side segment, because they are key to enabling new distribution channels, competitive product offerings and value-added non-traditional services.
Complexities in regulatory reporting are forcing sell-side firms to make digital investments in data management initiatives. Emerging technologies will require investments as well; these advancements are disrupting the sell-side of the value chain with new trading models, better cost structures and analytics-based advisory models, and keeping pace will be key to market survival.
***Download a complimentary abstract of Part 2.***
Intermediaries also are looking to leverage analytics and automation to reduce the costs of regulatory reporting. Blockchain and AI likely will play a role in changing the way intermediaries operate, which may prove essential as the proliferation of blockchain-based startups diminish the role of traditional intermediaries as a trusted party.
Enterprise digital initiatives transitioning from pilot to program: 57% of the enterprises’ demand is firmly around digital technologies in the next 12-18 months. Most enterprises now perceive digital to be indispensable for the firm’s long-term growth and are trying to position themselves as “digital-first” enterprises
Companies considering moving workloads to cloud environments five years ago questioned whether the economics of cloud were compelling enough. The bigger question at that time was whether the economics would force a tsunami of migration from legacy environments to the cloud world. Would it set up a huge industry, much like Y2K, of moving workloads from one environment to another very quickly? Or would it evolve more like the client-server movement that happened over 5 to 10 years? It’s important to understand the cloud migration strategy that is occurring today.
We now know the cloud migration did not happen like Y2K. Enterprises considered the risk and investment to move workloads as too great, given the cost-savings returns. Of course, there are always laggards or companies that choose not to adopt new technology, but enterprises now broadly accept both public and private cloud.
The strategy most companies adopt is to put new functionality into cloud environments, often public cloud. They do this by purchasing SaaS applications rather than traditional software, and they do their new development in a Platform-as-a-Service (PaaS) cloud environment. These make sense. They then build APIs or microservices layers that connect the legacy applications to the cloud applications.
There is a high correlation between cloud adoption and digital experience: cloud adoption is the foundation of advanced digital technology leverage
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