Tag: PaaS

Notable Numbers: Payment Companies Outperform in BPO | Sherpas in Blue Shirts

If you owned stock in major BPO companies in 2013, you’re happy, as most of them outperformed the S&P stock market. But you’re a really happy stockholder if you invested in payment transaction companies — those returns are almost twice as sweet as most of the other BPO stocks!

As a group, payment transaction providers’ performance was a spectacular success. Check out these awesome numbers:

  • Eight payments companies’ growth rates ranged from 53-71%.
  • 11 of 13 top BPO companies grew at 3-48% — and that’s in a strong year for BPO and with the stock market rebounding. (The two exceptions are WNS and Syntel; their stock appreciated the highest in the BPO market.)

How did the payments providers manage this outstanding performance?

The reason for the payments group’s dramatic growth is that these providers have what every BPO provider looks for — a transactional platform. The area where companies can create highly successful BPO platforms is the payments space. Providers can charge per transaction and do so in the as-a-service model that many customers want. The economies of scale in such platforms can be very lucrative; with more volume, the product becomes dramatically more profitable.

Although other BPO players invested significantly in trying to get to this transactional market, the fact is it’s difficult to build a platform or as-a-service model that truly works. Platform and as-a-service success requires an industry or a function that lends itself to the model.  Attempts to do this in other areas to date have not been as successful or profitable as the payments space.

Are there other areas where the platform model could be as successful?

Enterprise CIO: “The Reports of My Death Are Not Greatly Exaggerated” | Gaining Altitude in the Cloud

As a humorist, American author Mark Twain would undoubtedly have been amused by this variant of his famous quote. But the demise of enterprise CIOs’ traditional role is real, (unlike the misreports of Twain’s passing), and to understand this phenomenon, we need to understand the evolving market dynamics.

Three key trends are significantly altering the shape, structure, and operations of today’s CIO office:

  1. Cloud services: Unlike infrastructure, IT governance, and IT security teams, which are generally shared throughout an enterprise, large numbers of applications developers are normally aligned to specific businesses. Due to the complex labyrinth of multiple teams and decision centers, applications developers face substantial difficulties in fulfilling their business-based project sponsors’/budget holders’ demand for quick time to market.

    To overcome these challenges, applications developers are increasingly adopting cloud-based infrastructure/platform-as-a-service (PaaS). This allows them to bypass the other IT teams, (e.g., security and infrastructure). By leveraging cloud services, applications developers no longer solely rely on enterprise IT’s infrastructure and operations to develop and test their applications. They can develop, test, and even host their applications on a cloud-based platform. This is causing challenges for the CIO’s office in terms of reduced involvement with businesses, security issues, and audit risks.

  2. Software-as-a-Service (SaaS): Although it is part of the cloud ecosystem and has been in the marketplace for more than a decade, SaaS is treated as a different segment. The challenges with deploying enterprise software in the traditional manner, (e.g., ownership of licenses, hardware, support, upgrades, etc.), coupled with the significant time to deploy and the high rate of failure, are driving business to push the CIO’s office toward a “cloud first policy.” For simpler applications that do not require organizational support, (e.g., infrastructure, data, integration), businesses are more than willing to leverage the SaaS model. And to avoid getting embroiled into the complex labyrinth of organizational IT, businesses are also hiring contractors to perform specific IT-related tasks. Additionally, as businesses’ appetite to wait for months, even years, without knowing the possible outcomes of an enterprise software deployment is depleting fast, they are increasingly viewing SaaS as the solution.

  3. Digitization and business-IT budgets: Although cloud services and SaaS are disrupting enterprise IT, the biggest challenge facing CIOs is the shift of technology budgets to the business. This typically includes initiatives such as big data analytics, multi-channel customer engagement, social media, CRM, and enterprise mobility. While the CIO’s office plays a role in these initiatives, it is fast losing decision-making powers. CEOs and CFOs are now inclined to spend technology dollars on business initiatives that generate growth, e.g., digitization. Therefore, in a boardroom battle for technology budgets, CIOs are increasingly losing against the businesses (e.g., chief marketing officers and chief digitization officers). The growing perception that digitization is for growth and IT is for efficient operations also works against the CIO’s office.

Despite the fact that a CIO’s office will always exist, there will be an increasing debate around its utility in its existing form. While the misalignment of business and IT has been an age-old debate, the cloud age has finally provided businesses with the ammunition required to change the game. Cloud services, next generation technologies, techno-savvy business users, and the pivotal role of technology in an organization’s growth are creating pressure on enterprise CIOs. They need to act fast to prove that Mark Twain was indeed right and stem reports of their death.

If you are a CIO or an IT manager interested in sharing your story, please reach out to me at [email protected], or directly add a comment below.

7 Things We Learned at Cloud Connect | Gaining Altitude in the Cloud

Originally posted on Leverhawk


It was an interesting week last week at Cloud Connect Silicon Valley. In addition to the keynotes and track sessions, we also saw the release of the summary results of the latest joint Cloud Connect / Everest Group survey on enterprise cloud adoption.  Here are the seven things we took away from the conference, the survey results, and the discussions we had:

  1. The power shift from IT to business is real – one of the key findings from the adoption survey was that outside of dev test environments, disaster recovery (DR) and email / collaboration, business stakeholders are the primary drivers of enterprise cloud adoption. Anecdotal conversations with practitioners and vendors alike reinforced this idea that the cloud is permanently changing buying behaviors in the enterprise.  This is bad news for many of the legacy enterprise IT players, who struggle with transitioning from a CIO-centric sales model to one focused on emerging business buyers.
  2. OpenStack is on a roll – one of the common themes in both the sessions and side conversations is that OpenStack appears to be gaining steam not just with the Foundation members but with enterprises as well.  In fact one leading financial services player we met there has the target of moving half of their production workloads to OpenStack by the end of the year.  We heard countless more examples of deployments that were in fact more than just pilots, and indications that OpenStack is starting to gain serious momentum.
  3. Cloudwashing is contagious – many legacy enterprise IT vendors have a lot to lose as their customer base migrates to the cloud.  It’s probably not surprising that many of them are happy to have their customers mistakenly believe that virtualized environments = private clouds.  As a result we have the unfortunate phenomena of organizations claiming and believing that they’re migrating to private cloud models, when in fact they’re really not.
  4. Cloud infrastructure can create competitive advantage – while applications, analytics and data are commonly seen as the source of IT-enabled competitive differentiation, we heard about how some enterprises are actually seeking cloud infrastructure as potential sources of business advantage.  We heard from one other major financial services firm that the speed and agility benefits being provided by the combination of cloud and open source was in fact creating competitive business advantage in the marketplace.
  5. Shadow IT doesn’t always mean happy customers – a growing trend that we heard a bit about was the “lose / lose” dynamic that was being created in some organizations by shadow IT.  The scenario goes like this: business buyer asks corporate IT for on-demand infrastructure services, with requirements that are perhaps a bit unrealistic.  Unhappy with the response they hear, business buyer instead goes to a public cloud IaaS provider, but quickly realize requirements aren’t met there either, but for different reasons.  The result is one unhappy customer and two unhappy service providers.   While this is the exception not the norm today with shadow IT, it is a trend worth watching.  Note to business buyers:  with freedom comes responsibility, certainly at least to understand your real requirements.
  6. Compliance isn’t stopping adoption – conventional wisdom suggests that highly regulated verticals will be adoption laggards due to security and compliance concerns.  A series of sessions with IT executives at NovartisAmerican Express and Fidelity proves that’s not the case.  While in the most case they’re focus is on private cloud models, the motivation is still around business drivers – providing faster, cheaper and more effective applications and capabilities.  The initiatives they’re driving are global in nature, and far from the ubiquitous proof-of-concepts that everyone seemed to be discussing last year.
  7. The tipping point is near – if it’s not here already, we’re close to the point where cloud becomes accepted as the primary IT delivery model going forward.   The conference survey showed that the majority of enterprises now expect migration to some type of cloud model (public, private hybrid or other) across all major workload types.  This isn’t to say that everything will migrate tomorrow, or that it will make sense to migrate everything to cloud models (it won’t), but it does say that market conversation around whether cloud makes sense for the enterprise may be close to over.

Interested in reading more about how cloud is driving enterprise transformation?  Check out our recent post on how JP Morgan Chase is using PaaS to transform internal application development.  Also read our guide on understanding the Great Tech War being fought across cloud, mobile, digital content and big data.

Photo Credit: Cloud Connect

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.

PaaS, IaaS and SaaS Providers…Moving Up and Down the Cloud Stack | Gaining Altitude in the Cloud

As the market for cloud services expands, the providers at each level of the stack are realizing various opportunities beyond their core solutions. They are also realizing that scale is absolutely critical for the success of cloud services. As a result, they’re starting to enter each others’ domain. Let’s take a look.

Platform-as-a-Service (PaaS) Providers

Large PaaS providers such as Microsoft and Google are moving down the stack to create Infrastructure-as-a-Service (IaaS) offerings. This may indicate not only that standalone PaaS is a difficult business to scale but also that IaaS is required to create a broader cloud footprint and higher degree of acceptance, as evidenced by Amazon’s runaway success with AWS. At the current stage of cloud adoption, PaaS may appear to be too futuristic, and many organizations may be unwilling to bet on it for the long term. Therefore, it makes sense for PaaS providers to offer IaaS solutions to their clients.

Most PaaS providers, and their respective platforms – think CloudBees, dotCloud, Salesforce.com’s Force.com and Heroku, Google Apps Engine, IBM SmartCloud Application Services, Iron Foundry Web Fabric, LongJump, Microsoft Windows Azure, Morphlabs, OutSystems, RedHat OpenShift, and VMware CloudFoundry – have preferred programming languages, e.g., .Net for Microsoft Windows Azure, Java for CloudBees, Python for Google Apps, and Ruby for EngineYards. These preferences bind clients to a specific platform offering, as they believe that a PaaS solution typically works best with its preferred or native language. However, to scale their business and appeal to a broader set of application developers, these providers are beginning to widely support multiple programming technologies.

Infrastructure-as-a-Service (IaaS) Providers

IaaS providers are desperately claiming agnosticism in running any application on their infrastructure. They believe as their offerings are pure infrastructure, developers are free to choose any programming mechanism and build applications. However, they also realize that the developer community finds value in a PaaS solution as it reduces their burden of handling various time consuming, nitty-gritty application development tasks. Therefore, many IaaS providers are moving up the stack and creating PaaS solutions on top of their infrastructure offerings, in partnership with leading cloud platform providers such as Iron Foundry or LongJump.

Indeed, many cloud infrastructure players are also partnering with cloud database companies and calling themselves PaaS providers. They are unable to decide whether they truly want to embrace the cloud or just rehash their existing offerings and cloud-wash them with marketing buzz. Regardless, their attempts are to at least make some noise around IaaS, SaaS, and PaaS and position themselves as “integrated” cloud providers.

Software-as-a-Service (SaaS) Providers

Large SaaS providers, such as Salesforce.com and NetSuite, have created their own versions of PaaS, and Workday partnered with Force.com to offer customers a platform on which to customize its solution. These moves not only allow extension of these companies’ basic offerings and integration with other applications; they are smart strategies to convert clients to their platforms. Therefore, these PaaS solutions end up being the “relationship builder” between a technology provider and the client.

Clearly, IaaS providers are realizing that cloud infrastructure is a low-profit, commoditized business and that they must move up the value chain. PaaS providers understand that they need to scale their offerings and that may require them to enter the IaaS market either organically or through partnerships. And SaaS players are already creating PaaS solutions to provide value added services.

The reality is…not all cloud service providers will be able to endure, and many will get consolidated or go belly up. The survivors, who aspire to be big, will be those that offer services across different cloud layers, either through in-house offerings or partnerships.

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?

Is Budget Leakage Sinking Corporate IT’s Boat? Enterprise Cloud Adoption Update | Gaining Altitude in the Cloud

A lot has changed in the short six months since our initial blog on on the emerging enterprise cloud adoption paths. Recent discussions with cloud infrastructure service providers clearly show that  CIOs and corporate IT seem to be interested in talking about cloud, and RFP flow is definitely increasing, but we’re not seeing conversion to contracts and revenue. One statement by a leading cloud service provider was particularly interesting:

“The cloud RFPs we’re seeing from enterprise IT are really strange, and poorly thought out. It’s like they’re just going through the process to get someone off their back…”

At the same time, there does appear to be an acceleration of enteprise spend on cloud, including SaaS, PaaS, and IaaS.

So what gives?

While there are a number of factors in play, we’re finding the biggest one is the role of the business user, and how cloud is eroding the monopoly corporate IT has traditonally had over information technology, services, and even infrastructure. People tend to forget that developer teams are frequently embedded in business units and deparments. They have budget approval limits, but typically high enough that they can spin up dev / test environments on Amazon AWS, for example, with no flags being raised. They no longer have to go to corporate IT to get a server provisioned, or a test environment setup. This is IT budget now flowing through the business, though through technical and not business resources.

As a result, IT is under significant pressure as it sees its budget dollars being threatened. It hasn’t fully figured out the implications of cloud for its IT organization, but can’t appear to be a roadblock to the business. What we see, although not in every enterprise IT organization, is a pretty substantial increase in tire-kicking, pilots and “RFPs” to give the illusion of  progress.

Based on an additional set of conversations, analyses, and insights from recent client work, we’ve updated our enterprise cloud adoption framework to more strongly reflect the business buying dynamic. This new framework is defined by two major dimensions:

  • Change Agent – is the primary driver of cloud adoption led by business or IT?
  • Adoption Approach – is the organization looking at how cloud and next generation platforms could fundamentally transform its business or IT environment? Or is it looking at more tactical, incremental opportunities being presented by cloud applications, platforms, or infrastructure?

Based on these factors, here’s our new framework and overview of the different ways we’re seeing enterprises migrating to the cloud:

Enterprise Cloud Adoption Paths

Enterprise Cloud Adoption Paths

A quick note on the different models:

Innovators

By far the most common enterprise adoption model we’re seeing is driven predominantly by business users implementing cloud solutions for new business capabilities, improved agility, flexibility, or reach. This adoption is coming in several flavors:

  • SaaS – in the majority of cases, business users are directly deploying SaaS business or collaboration apps at the individual, departmental, or business unit level.
  • PaaS / IaaS – for deploying new custom apps, or in some cases replatforming existing apps, developers with reporting lines into the business are deploying cloud with limited involvement from corporate IT.

Adoption is largely driven by individuals, departments, or functions around and outside of IT (even in the case of IaaS and PaaS). Business users want to innovate, recognize they can do it themselves, and feel empowered to do so.

Opportunists

The next most common model is corporate IT driving cloud adoption, albeit for specific, focused use cases. The goal is not broad transformation for “how IT does business,” but targeted adoption to prove the model, or to demonstrate improvements in efficiency and cost. Some of the most frequent use cases include:

  • Test / dev environments (under IT control)
  • Corporate and marketing websites
  • Backup and archival
  • Email and collaboration
  • Virtual desktop infrastructure (VDI)

The private cloud is still the preferred model for corporate enterprise IT, with most CIOs looking to play it safe with known enterprise vendors like IBM, VMware, or VCE. Note that the 20 percent in the Cloud Adoption Paths graphic above does not refer to the percentage of enterprise IT organizations that are pursuing cloud, but rather the number of companies in which cloud adoption is being driven predominantly by an “IT opportunist” model.

Modernizers

While they are the exception, a few enterprises’ CIOs are using next generation IT platforms to drive wide-scale modernization and transformation of their environments. These CIOs are viewing private, public, and hybrid cloud models as vehicles for fundamentally changing their infrastructure strategy, and are actively seeking to get their organizations out of the data center business. Although  rare, two of the more interesting examples we’ve recently seen include:

  • State Street – Chris Perretta, CIO at State Street, is seeking to drive $600 million in cost reduction by 2014 by leveraging private clouds to streamline application development. State Street historically has relied heavily on internally developed, custom software, with app dev representing 20-25 percent of the total IT budget. Through standardizing on common, private cloud developments platforms (based on x86-based public cloud models) and encouraging code sharing and reuse, State Street believes it can reduce test times by 30 percent, and the overall amount of code written by 30-40 percent. As with other examples we’re starting to see, standardization and simplification is being leveraged to drive significant improvements in process and cost efficiencies.
  • CP Rail – finding itself unable to keep pace with user demands, CP Rail launched a broad, multi-year infrastructure transformation initiative to dramatically reduce cycle times and costs, while still supporting increasing volumes. It has already developed a global hybrid cloud dev/test network across operations in Canada, India, and Singapore, which relies heavily on AWS. Interestingly, CP Rail places as much emphasis on process (agile development) and organizational transformation as it does on technology. For those interested in more of the details, a great presentation describing the initiative is available here.

Transformers

These are enterprises using cloud and other next generation IT platforms to create new disruptive business models, transformational improvement in growth and profitability, and strategic advantage. The starting point for their discussion is not around cloud technology, but how to use the agility, flexibility, reach, and cost effectiveness of cloud to enable new business strategies. Business executives are typically the emerging change agents. The best example in the public domain is:

  • Netflix – the classic example of a transformer is Netflix, which cannibalized its highly profitable DVD-by-mail model with an online subscription-based streaming model. After concluding it couldn’t build data centers and infrastructure quickly enough to meet user demand, the company famously leveraged AWS to scale its streaming and back-end operations. Netflix has not added data center capacity since 2008, and currently runs all streaming apps, infrastructure and back-end applications in the cloud. Those interested in learning more should check out a great recent presentation from Adrian Cockcroft, Netflix’s Cloud Architect.

While Transformers is the rarest adoption path today, we do believe it will become far more frequent as the market matures, and as cloud changes the competitive dynamic in some industries.

Note that there are still a small (and shrinking) number of enterprises that are still purely in “Observer” mode, and not actively deploying SaaS, Paas, IaaS, or private clouds anywhere across their organizations. We haven’t reflected them in our framework, and struggle to see any enteprises where at minimum there isn’t at least an individual or department using a cloud-based collaboration or productivity app.

Stay tuned, as we’ll soon be posting more here about implications for both enterprises and the cloud service provider community.

Enterprise Cloud Goes Vertical | Gaining Altitude in the Cloud

Most enterprise cloud offering conversations to date have focused on the horizontal benefits…flexibility, scalability, auto scaling, cost savings, reliability, security, self provisioning, etc.

Advantageous as these are, CIOs are increasingly interested in learning more about cloud benefits that are specific to the industry in which their organizations operate. For example, latency requirements, failover mechanism and data encryption are important to a CIO in the financial industry. A healthcare industry IT executive will be interested in hearing more about mobility and data archiving. How the cloud can improve supply chain or logistics is important for a CIO in manufacturing industry. And a media industry IT executive, quite aware of the various platforms being used to access content, will want to hear more about Content Delivery Networks (CDN) supported by the cloud.

A growing number of enterprise cloud providers are beginning to understand this interest in vertical cloud benefits. While their focus has been on “SaaS-i-fying” their offerings to meet unique, industry-specific application requirements, the trend will continue towards “PaaS-i-fying” and even “IaaS-i-fying” their offerings.

Let’s take a quick look at some of today’s verticalized enterprise cloud offerings.

IBM’s Federal Community Cloud is dynamic and scalable to meet government organizations’ consolidation policies as mandated by the Obama administration’s CIO. It is in the process of obtaining FedRAMP certification to meet Federal Information Security Management Act (FISMA) compliance standards, a requirement for government IT contractors, and will be operated and maintained in accordance with federal security guidelines.

Savvis provides customized IaaS solutions that cater to the financial industry. Growth in this vertical has been led by providing infrastructure services – such as proximity hosting and low latency networks – which support electronic trading. Savvis has added six new trading venues and an international market data provider. Its customers can now cross-connect, or have network access, to over 59 exchanges, Electronic Communication Networks (ECNs), and market data providers. For example, it hosts Barclays Capital’s dark liquidity crossing network, LX, which aggregates its global client bases’ market structure investments.

Infosys took advantage of Microsoft Azure PaaS platform and its SQL Data Services (SDS) to provide automotive dealers with cloud-based solutions to go from a point-to-point dealer connection for inventory management to a hub-based approach. In this solution, an inventory database for all dealers is hosted at a dedicated instance of SDSin the cloud. It provides middle tier code and business logic to integrate data between participating parties and a web-based interface for dealer employees wanting to check inventory at other dealerships.

Amazon Web Services (AWS) has cloud solutions that cater to the media industry’s needs for transcoding, analytics, rendering, and digital asset management. It developed a CDN, based on CloudFront™, which provides the streaming from edge nodes strategically located throughout the United States for a robust streaming experience.

AWS’ Gov Cloud™ provides a cloud computing platform that meets the federal security compliances FISMA, PCI, DCC and ISO 27001. The Department of State and its prime contractor, MetroStar Systems, built an online video contest platform to encourage discussion and participation around cultural topics, and to promote membership in its ExchangesConnect network. The contest drew participants from more than 160 countries and took advantage of AWS for scalability. AWS hosts websites for many federal agencies such as the Recovery Accountability and Transparency Board (recovery.gov) and the U.S. Department of Treasury (treasury.gov). AWS provides multiple failover locations within the United States, a provision which meets the security requirement that only people physically located within the United States have access the data.

Game hosting companies are running their games in the cloud for faster delivery and scalability. And AWS’ S3 platform provides the storage capacities for gaming companies such as Zynga and Playfish.

GNAX’s healthcare cloud specifically caters to the healthcare industry and understands the nuances of HIPPA. It provides a private cloud solution to healthcare companies that scales up and down depending on patient volume.

Of course, there are both pros and cons to adopting vertical-specific cloud offerings.

Pros:

  • Customized solutions based on industry regulations
  • Immediate creation of competitive advantage

Cons:

  • Vendor lock-in
  • Proprietary workloads may not be migrated

These issues can be mitigated through a careful sourcing methodology, now being provided through cloud agents who negotiate the contracts with multiple vendors as per the needs of the client organization.

As illustrated above, there are significant benefits to be gained from industry-specific cloud solutions, and I predict we’ll see an increasing number of them emerging in the near-term.

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

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

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