IT Transformation Archives - Page 2 Of 3

Offshore Providers and the Cloud – No Datacenter Is Not a Choice! | Gaining Altitude in the Cloud

June 22, 2012

As large IT services buyers increasingly embrace cloud-based delivery, offshore IT services providers are being forced to innovate beyond their traditional strengths of labor arbitrage, process excellence, and delivery maturity. Indeed, as these providers witness their application services reaching wallet share saturation in the large buyer market, there is growing perception in the industry that if they do not offer “next generation” services they risk losing even their traditional business.

Granted, these providers are not sitting idle. They have created “cloud advisory” teams and executed multiple application migration/porting engagements as part of their global services contracts. But the crux of cloud opportunity lies in the transformational nature of these engagements, which invariably involves owning IT infrastructure.

Our discussions with enterprise IT services buyers point to three types of roles for offshore providers, which extend beyond typical SaaS implementation and integration. These roles will also require services related to consulting, architecture, application migration, etc.

Offshore providers possess varying degrees of competence for these roles, but to remain relevant, they must continue to invest in newer capabilities. Today, a select few are investing in areas such as cloud management platforms, consulting services, readiness assessments, and migration services to move beyond simplistic cloud engagements. However, most lack a comprehensive datacenter-driven cloud infrastructure service, which is needed to drive transformational engagements.

One of the key findings in Everest Group’s recently released Cloud Vista research study was that more than 50 percent of large cloud-related engagements – and even most application transformation deals – contain a significant amount of infrastructure transformation, but offshore providers have scant presence in these engagements.

It is becoming abundantly clear that offshore providers need to swiftly tackle the area of cloud infrastructure services. One of the biggest challenges they must overcome is their lack of willingness to invest in owning datacenters, instead opting to relegate core datacenter operations to the partners. Many buyers convey their disappointment with this type of partnership model, believing it can at best support running IT operations, but that it is not appropriate for enterprise class cloud infrastructure services that can assist them to variabilize their costs and access self-service, consumption-linked infrastructure.

Given their general reluctance to own large scale datacenters, offshore providers may at least evaluate “white labeling” hosting providers’ datacenters so that they can offer cloud infrastructure services which will allow them to calibrate their investments while simultaneously serving their buyers. Given that white labeling of datacenters is an accepted practice and even large scale datacenter service providers white label datacenters from other core datacenter operators (e.g., Equinix), this model will find acceptance with the buyers.

Offshore providers need to understand that for a game changing paradigm such as cloud, there always will be a risk associated with investments. The days of cherry picking attractive contracts are over, and they can no longer walk away from complex deals that do not meet their sweet spot. Therefore, they must inculcate a culture of risk taking, and invest in areas outside their comfort zone, especially in cloud infrastructure services. The cloud is changing buyers’ sourcing strategies, and offshore providers that fail to change accordingly risk losing their relevance and even their traditional business.

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

May 21, 2012

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.

Video Interview: Simon Wardley on Cloud Adoption Inertia | Gaining Altitude in the Cloud

February 23, 2012

In my last blog, you watched Francesco Paola’s response to CIOs’ willingness to fund a “cloud account team.” Another resistance an enterprise could face is the agnostic feeling towards the cloud promise and the resulting reluctance to move to the public cloud at the opportune time because of its perceived insecurity compared to the private cloud.

In today’s video interview, Simon Wardley, researcher for the CSC Leading Edge Forum, answers the question: Do you think enterprises who are adopting private clouds over public clouds are fighting the inertia due to computing utility?

Simon also added to his first response by explaining how organizations can transform themselves to fight this inertia efficiently.

In case you missed the first blog, this is the second video interview of a series we taped at CloudConnect 2012 in Santa Clara. Everest Group’s Scott Bils chaired the Organizational Readiness track and enlisted an impressive lineup of speakers.

Watch the first video, featuring Francesco Paola of Cloudscaling.

Watch the third video, featuring Erik Sebesta of CloudTP.

Watch the last video, featuring Clayton Pippenger of Quest.

Grief Counseling for the CIO | Gaining Altitude in the Cloud

February 9, 2012

The accommodation and integration of disruptive technologies into the enterprise IT ecosystem is a significant issue for IT executives. And just as distributed computing did 20 years ago, successful adoption of cloud computing in its many forms requires substantial change across the IT enterprise. The rapid pace of innovation and ability of business users to deploy cloud services without IT involvement are raising these issues much faster than past transformation waves.

At Cloud Connect in Santa Clara, CA, on February 15, I’m going to have a “fireside chat” to discuss this “keeps me awake at night” issue. While I’m sure the conversation will take some unexpected turns, I plan to navigate our talk to some of the more challenging factors enterprise IT organizations face as they embrace cloud.

A different mindset – To be able to fully leverage the benefits of the cloud service model, IT organizations are finding they have to adjust a number of strongly held beliefs that have served them well in supporting their current environments but constrain them as they move into the next generation cloud world. These include changing their orientation and thinking about how and when to provide customization for both applications and infrastructure, embracing the power of speed to impact by utilizing commonly available components, adjusting expectations about how security and compliance issues can be resolved…and many more. Indeed, there are a significant number of mindset adjustments that, when taken together, present a steep learning curve and cultural change requirement.
A new framework for IT architecture – As enterprises embrace cloud service models, they find that the existing architectures, frameworks, methods, and processes need to be adjusted, and, in some cases rethought and reinvented. .
A new orientation toward innovation – One of the more difficult aspects of the new cloud world is the dilemma posed by a constantly evolving marketplace with a wide array of attractive options at competitive prices. The quick access to robust functionality allows and often encourages business units and other empowered stakeholders to experiment with cloud tools and applications. If they find the functionality useful, they often scale its use, creating new layers of technology outside the constraints of IT policy, compliance, and security. The lack of widely accepted industry standards and APIs and the constant evolution of the underlying technologies further complicates the enterprise IT agenda. Traditional approaches IT organizations utilize to evaluate, integrate, and mange the introduction of applications and technologies are often unable to accommodate these conditions without restricting the very flexibility and choice that make cloud services so attractive. The result of these challenges drives many IT executives to reexamine their approach to innovation, and challenges them to adopt new thinking about the lifecycle of technology, how integration is accomplished, and compliance is assured.
Alterations to policies, processes, and the organization – As enterprises more deeply embrace these next generation technologies and associated changes, they find that to fully capture the benefits they must revisit some of their long held policies, adjust many of their existing processes, and facilitate and reinforce these with organizational alignment and change. New skills are required, other skills are in less demand, and the old ways interfere with or constrain progress in the new world. In most cases, these adjustments that will enable successful leverage of cloud computing must take place simultaneously with protection and maintenance of the work that will continue to be delivered from the legacy environment.

As we reflect on the size, scale, and depth of the changes cloud computing drives, I want to press my discussion partner(s) to think back to our experience with the adoption of distributed computing. We are now 20 years into that journey, and many enterprises are finding that they still maintain some applications in a mainframe environment. While it’s not possible to know how long the cloud expedition will take, it seems prudent to believe that most enterprises will be on it for at least a number of years. And, as with distributed computing, we may find that some workloads have a very long tail.

Given the realities of most large IT enterprises, it is clear that in most cases we can’t expect to achieve a clean break, making it likely that the legacy organization and the people in it will have to balance the realities of the new world while dealing with the old. As IT executives contemplate the journey ahead, they can be forgiven for nostalgia for the status quo. While our conversation next Wednesday will not solve all the problems, the grief counseling may at least help us sleep better.

Cloud Computing is not a Technology….But an Idea with Different Meanings | Gaining Altitude in the Cloud

November 21, 2011

Following are just a few of the many definitions you will find for cloud computing in technology publications, forums, blogs, etc.

“Cloud computing is scaling infrastructure on-demand within minutes or seconds.”

“Cloud computing is the shift from a single-tenant software development model to a multi-tenant, multi-network model.”

“Cloud computing is a broad array of web-based services providing a wide range of functional capabilities on a pay-as-you go basis.”

“Cloud computing is transformation of the physical layer to software based virtualization.”

“Cloud computing allows people to access technology-enabled services over the Internet.”

“Cloud computing is everything as a service. Grid computing, SaaS, PaaS, IaaS, etc.”

One of my favorites is:

“There sure is a lot of confusion when it comes to talking about cloud computing. Yet, it does not need to be so complicated. There really are only three types of services that are cloud based: SaaS, PaaS, and cloud computing platforms.”

Reading all these varying definitions, it would appear that cloud computing is everything but the kitchen sink. But I think it’s important that we view cloud computing as what it really is – an idea or a concept on which technologies are built – just like the Internet, which means different things to different suitors depending on the context in which it is being defined.

Is cloud computing as revolutionary as the Internet? It’s hard to say because it’s still evolving, but in my opinion it holds lots of promise. Just as technologies, such as TCP/IP, BGP, OSPF, MPLS, etc., were built on the idea of the Internet, we will see new technologies emerging with the idea of cloud computing.

The Internet has evolved over the years, and everyone conceptually knows what it is. Yet I would never tell a CIO that he or she should move its business to the Internet.

In that same vein, I think we need to reorient the discussion of cloud computing with CIOs to avoid any more confusion. Talk about the technologies that make cloud computing possible. Talk about multi-tenancy, virtualization, dynamic provisioning, storage technologies, unified fabric, etc., and those are just the beginning.

Start a discussion with a CIO with something like, “Are you ready for IT transformation based on new technologies?” That will get the conversation moving in the right direction, with no confusing or constrictive preconceptions.

Talking the Talk, but not Walking the Walk, in the Cloud | Gaining Altitude in the Cloud

October 18, 2011

Over the last two months, we have visited with more than 50 Fortune 500 firms to discuss their thoughts about adopting and harnessing the disruptive technologies and services that are driving the next generation of IT. Inevitably, our conversations focused on the cloud and its potential impact on the price point and flexibility of IT delivered and consumed at the enterprise level.

But most of the firms we met with expressed disappointment in the support they are currently receiving from their incumbent hardware and software providers. We heard time and again that the providers are eager to engage in conversations (often confusing and contradictory) about the power and relevance of the cloud, and each pointed to the groundbreaking products and services they have, or soon will. However, when it came to presenting an actionable roadmap to for planning and/or actually implementing production-ready solutions, the providers launched a major back-peddle. They suggested that despite the hype, the client was already close to best practice, as it was well down the road to virtualization, or that the offerings were not appropriate for firms of its size or industry. If pushed further, the providers stated that the solutions under consideration were not practical because of security and or regulatory issues.

What’s going on?

It is clear that most large enterprises are giving serious thought to actively adopting cloud-based solutions for at least some of their workloads. And fearing they will be left in the dust by the new breed of cloud-specific competitors – including Rackspace, Amazon, and Savas – the incumbents feel they must, at a minimum, engage in conversations with their clients about cloud. When pushed to deliver a public/private cloud solution, the major hardware and software providers are investing considerable time and money on solutions with unacceptable quality, performance and/or resilience. They also lack the internal expertise to implement the new solutions. Perhaps most troubling for the incumbents is that they face a huge conflict of interest as the next generation of IT solutions replaces the existing infrastructure at a fraction of the cost and, hence, dramatically cuts into the providers’ revenue.

In short, their strategy is to obfuscate, delay and criticize. And while enterprises are looking to their existing providers for leadership, and would much prefer to have one familiar throat to choke, the frustrating and confusing conversations they are having with their current incumbents is driving them further into the waiting arms of the challengers that have, solid offerings, real capabilities, and strong value propositions.

Financing Your Way to the Cloud | Gaining Altitude in the Cloud

October 14, 2011

Just as the dot-com era required an overhaul of financial and funding models, today’s clouding computing revolution is also challenging the status quo of traditional financing. Indeed, with so many uncertainties about the cloud looming in the minds of potential buyers, coupled with challenges in obtaining credit, the technology vendors in all cloud computing areas (IaaS, PaaS, and SaaS) are quickly realizing that to facilitate the transition to the cloud they need to step up to the plate and streamline and overhaul their financial arms. And this means establishment of capital entities, e.g., Cisco Capital, HP Financial Services, etc.

Ultimately, we’ll see levels of standardization among cloud-focused funding models. But until then, technology providers are developing and offering customized financing structures for key customers to enable them to meet their Capex budget requirements. The offerings include on pay-as-you-grow or pay-as-you-go bases for server/hour and RAM/hour computing.

The upside of these new financing models is initially for buyers, as they make it more palatable for CIOs, who would otherwise be thinking and sitting on the fence, to transition faster to the cloud. In the short term, however, they are having an adverse affect on cloud technology vendors’ financial statements, as they cannot immediately recognize the revenue for hardware and software sales. And this will make it appear that margins and revenues are distressed. But as the financial analysts at investment banks gain greater understanding of the nature of the cloud computing business, they will gradually rewrite the rules on how they financially evaluate cloud computing providers.

But we all need to hope that the financial analysis done for the cloud computing business is done right. Remember Kozmo.com? It was a company with a doomed business plan, but it was still able to attract millions of dollars in capital. We don’t want to go back to a time where capital is committed based on the promise of the business but which makes little financial sense.

In our next blog, we will talk about the operational and financial challenges technology vendors face in rolling out these new business models.

ITO, Cloud and Next Generation Outsourcing – How Do You Get There? | Webinar

October 10, 2011

Thursday, October 20, 2011 | 11 a.m. CDT

Download the webinar deck

View the webinar recording

New cloud and next generation IT models are starting to deliver global enterprises disruptive improvements in cost and performance. Unfortunately, many organizations that have outsourced parts of their IT environment have been unable to capture these benefits. And perceived contractual constraints have prevented many of these enterprises with ITO agreements from aggressively exploring the benefits of IaaS, PaaS and SaaS models.

However, forward-thinking enterprises are starting to find that traditional outsourcing agreements in fact do not significantly constrain organizations’ ability to develop and pursue cloud strategies. Innovative enterprises with ITO solutions in place are still developing new approaches for capturing the benefits of cloud and rethinking their approach to outsourcing and IT providers.

In this webinar, learn:

How next generation IT models can reduce infrastructure costs by 30+% over ITO solutions
How cloud solutions can be leveraged even when an ITO solution is in place
The myths around ITO contractual constraints to cloud migration
Why your ITO vendor may not be incented to migrate you to the cloud
New approaches for IT vendor governance and management in cloud environments
How to develop a migration strategy and roadmap in preparation for ITO end-of-term

Everest Group’s Next Generation IT Practice is focused on helping leading enterprises navigate the opportunities and challenges associated with transformation and cloud migration. Based on extensive work with leading enterprises and cloud service providers, Everest Group has developed the first comprehensive set of analytics, frameworks and fact-based economic models for enterprise IT transformation and cloud migration.

Who should attend?

Enterprise IT executives and senior professionals with ITO agreements seeking to understand how they can begin capturing the benefits of cloud.
CFOs and procurement executives looking to understand the potential financial benefits of cloud migration, and implications for managing their IT vendors.
Enterprises “experimenting” with cloud services who are seeking to take the next step and develop a broader perspective on the transformational potential of cloud for their businesses.

Presenter:

Scott Bils, Partner and Next Generation IT Practice Leader, Everest Group

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Notes from the Interop NYC 2011 Carrier Cloud Forum | Gaining Altitude in the Cloud

October 6, 2011

I had the good fortune to participate in a lively panel discussion at this week’s Interop NYC Carrier Cloud Forum on the topic of Enterprise Expectations for Cloud Services. My co-panelists were Troy Angrignon of Cloudscaling, and Charlie Burns of Saugatuck Technology, and the moderator was Carol Wilson from Light Reading. We covered a pretty broad waterfront, discussing everything from the state of enterprise cloud adoption to enterprise perceptions of telcos/carriers as potential cloud service providers. Some of the more interesting exchanges focused on the following points:

The market noise is getting deafening – one of the biggest emerging obstacles to enterprise cloud adoption is actually the market confusion being created around what cloud is (and isn’t). Every enterprise IT vendor, including hardware, software or services, is pitching a cloud story, whether it actually has capabilities or not. The vendor marketing onslaught is making it extremely difficult for CIOs to separate truth from fiction, and in many cases is slowing down efforts to drive migration. The good news? This is a purely self-inflected wound from a cloud industry perspective, and it should sort itself out over time. The bad news? In the short term, some CIOs are starting to tune out, or at least very skeptical in engaging in yet another vendor discussion around cloud.
It’s all about business agility – on the topic of what ultimately will be the primary driver of enterprise cloud migration, there was some healthy debate around the importance of the cost efficiency value proposition to enterprises. While we all generally agreed that business agility and flexibility was going to be the dominant theme, there were differing perspectives on how important a compelling cost reduction component was going to be. Some think agility alone will be enough, while others (including me) believe that overall cost improvements of 30+ percent will be required to get the attention of enterprise CIOs and to drive wide-scale transformation, particularly in infrastructure.
Cloud security is often more about IT job security – Charlie Burns made the great observation that enterprise concerns around data security often have more to do with IT executives’ anxiety about their future roles, and less to do with actual cloud security. Major cloud service providers have matured quite a bit when it comes to security, and the major enterprise issue now has more to do with transparency than the actual security policies and practices being implemented by providers.
Significant market “white space” still exists – we agreed that enterprises view the network as a critical component of cloud services and that carriers have a strong “card to play” as enterprise cloud emerges. Rather than focusing on horizontal IaaS services, carriers may be better off identifying specific solution areas and use cases where network ownership could create strategic differentiation and advantage – for example, use cases in which high availability or bandwidth are critical. While we all recognized the challenges of carriers entering more horizontal IaaS or PaaS markets from scratch, Troy gave an interesting example of how Cloudscaling has recently helped KT launch cloud IaaS services in Asia that were priced 30 percent lower than Amazon AWS.

Thanks again to Troy, Charlie, and Carol for a great discussion!

Photo Credit: Interop Events

Live from Bangalore – the NASSCOM IMS Summit, September 22 | Gaining Altitude in the Cloud

September 22, 2011

Hello everybody! I’m back, reporting from day two of the NASCOMM IMS Summit in Bangalore. Today’s conference was focused on discussing alternative models of cloud computing and what works best for who.

First, Adam Spinsky, CMO, Amazon Web Services (AWS), told us his view of what happening out there in the cloudosphere. An interesting factoid to chew on – as of today, AWS is adding as much data center capacity every day as the entire Amazon company had in its fifth year of operation when it was a US$2.7 billion enterprise.

Even more compelling proof of the fact that the cloud revolution is really happening were Spinsky’s examples of the types of workloads AWS supports – SAP, entire e-commerce portals that are the revenue engines of companies, and disaster recovery infrastructure…all are hosted on the cloud. Fairly mission critical stuff, rather than “ohh, it’s only email that’s going to go on the cloud,” you must admit.

Next up, Martin Bishop of Telstra spoke of the customer’s dilemma in choosing the right cloud model. This segued nicely into the panel discussion, “Trigger Points – Driving Traditional Data Center to the Private Cloud,” of which I was a part.

M.S. Rangaraj of Microland chaired the panel and set the context by talking about the key considerations of cloud implementation. According to Rangaraj, the key issues are orchestration and management, as the IT environment morphs into new levels of complexity with multiple providers delivering services across a multitude of devices.

I spoke of the business case for a hybrid cloud model. While private cloud is good, and current levels of public cloud pricing provide slightly better business value, a combination of the two enables clients to reduce the huge wastage of unused data center resources they now have to live with. Today, infrastructure is sized to peak capacity, which is utilized once in a blue moon. The dynamic hybrid model enables companies to downsize capacity to the average baseline. Associated savings in energy, personnel, and maintenance imply dramatic cost advantages over both pure public or private models.

Kothandaraman Karunagaran from CSC took up the thread and spoke of the role of service providers in this new paradigm. While outsourcing may not “die” as a result of the cloud movement, it’s jolly well going to be transformed. Service providers will need to spend far more time in managing, planning, and analyzing usage and consumption data, and less time on monitoring and maintenance. In other words, service providers’ roles will evolve from reactive to proactive management.

Some of my key takeaways from the conference include:

Everybody agrees that there is no silver bullet model, meaning that there are no clear winners in a cloud environment, and the hybrid model will keep getting traction as the world becomes increasingly, well, hybrid.
Until not long ago, we spoke of the need to simplify IT. Well, the only part of IT that’s going to get simplified is the consumption bit. If you are a CIO reading this, we’ve got bad news for you. Management of IT is going to get more, not less, complicated. Multiple service providers, networks and devices, reduced cycle time, and self-provisioning means that management just got a whole lot tougher.
Service providers need to rapidly engage with this new reality and figure out business models can adapt to it. The unit of value is no longer the FTE. It’s what the FTE achieves for the client, or even more complicated, what the consumer actually ends up using. We live in interesting times, and they will only become more interesting as time goes on.

That’s it from my end. I enjoyed the conference, look forward to more illuminating discussions next year, and, hopefully, to seeing you there!

If you weren’t able to attend this year’s conference – or even if you were – you can download all speaker presentations at: http://www.nasscom.in/nasscom/templates/flagshipEvents.aspx?id=61241

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

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