Cloud and Infrastructure Services Category Strategy: Definition and Characteristics | Market Insights™
Cloud and Infrastructure Services
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Cloud and Infrastructure Services
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Enterprises must consider many different factors when building their cloud adoption strategy. It’s not easy, but the decisions are critically important. Learning the smart – and not so smart – choices other organizations have made can be enormously valuable. Project JEDI is an example of what not to do.
In 2018, the U.S. Department of Defense (DoD) launched the Joint Enterprise Defense Infrastructure (JEDI) project to accelerate its adoption of cloud architecture and services. The contract was written to award the US$10 billion deal to a single commercial provider to build a cloud computing platform that supports weapons systems and classified data storage. With this ambitious project, the Pentagon intends to drive full-scale implementations and better return on investment on next-generation technologies including AI, IoT, and machine learning.
Here are key learnings from Project JEDI that enterprises should take very seriously.
The JEDI contract’s fundamental issue arose from the fact that it considered a single cloud provider to chart out its entire cloud strategy. This caused great stakeholder dissonance, in large part because alignment with just one provider could result in losing out on ongoing innovation from other providers.
Because a single cloud strategy offers advantages including lower upfront cost and streamlined systems, enterprises often adopt this approach. But a multi-hybrid architecture allows them to tap into the best of multiple providers’ capabilities and stay ahead on the technology curve.
A well-planned multi-hybrid cloud strategy offers the following benefits:
Project JEDI is completely dependent on a single cloud model, which exposes it to significant lock-in risks such as threat to transfer of data, application, or infrastructure. All of these can have a lasting negative impact on business continuity.
An open cloud model allows application interoperability and portability, and saves enterprises from vendor lock-in. Enterprises should be open to exploring open source or open design technologies for cloud. They should also consider implementing DevOps tools, container technology, and configuration management tools, as they will allow them to deploy their applications to diverse IT environments. All these options reduce the lock-in risks that stem from proprietary configurations, and enable organizations to easily, and with minimal technical costs, switch between providers based on business objectives.
The Pentagon recently awarded the JEDI contract to Microsoft. However, in the initial stages, the project garnered massive attention for its alleged preference to Amazon Web Services (AWS,) which has been involved in multiple government contracts for providing cloud support. Critics of the contract cited that an alleged unfair relationship between DoD employees and AWS would lead to inherent bias and rigged competitive bidding.
While existing relationships are important and can deliver strong value, enterprises should carefully evaluate their vendor portfolio against their workload needs. In most cases, a combination of different vendors will provide the most optimum solution. For example, Java workloads are known to work best with AWS, .NET workloads work best with Microsoft Azure, and Google Cloud Platform (GCP) is most suited for analytics workloads.
A wide range of stakeholders are involved in selecting a cloud provider, and each of their needs, interests, and pre-existing biases must be addressed to avoid project derailment. For example, President Trump’s distaste for Amazon is cited as the prime reason that the JEDI project was awarded to Microsoft rather than AWS.
One of cloud project leaders’ most critical responsibilities is identifying and understanding stakeholders’ vendor biases and bringing them into alignment with business objectives if the biases are based on something other than facts.
The DoD’s approach to Project JEDI led to a prolonged delay in its aspirations in adopting cloud architecture and services and developing leading cloud-based AI capabilities. Avoiding the DOD’s missteps will help enterprises more quickly shape and secure a cloud-based contract that satisfies all stakeholders and supports their organizations’ business agenda.
Rise in digital means rise in agile networks: As enterprises launch more digital projects, demand for agile and programmable networks rises
When companies undertake digital transformation, it’s crucial that they keep executive and organizational support throughout the multi-year journey. An effective strategy for getting and sustaining that support is to focus on the “moments that matter” to the executives and/or users. Those are the moments (or events, decisions, actions) that comprise the most important issues to decide and evolve on the journey – things that the company must get right.
Leaders must not only communicate effectively about those moments but also deal with the related challenges along the way. Otherwise, progress on the digital transformation journey will slow or the journey will be derailed and likely will fail. To avoid either of these outcomes, let’s consider three moments that matter in a common digital initiative – migrating to a hybrid cloud environment.
Read more in my blog on Forbes
EMC has taken a significant step forward in its hybrid cloud journey with the announcement of its acquisition of Virtustream in an all-cash transaction of US$1.2 billion. Founded in 2009, Virtustream is estimated to have clocked ~US$ 100 million in revenues last year through its cloud hosting services and management software (xStream) offerings – while cloud IaaS accounted for 60% of this revenue, the remaining 40% came from management software licenses.
The U.S.-based company will eventually become the managed cloud services division within the EMC Federation business. The transaction is expected to close by the third quarter of 2015 and be additive to EMC’s revenues starting 2016.
EMC is well known for its deep pockets. With about 70 acquisitions since 2003, the inorganic route is clearly not new to EMC (to put it mildly). The company has not shied away from flexing its muscles from time-to-time to build capabilities for its mainstay storage business and beyond.
The emergence of cloud has had a strong impact on EMC’s core storage business, which has been witnessing a sluggish demand over the past few years (the overall Information Storage division of EMC has witnessed a CAGR of ~3% over 2012-14). While EMC has rejigged its focus to cover new storage products, this “strategic tweak” in itself is not expected to arrest EMC’s plummeting revenue growth. Therefore, EMC has put its bet on the “next big thing” in the IT industry – hybrid cloud.
EMC’s association with VMWare and Pivotal has ensured that EMC is no newbie to the cloud; however, the real sign of intent from EMC came with the launch of its Enterprise Hybrid Cloud Solution last year. The launch also coincided with a triplet of cloud acquisitions – Cloudscaling (an OpenStack IaaS solution developer), Maginatics (a cloud-enabled storage provider), and Spanning (a cloud-based application data security provider).
As EMC looks to make a mark in the enterprise cloud market, the Virtustream acquisition offers multiple benefits to EMC:
Expansion of the Enterprise Hybrid Cloud Solution portfolio: EMC’s Enterprise Hybrid Cloud Solution is currently an on-premise private cloud offering that provides cloud-bursting options to VMware vCloud Air and other public cloud services. The addition of Virtustream’s xStream platform provides EMC with capabilities to manage both on-premise and off-premise deployments, thereby offering a truly hybrid cloud setup
The xStream platform will be leveraged by EMC Federation service provider partners to deliver independent services based upon it
Credible cloud managed services capabilities: Virtustream has witnessed credible success in serving large enterprises with complex cloud deployments and managed services requirements, through partnerships with industry-leading vendors such as SAP (which made a US$40 million investment in Virtustream in 2013), Oracle, and Microsoft. Virtustream has been certified by SAP to offer SAP HANA as-a-service. EMC can leverage Virtustream’s managed service capabilities/experience to serve its own existing clientele as well as prospects
Datacenter footprint: Virtustream brings a credible revenue stream based on its datacenter footprint spanning locations such as the U.S., UK and the Netherlands (catering to key demand markets such as North America and Europe)
Meaningful clientele: Virtustream brings a credible roster of clients including Coca-Cola, Domino Sugar, Heinz, Hess Corporation, and Kawasaki, which will get added to EMC’s kitty (to cross-sell its broader hybrid cloud and storage offerings).
The move to acquire Virtustream seems to be a logical one for EMC (although the revenue multiple of ~12X indicates some level of desperation on EMC’s part, given the ongoing stakeholder unrest). Also, given EMC’s traditional modus operandi of allowing its acquired entities to operate autonomously, we do not expect the acquisition to grossly impact Virtustream’s innovation capabilities (barring potential integration and cultural challenges)
The development may have come across as a surprise for many market observers, given that the company was grappling with the idea of going public barely six months ago. While Virtustream was going great guns, the brand recognition of a cloud provider typically plays a huge role when it comes to large enterprises looking for sourcing options. Consequently, hitting the “next level” of growth trajectory potentially becomes a significant challenge for players such as Virtustream (especially with a large enterprise focus).
Therefore, it comes as no surprise that Virtustream’s CEO, Rodney Rogers, claims to have considered multiple suitors over a period of time, before choosing EMC (based on terms offered and a chance to become a part of the EMC Federation).
The EMC-Virtustream deal has been preceded by multiple notable acquisitions in the cloud market over the past few years (Terremark by Verizon, Savvis by CenturyLink, SoftLayer by IBM, Metacloud by Cisco, and GoGrid by Datapipe). As various players in the enterprise cloud market, be it global IT service providers, telecom providers, or public cloud providers look to gain a stronger foothold, it is hard to bet against other similar acquisitions happening in the near future. The question is which company will be the next one to get gobbled up? CloudSigma? DigitalOcean? Joyent? ProfitBricks? Or even Rackspace? That only time will tell.
Photo credit: EMC
According to results from our annual Everest Group – Cloud Connect Enterprise Cloud Adoption survey, 56% of organizations consider cloud to be a strategic differentiator
According to results from our annual Everest Group – Cloud Connect Enterprise Cloud Adoption survey, enterprises are most likely to migrate application development/test environment to the cloud and least likely to migrate ERP
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.
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:
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.
There’s a lot of noise in the industry today about whether or not infrastructure appliances, engineered systems, datacenter-in-a-box, and other similar solutions can be labeled “cloud.”
The basis for this debate is rooted in assertions that the public cloud model, or more aptly Amazon’s, is the only cloud model. There’s no doubt that Amazon is the poster child for the cloud industry, and was around when the cloud buzz was making inroads; and therefore subsequent “definitions” of cloud have become inspired by Amazon’s delivery model. Moreover, the idealistic pursuit of converting IT into a pure utility, as well as addressing overarching pain points of enterprise IT, are also driving some of the arguments. But does doing so restrict the benefits an enterprise can derive from cloud principles?
Private cloud providers make their business case based on security, lower total cost of ownership (TCO), manageability, tight integration, and some other “public cloud-like” benefits. But while they do not always possess the scalability, payment options, and other aspects of public cloud services, is it fair to limit the cloud ecosystem to a particular definition, and term other solutions “cloud washing”? Similarly, various SaaS providers that believe they are the “true cloud application providers” have defined the criteria for a “true SaaS application”, in turn expecting other cloud applications to satisfy their self-anointed criteria to become a SaaS provider. Does this add value to cloud discussions?
Unfortunately, the public cloud provider-driven “definition debates” – that revolve around the pay-per-use aspect of public cloud vis-à-vis a minimum capacity commitment required in a private cloud, the virtually infinite capacity of infrastructure public cloud vis-à-vis requirements to buy “infrastructure boxes” that impact the scalability and flexibility in a private cloud, the minimum capex in public infrastructure cloud vis-à-vis expensive hardware procurement in a private cloud, etc., are doing more harm than good. In retaliation, private cloud providers have also started poking holes into public cloud providers’ security, financial stability, commitment, quality of service delivery, and other seemingly relevant aspects. These assertions are also futile.
The fact is, the name or definition assigned to a given cloud-type solution is moot. The real issue is whether the customer sees value in and gains benefit from a cloud offering. Does it improve IT management? Does it save money? Does it improve IT delivery? Does it help the business become more agile?
Failing to take this client-centric view and instead utilizing the prescriptive, self-created definitions of cloud services can significantly inhibit cloud uptake and the potential benefits from its usage. Just because a cloud solution does not satisfy an “industry definition” should not prevent an enterprise buyer from evaluating it, as long as it offers cloud-related benefits and serves the intended purpose.
Our discussions with a wide range of enterprises show a growing propensity to embrace the hybrid cloud model. And our recent research, in which we analyzed the cost of operations under various infrastructure set-ups such as legacy, virtualized, private cloud, and hybrid cloud), found that the hybrid cloud model is definitely more cost effective and flexible as compared to other cloud models.
But, a word of caution: buyers must differentiate between a silo collection of different private and public cloud solutions and a hybrid cloud. A true hybrid implies the coordinated orchestration of private and public cloud to manage workloads.
So, where should buyers begin? Move beyond the futile “name game” and evaluate serious private and public cloud offerings to create a hybrid cloud environment that can transform their IT organization.