Tag: enterprise

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

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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

Enterprise Cloud: Is Corporate IT Finally Getting Serious? | Gaining Altitude in the Cloud

One of the better indicators that corporate IT groups are starting to get serious about cloud is their growing interest in solutions that help them aggregate and manage multiple cloud services. Some call these solutions cloud services brokerage and management, and others term them cloud orchestration. While the market hasn’t yet converged on a common set of capabilities or definition, the broad category typically includes the following:

  • Service catalogs – “App Store”- like models that provide users access to internal IaaS and PaaS services and in some cases third-party SaaS apps and infrastructure services as well
  • Service provisioning – capabilities that support end-user requests, provisioning, and deployment of cloud services
  • Service integration – data integration services across multiple cloud services, including “cloud-to-cloud” and “cloud-to-ground” models
  • Chargeback and billing – consumption-based metering and billing of cloud services to internal users, including private services and aggregation of public cloud services spend
  • Service management – monitoring and management across multiple cloud services, including performance, capacity planning, workload management, and identity management
  • Sourcing – contracting and sourcing of cloud services across multiple platforms and providers

These solutions are being offered by a wide variety of players, including not only traditional enterprise systems management vendors – which in some cases are just repackaging SOA offerings – but also global systems integrators (SIs) and focused startups.

What’s important about this phenomenon?

First, corporate IT’s interest in these capabilities is, in a way, an implicit acknowledgement that:

  • Cloud services will be adopted in scale across enterprises
  • Multiple large scale services will need to be orchestrated and managed
  • Orchestrating these services will be hard and will require external third party solutions

This is a far different conversation than corporate IT was having a year ago at this time, which was primarily around what pilot or proof of concept to launch.

Second, interest in cloud orchestration is being “pulled” by corporate IT, rather than “pushed” by the business. A premise we recently heard is that business’ role in driving adoption of cloud is no different than it was in the packaged software era. Packaged software required servers, storage, and networks, all of which required IT management and support. This provided IT with long-term job security and the opportunity to “empire build.” As a result, corporate IT aggressively supported packaged software rollouts and implementations.

The difference in the cloud era is corporate IT’s attitude. To date, it largely perceived the cloud as a threat. But now, IT is discovering it can potentially regain a measure of relevance and control by adopting a service provider mindset, and service catalogs / chargeback models combined with private and public cloud services.

Is corporate IT finally finding a path to building its empire in the cloud? Are you or your IT group considering, or embarking upon, a cloud orchestration initiative? What thoughts and experiences do you have to share with your peers?

5 Things We Learned At Cloud Connect | Gaining Altitude in the Cloud

Even though email, smart phones and iPads are great virtual communications devices, nothing beats the value you can gain from face-to-face time with your peers and other industry thought leaders. If you weren’t fortunate enough to attend the Cloud Connect conference in Chicago earlier this month, we’ve captured some of the highlights of and insights from the discussions during the Organizational Readiness track (which we were privileged to lead) for you:

  1. Change management comes to the fore – executive sponsorship and early successes are keys success factors for driving cloud-enabled transformation. While “top-down” CIO-driven programs are helpful in shifting culture and mindset, “bottom-up” adoption and innovation is also required to demonstrate the value of cloud models to skeptics. In many cases, new cloud initiatives need to be incubated and protected from the enterprise to provide freedom for experimentation. This kernel of wisdom was a result of our very interactive session with Matt O’Keefe (Morningstar), Keith Shinn (Fidelity) and Dave Roberts (ServiceMesh) about the hard choices in enterprise cloud adoption. Watch Dave in this video for tips on ensuring a successful cloud deployment in.

  2. “Shadow IT” isn’t a dirty phrase – corporate IT needs to focus its limited resources and time on the objectives and initiatives that are deemed to be highest priority. In many organizations this means focusing only on applications and infrastructure considered to be “mission-critical.” As an unfortunate result, many projects requested by the business fail to make the cut. Thus, it’s understandable if the business decides to “end-run” IT and go to the cloud. The cloud can give enterprises additional scale with limited IT budget and go deeper in the project stack. In fact, in many cases CIOs actually encourage their business counterparts to go to external cloud service providers. The key to success, however, according to Bates Turpen (formerly InterContinental Hotels Group) and David Falck (salesforce.com), is that IT leaders , help internal customers self-provision without losing control and help business users ask the “right” questions of potential cloud vendors.

  3. Culture changes within IT – not only is cloud reshaping the relationship between business and IT, it’s also starting to restructure the IT organization itself. The dev ops revolution is shifting IT from a CIO-driven model to a developer-driven decision-making model around infrastructure. Developers are making their own frontline choices around platforms and service providers that are then being aggregated up by managers, a distinct break from legacy models where platforms and infrastructure are mandated by the CIO. Also, as user experience becomes an integral part of a product, CIOs need to encourage their developers to think like a user and empower them to build a product from beginning to end. Watch Lauren Cooney (Cisco) talk more about the dev ops movement.

  4. Different clouds for different folks – common enterprise concerns around cloud continue to center around security, compliance, performance and vendor lock-in. We asked the experts on our “Current Thinking in Addressing Persistent Cloud Challenges” panel, Paul Burns (Neovise) and Troy Angrignon (Cloudscaling), how to best address these questions. Their answer was : “It depends” (which is a much better answer than the vendor community could deliver just a few years ago). Options across public and private, and enterprise virtualization and elastic infrastructure clouds, provide new answers to these issues for both legacy and new applications, but also must be carefully evaluated.

  5. Adoption is about innovation – in conjunction with the Chicago conference, we conducted a joint survey with Cloud Connect on enterprise cloud adoption patterns. While most service providers think enterprises are migrating to the cloud for total cost of ownership (TCO) reasons, agility, innovation and flexibility are actually the drivers. Thus, there’s a glaringly apparent  disconnect between vendors that are focused on selling next generation infrastructure to IT, and businesses that want cloud platforms to drive top line revenue. Download the complimentary survey results.

If you attended Cloud Connect, our readers would enjoy hearing what you took away from the conference sessions, as well as your concerns, issues and successes on cloud adoption within your enterprise, so feel free to share away!

Picture This: a 360° Visual Depiction of Current Cloud Adoption Trends | Gaining Altitude in the Cloud

Download the Enterprise Cloud Adoption Survey Results


We wrote in a blog last week about the top messages that emerged from the extensive enterprise cloud adoption survey we conducted earlier this year in partnership with Cloud Connect. To ensure we’ve “got the backs” of our readers who tend to be right-brained and thus more attuned to images and visual thinking, the following shows the key findings we reaped from the responses of the 346 buyers, providers and advisors who participated in the survey.

Enterprise Cloud Adoption Infographic
Click to expand

As you see:

  •  Cloud adoption is expanding beyond “low hanging fruit” like email and custom applications to include disaster recovery, storage and archiving, and business intelligence and analytics to support Big Data initiatives
  • Buyers’ opinion of the Cloud is extremely positive, with highest satisfaction in ability to create flexible infrastructure, and they have exceptionally high expectations of future benefits
  • Enterprises are increasingly viewing Cloud as an enabler of top line growth, i.e., to reduce time to market for applications, solutions and products, yet providers continue to sell with a cost reduction value proposition

To gain more insights on these and other key findings, you can download the survey summary report, and/or join me at the Cloud Connect Chicago conference on September 12, when I’ll be discussing the survey results in detail. Use code EVERESTGRP to receive 25% off conference passes or claim a free expo pass. For now, up and away on the Cloud!

Top 5 Takeaways from the Enterprise Cloud Adoption Survey | Gaining Altitude in the Cloud

The enterprise cloud adoption survey jointly conducted by Everest Group and Cloud Connect in mid 2012 shows very interesting trends. Unlike other surveys, this effort includes all the cloud market participants such as cloud providers, buyers, third-party advisors, consulting firms, and cloud enablers. This ensures a 360o view of the market.

The survey summary report is now available and can be downloaded here.

The top five messages emerging out of this survey effort are:

  1. Buyers are willing to transform their infrastructure and business application landscape leveraging cloud models. The growing need for data intensive applications, quicker time to market, flexible infrastructure, and data management is driving this transformation. The survey indicates that over 85% of enterprise buyers have already deployed or plan to deploy cloud-based infrastructure solutions.

  2. Buyers and providers of cloud services need to find a common ground on understanding challenges in cloud adoption. Though security and integration challenges top the list, the buyers believe that their management is more than willing to deploy cloud solutions whereas providers see lack of management buy-in from the buyers as an important barrier.

  3. There is a disconnect between what the buyers hold valuable and what the providers believe is important in cloud adoption. Adopters believe that cloud model enables them to improve top line by increasing productivity and reducing the time to market. Moreover, reduction of total cost of ownership does not drive their cloud adoption whereas providers see it as the most important factor.

  4. Cloud delivery models are significantly impacting the traditional IT buying centers. The survey shows that a considerable portion of IT budget is increasingly getting allocated to the businesses. Moreover, individual business leaders (including C-level executives) have more say in cloud decisions over IT, procurement, or the finance team.

  5. Overall, the sentiments of buyers of cloud services remain very positive. Most of them met their objective, especially from cloud infrastructure solutions. The survey reveals that ~65% of buyers met their objectives from cloud deployment and ~90% decision makers believe that their cloud adoption will increase in the future.

The survey shows that though currently a large part of cloud adoption is driven by industry-agnostic offering, there is a considerable demand for industry specific solutions. We believe that industry flavors will become prominent once a critical mass of cloud adoption is achieved.

Though the survey showed disconnect between the perspective of buyers and providers in cloud adoption, it also revealed common ground on various aspects. For example, in key decision criteria for cloud evaluation, both the buyers and providers believe that security, contract terms and SLAs, fair pricing, and tenure of the provider are important parameter. We believe these common grounds are good for the industry and development of the cloud market as it aligns the expectations of various market participants and should help in creating relevant cloud services.

Overall the enterprise cloud adoption survey shows that despite all the challenges, confusion, barriers, and other issues, market participants are upbeat about cloud adoption. The buyers are quite satisfied with the outcome of cloud adoption within their enterprise IT set-up. Not only is this positive for the industry, but it also establishes the fact that, unlike other hyped-up trends, cloud delivery models are here to stay.

I will be speaking more about the survey results at Cloud Connect Chicago on September 12. We also have an excellent speaker lineup for the Organizational Readiness track, including thoughts leaders from Cisco, InterContinental Hotels Group, salesforce.com, Morningstar, Fidelity, Neovise and Cloudscaling. Read my blog from earlier this month for a sneak preview of the track sessions. Use code EVERESTGRP to receive 25% off conference passes or claim a free expo pass. I look forward to seeing you at Cloud Connect!

Gain the Insights You Need for Next Generation IT Success: the Organizational Readiness Track at the Cloud Connect Conference | Gaining Altitude in the Cloud

This blog originally appeared on Cloud Connect Blog. Read the original post.


GE’s Jack Welch once stated, “Change before you have to.” While it’s certainly sage advice, with virtually everything in the cloud computing world evolving so rapidly – the offerings, the providers, the implementation strategies, and the buyers, who these days are most typically business users rather than IT – it’s dauntingly difficult to decide what, how, when and with whom to change.

Yet, following in the footsteps of the highly successful, inaugural Organizational Readiness track at the Cloud Connect conference in February 2012, the sessions at the September 11-12 event in Chicago are all designed to cut through the clutter, and provide deep insights on the organizational issues that are threatening to thwart cloud-oriented next generation IT success.

In “New World Order: Your Dev Team Just Became the CIO” session, industry analyst Vanessa Alvarez and Cisco’s Laura Cooney will discuss the emergence of developers as decision makers, what organizations are doing to adjust to this revolution, the technologies to look at, and pitfalls to avoid.

With budgets increasingly migrating to “shadow” IT driven by business users, it is more critical than ever for CIOs to understand how to serve and enable this new buyer group in a next generation IT environment. During the “Tough Questions You Need to Ask” session, business users who have driven major cloud initiatives will provide answers to questions CIOs may be afraid to ask.

The panel session “Hard Choices in Enterprise Cloud Adoption” will feature three 15-minute drill-down presentations that provide insight into the major choices and decisions organizations face around:

  • Open versus Closed Cloud Infrastructures, and the pros and cons of each
  • Forklift versus Greenfield, and how to determine if you should first focus on moving existing applications to a virtualized environment, or deploy a new infrastructure for greenfield applications
  • Now versus Later, to help CIOs evaluate whether they should accelerate or put a hold on their enterprises’ move to the cloud

“Current Thinking in Addressing Persistent Cloud Challenges” will examine Security and Compliance, Performance, Vendor Management and Lock-In issues, and provide practical, real-world examples of how panelists’ and other organizations are creatively addressing them.

If you haven’t yet registered for Cloud Connect, I hope you’ll visit the conference registration page and sign up today. Use code EVERESTGRP to receive 25% off conference passes or claim a free expo pass. You’ll unquestionably gain strategic, tactical and actionable insights on how to shine much needed light into all things cloud. As Chair of the Organizational Readiness track, I look forward to seeing you in Chicago in September!

Download the Enterprise Cloud Adoption Survey Results.

Cloud Connect and Everest Group Launch Global Enterprise Cloud Adoption Tracking Survey | Gaining Altitude in the Cloud

Download the Enterprise Cloud Adoption Survey Results.

The market conversation around enterprise adoption of private, public and hybrid cloud models has been surprisingly light on facts. Data, surveys and analysis tend to focus either on predicting overall market sizes for cloud services (which often strain credulity of even the most ardent cloud supporter), or on high level surveys around planned cloud adoption and perceived issues.  While interesting from a broad market perspective, they provide little insight for IT executives facing hard choices around cloud migration. Decision makers are faced with little hard data on the use cases that are actually being implemented in the enterprises and the value that they’re generating.  This gap creates challenges not just for enterprise CIOs but also for cloud service providers and consultants.

Enterprise Cloud Adoption SurveyIn conjunction with Cloud Connect and UBM TechWeb, Everest Group is excited to announce a new tracking survey focused on better understanding where the “rubber is hitting the road” with enterprise cloud adoption. Targeted at enterprises and vendors alike, our Enterprise Cloud Adoption Survey will focus on identifying global enterprise cloud adoption trends and patterns and where enterprises are seeing value today from the cloud. Our survey will help readers gain visibility and insight into questions such as:

  • What are the use cases that are driving adoption of SaaS, PaaS, IaaS and private cloud?
  • How are cloud adoption patterns and uses cases are differing by vertical? By geography?
  • What cloud infrastructure models are most frequently being deployed (private, public, hybrid)?
  • What cloud management platforms are gaining traction in the enterprise? Where are open source options (OpenStack, CloudStack) being adopted?
  • How does the value being delivered by cloud deployments compare to expectations?

We think some of the more interesting insights will come from seeing how these responses change and trend over time. Our goal is not to provide just a one-time shapshot of adoption, but to conduct an ongoing survey several times a year to surface key trends and patterns. The results from our first joint survey will be announced in conjunction with Cloud Connect Chicago, to be held September 10-13 at the Hyatt Regency O’Hare.

ERP and the Cloud: Enterprise Migration Quietly Begins | Gaining Altitude in the Cloud

Given how much of the typical large enterprise IT budget is consumed by ERP, we’re not surprised to find a growing curiosity among many CIOs to understand how cloud delivery models could reduce costs. On the surface, you wouldn’t think that production ERP applications would be at the top of the list for cloud migration. ERP apps are mission critical, complex and highly customized, often with significant data security and compliance requirements.

That’s why we think one of the more interesting, underreported stories in cloud are the examples of large enterprises that have migrated existing ERP environments to  private, hybrid and community cloud models. We’re actually finding quite a number of quite interesting, global scale ERP cloud deployments particularly among SAP customers. Why SAP? While Oracle is obviously the other large enterprise ERP heavyweight, as we’ve discussed here before, Oracle’s licensing policies are creating roadblocks for customers to migrate to even virtualized models, let alone private or public clouds.

The market for SAP cloud services is surprisingly robust with at least 10 major service providers that deliver SAP ERP capabilities via managed or host private or hybrid cloud models, including IBM, T-Systems, Fujitsu, Accenture CSC, CapGemini and others. T-Systems alone already supports 500 customers and 1.9 million SAP users via cloud-based models. Not surprisingly, most of these service providers started by originally providing SAP hosting services and have since extended their offerings. What’s the customer value proposition for SAP in the cloud?

  • Cost variablization – given the significant capex investments associated with SAP deployments and upgrades, cost variability is central to cloud-based SAP offerings. Nearly all providers offer consumption-based pricing models for SAP cloud services.
  • TCO reduction – many service providers are claiming the ability the reduce TCO for customer SAP environments by 30+% through the typical cloud levers. Several providers have customer references that have achieved these efficiencies and more in live production.
  • Flexibility – service providers are touting the ability of cloud-enabled deployments to more rapidly and easily provide new capabilities to users.
  • Standardization – in conjunction with cloud migration, many enterprises desire to consolidate data centers, rationalize SAP instances and standardize global processes to drive efficiency and flexibility.

Unlike other enterprise cloud use cases focused more on business agility and flexibility, in most cases cost appears to be the major driver of SAP cloud migration. Some of the more interesting examples include:

  • British American Tobacco (BAT) – just last month BAT announced a seven-year, US$160 million deal with T-Systems to consolidate its current SAP deployments into a single, cloud-based instance by 2016. The deal will enable BAT to variabilize its SAP costs through a usage-based pricing model.
  • Domino Sugar – leveraging Virtustream’s virtual private cloud platforms, Domino Sugar has been able to reduce SAP costs by over 30%, while actually improving availability and performance for several thousand users. As with BAT, SAP costs are variabilized and based on actual resource consumption.
  • Shell – to drive standardization, increase flexibility and shift to consumption-based pricing, Shell migrated its SAP environment to private cloud models (delivered by T-Systems) in support of 102,000 global employees across 100 countries.

Other notable enterprise examples include Audi, Freeport McMoran, Siemens,  and Suntory.

Why haven’t we heard more about these and other examples?  With the exception of IBM, most leading SAP cloud service providers and many of the early enterprise adopters of SAP in the cloud aren’t U.S.-based and are outside of the cloud hype and “echo chamber.” Also, details on many of these deployments tend to be tightly held both by both service providers and customers.

While many segments of enterprise cloud appear to be stuck in pilots and proofs of concept, ERP is surprisingly providing some early examples of large scale enterprise cloud migration.

Cloud Computing in ITO – Everybody Wins, but Who Gets to Win More? | Gaining Altitude in the Cloud

Less than three years back, there was widespread excitement (and alarm and despondency) in many quarters about the impact of cloud computing on traditional IT outsourcing providers.

Cloud computing was predicted, though not by us, to greatly disadvantage the incumbent players, but as of today, such a prediction is difficult to stand by (just take a look at TCS’s and Accenture’s results since then). Sure, public cloud providers continue to grow rapidly, and the traditional license model is increasingly giving way to the pay-as-you-go paradigm. Yet most leading providers of outsourced IT services seem to be adapting well through a combined strategy of alliances, acquisitions, and in-house cloud solutions. Cloud computing appears to be increasingly well integrated as part of the delivery model for most traditional ITO providers. Consider the following statistics from our recently released report, Enterprise Cloud Adoption: Role of Cloud in Global Services:

  • In the second half of 2011, approximately eight percent of all ITO/BPO deals serviced by traditional outsourcers (excluding SaaS product companies, and public cloud and hosting providers) included cloud delivery models or platforms within their scope. This is up from four percent in the first half of 2011.
  • The average total contract value (TCV) of 2011 global services deals with cloud delivery in scope  was US$168 million, compared to US$95 million for deals without cloud in scope.
  • Cloud deals seem to be more transformational in nature, almost at the cutting edge of ITO capabilities if you will. 53 percent of all ITO deals with cloud delivery in scope involved significant infrastructure transformation of test, development, and production environments. Clearly, traditional ITO providers view cloud computing as an important solution component for large, transformational deals.
  • Cloud computing seems to be helping service providers get access to markets that were previously unprofitable or too complicated to serve. Approximately 38 percent of all global services contracts with cloud in scope were awarded by enterprises with less than US$500 million in revenues. And government and non-profit sectors together account for 20 percent of all global services deals with cloud delivery in scope.

Clearly, there’s a big pot of gold somewhere amidst all these clouds, but what’s interesting to note is that few service providers  have all of what it’s going to take to win all of it:

  • Design and Consulting – Service providers, such as Accenture, with a consulting legacy and orientation are going to have an advantage when it comes to advising clients on how to build their cloud solution from scratch.
  • Host and Implement – Players like IBM and HP with  a deep legacy of asset-based infrastructure transformation will have an advantage in providing these services
  • Management and Professional Services – Offshore players such as TCS, with their global delivery models, have an advantage in offering the “cloud management” role

The problem is that these activities are seldom commissioned in isolation. This is not something where a best-of-breed approach always works, despite buyers being wary of lock-in risks. The opportunities are tightly coupled, and service providers need intelligence on the characteristics of relevant opportunities as they are torn between focusing on what they have, and plugging the gaps through alliances and acquisitions.

The fact of the matter is that there will be winners and losers, and the market today is too dynamic to predict who will play which part. It will be interesting to see if there are ground-breaking disruptions (e.g., a major public cloud provider making a headline acquisition of a giant system integrator, thereby making its move in the private cloud market, potentially disintermediating a lot of other system integrators, and at one stroke making a deep thrust in the enterprise market) as the stakes get higher. Or an asset-light provider marking a strategic u-turn by investing in physical infrastructure to build its own cloud solution, complete with consulting, system integration, and management services delivered through a global platform?

To learn more about the nature of cloud-related opportunities for providers of global services, check out Enterprise Cloud Adoption: Role of Cloud in Global Services.

Where Are the Transformers? Enterprise Cloud Adoption Roadblocks | Gaining Altitude in the Cloud

As discussed here before, a number of different enterprise cloud adoption paths are emerging. These patterns range from “Observers,” who are taking a reactive, wait and see approach to migration to “Transformers,” who are using private and public clouds to drive wide scale IT transformation and modernization programs. Not surprisingly these transformers are the Holy Grail being pursued by many cloud service providers and enterprise IT vendors. The opportunity to drive significant pieces of an enterprise IT environment to cloud environments (private and public) in multi-year transformation efforts creates visions of big services, hardware, and in some cases software dollars.

While many service providers are crafting go-to market strategies around these types of client opportunities, they’re running into an interesting challenge. They’re not finding a lot of Transformers out there yet. Enterprise cloud adoption, particularly for IaaS, is still largely focused on specific use cases or initial pilots. While many CIOs have long-term visions for cloud-centric future state environments, few CIOs are actually doing it today.

So why aren’t we seeing more Transformers in the market? Our experience suggests that in many cases there are a set of tactical (and often mundane) issues preventing CIOs from getting to the cloud more aggressively. While by no means comprehensive, several of the issues we frequently see are:

  • Licensing handcuffs – legacy enterprise software vendors clearly understand the business model disruption that cloud represents. Not surprisingly, most enterprise software houses are in no hurry to get their customers to the new world. For example, nearly all of Oracle database licensing policies are still based on physical server CPUs. One notable exception is with Amazon AWS, for which Oracle does support a “BYOL” (bring-your-own license) model based on virtual cores; at this time, Amazon is the only cloud service provider certified by Oracle.  In addition Oracle software licensing also provides no or limited technical support for major non-Oracle virtualization platforms such as VMware, KVM, Xen and Hyper-V. Needless to say, if you’re a CIO running an Oracle shop (as many Fortune 500 companies are), there are significant constraints to migrating to even private cloud environments. While not every legacy enterprise software vendor has staked out a position as extreme as Oracle, many are still using licensing as leverage to drive clients to preferred models (or keep them there).
  • Shortage of skills – cloud expertise and experience is hard to find. Without cloud architecture and solution skills, enterprises are finding it difficult to drive wide-scale transformation efforts. While retraining would seem to be the obvious answer, CIOs that have tried going down that path are finding it to be a dead end. As discussed at our Organizational Readiness track at Cloud Connect Santa Clara last February, IT leaders are finding that the cloud paradigm shift is a bridge too far, and that most of their current employees are unable to make the shift. The lack of internal talent, combined with the wariness to trust vendors and service providers, is leading to a real constraint to further adoption, particularly in IaaS and private cloud models.
  • Analysis paralysis – private cloud provides an interesting example of the proliferation of options facing enterprise IT. Private clouds can be provided in a variety of flavors, with important choices to be made around delivery model (VPC vs dedicated), location (on-premise or hosted), asset ownership (customer or service provider), platform (proprietary vs open source) and, of course, vendor.  Given the skills shortage mentioned above, even sophisticated enterprise IT shops are challenged with the variety of vendor and service options in the market, particularly given the pace of change. Of course the recent flare-up of IaaS platform wars doesn’t help make these choices clearer for risk-averse CIOs.  The result of too many choices? It’s not uncommon for us to see clients experiencing “vapor lock,” not really knowing what to analyze, let along what methodology to use. Clients are finding the frameworks, methodologies and tools they’ve historically used to make similar decisions in the past aren’t applicable or relevant in the cloud paradigm. As simple as it seems, many of our clients simply don’t know where to get started.

Why isn’t security and compliance on the list? Because in many cases, we’re finding that security and compliance is a red herring that IT is hiding behind. This is not to say that there are not workloads and use cases where security and compliance issues prevent certain public cloud models; however, these situations in reality are the minority. A variety of examples exist of enterprises leveraging the cloud today while still maintaining compliance with PCI, HIPAA and other mandates (most of which are open to auditor interpretation anyway). Best practices, tools and architectures for addressing common security issues are also becoming more prevalent, as are more mature CSP offerings and security practices for common use cases. Net, net: where there’s a will there’s a way, and in most cases if CIOs are truly interested in getting to the cloud, there are secure, compliant ways of getting there.

Overall, we believe that the wave of transformation is coming in the enterprise. Early movers exist and are achieving the promised payoff. Unfortunately the timing and shape of the wave for the mainstream organization is not as clear as those in the enterprise IT world would like, and the pace is being shaped primarily by a set of factors that are largely non-technical and beyond the IT leader’s control.

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