Decoding the Percentage Fees Model for Public Cloud Management
According to results from our annual Everest Group – Cloud Connect Enterprise Cloud Adoption survey, 56% of organizations consider cloud to be a strategic differentiator
For several years we’ve predicted that the cloud would disrupt data centers. But it’s not as simple as lift and shift; it requires an understanding of how to deploy in the cloud and also requires some reengineering. Now some innovators are succeeding in deployment solutions and achieving momentum. One that caught our eye: the explosive growth of CSS Corp Cloud Services.
CSS is off and running. Need evidence? Among other clients, they’re currently working with:
The issue around using any public cloud — especially the lowest-cost cloud, AWS — is that it requires re-architecting applications in such a way to get enterprise performance. This has been a significant constraint in the migration of workloads to public clouds.
But we’re now seeing real use cases emerging where companies systematically take production workloads, reengineer them and deploy them into the public cloud in a way that gives them production-quality outcomes — that is, high performance and high resilience.
CSS Corp Cloud Services was an early AWS adopter. The firm invested in toolsets around AWS cloud services and developed a capability for consistently re-architecting and deploying into the AWS public cloud. The company’s public-cloud use cases already span a wide area of processes including Big Data analytics, digital marketing, e-commerce, backup and storage, disaster recovery, application and Web hosting, development and test environments and media/entertainment.
Data centers are not yet an endangered species. But as firms such as CSS master cloud deployment in large corporate enterprises, we believe the rate of disruption will quickly pick up.
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
According to results from our annual Everest Group – Cloud Connect Enterprise Cloud Adoption survey, enterprises now view the cloud as a consumption model and are losing interest in debating the deployment model
The cloud services space just got a lot more interesting. Announced earlier this month, IBM paid a hefty price — $2 billion — to buy Dallas, Texas-based SoftLayer Technologies, the world’s largest privately held cloud computing infrastructure provider.
IBM is now well on the way to delivering on the goal stated in its 2012 annual report: to make a key impact on cloud and reach $7 billion annually in cloud revenue by the end of 2015. Clearly IBM wants to participate in the revenue potential from the growth of cloud services. Big Blue has already spent $4.5 billion over the past five years to build its SmartCloud portfolio of cloud services, but those acquisitions were in the private cloud arena. To compete broadly in this lucrative market, IBM needed a compelling offering in the public cloud arena.
A recent report from North Bridge Venture Partners and GigaOM Research predicts the cloud market will reach $158.8 billion by 2014. And Gartner predicts the market will grow to $210 billion by 2016.
The SoftLayer acquisition accelerates IBM’s efforts to establish a footprint in the public cloud arena without having to start from scratch when AWS, Google, Rackspace and others already dominate the space. SoftLayer’s cloud infrastructure platform, and its existing 21,000 customers, gives IBM immediate scale and relevance.
Other than increased revenue, why does IBM want to have a compelling offering in the public cloud space in the first place?
They believe — correctly, I think — that significant workloads will migrate from the data center and private clouds to the public cloud. There is a set of workloads that, quite frankly, are more attractive in the public cloud than they are in a private cloud space (web hosting, application development and testing, and email, for example). It makes more sense to pay for these services on an hourly basis rather than on a monthly or yearly basis.
We believe these types of services currently comprise about 50 percent of the workloads that currently run in IBM customers’ data centers or their private cloud environments. So about half of IBM’s customer workflows are well positioned to move into the public cloud. They won’t all move at once, but we see clear indications that they are starting to move. If IBM is to provide comprehensive cloud services, it needs a smooth path for migrating those workloads. SoftLayer gives IBM the capability to create a glide path.
Thus, IBM’s acquisition of SoftLayer is both a defensive strategy and an offensive strategy. On the offense, they want to increase market share in the fast-growing public cloud space and need a compelling offering to compete with AWS, Google, Rackspace and other cloud players. On the defense, they need to create a migration path from traditional IT infrastructure space into the public cloud.
I don’t think the SoftLayer acquisition is a game-changer. Nor do I think it remakes the cloud space. But it does put IBM into a credible role.
Will this acquisition be enough to secure IBM’s position as a cloud leader? I suspect it isn’t enough, given the role that IBM likely will want to play. I think we will see further acquisitions to build up IBM’s capabilities and scale.
Photo credit: Simon Greig (xrrr)
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.
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.
End users. Can’t live with them, can’t live without them. When procuring new IT solutions – a new opportunity for them in a corporate environment—they often like quick, flexible, and cheap. When working with current IT models, they value secure, scalable, and bullet-proof. Over the years, successful IT leaders have learned to help guide (read: manage) them through those trade-offs in a well-defined and disciplined approach.
Then along came cloud. For many consumers, cloud offerings seem to provide all that they are looking for, without the bothersome trade-offs. They are being told public cloud offerings can provide quick, cheap, secure, and scalable solutions. The beachhead for this type of messaging is often found on the fringes of enterprise-wide applications – just out of the reach and influence of traditional IT governance.
Many IT leaders have been caught a little flat footed with the recent marketing of cloud services to their constituencies, with the looming question being whether they should annex public cloud solutions from under the “control” of centralized IT governance wherein IT has authority over what can be purchased and how it can be deployed. This concept is counter to the pervasive centralization that for years has been justified by reasonable arguments around security, leveraged spend, and internal efficiencies.
So, what is the role of IT governance in the procurement of public cloud services?
On one hand, empowering end users and small groups within the enterprise to make their own decisions can improve the agility of the organization. Users can augment the enterprise portfolio to better meet needs with publicly available solutions. Demand can be harnessed by capabilities in the marketplace and budgets, not by the capacity of internal IT. Organizations empower their employees to make business decisions everyday to meet the firm’s objectives, so why restrict their judgment when it comes to IT solutions?
On the other hand, decentralizing IT decisions can bring about a host of issues that traditional IT governance handles well, e.g., architectural considerations such as interoperability, portability, security, and disaggregation of strategic information. With centralization, financial management can ensure the enterprise is optimizing spend, decommissioning underutilized services, and managing internal allocation models.
We believe the best course of action is to proactively define characteristics that a public cloud solution must have in order for the end user population to directly purchase services. One straightforward way to accomplish this is for the IT governance organization to publish a solution verification checklist. If the desired public cloud solution meets all the criteria on the list, the user has the authority to purchase directly from the cloud provider.
Examples of criteria on the “Yes” (the end user has the authority to purchase)/”If” (the proposed public cloud solution) list include:
Empowering users in this way, while not without risk, can enable the business in ways IT organizations often profess – speed being the primary. One of the emerging roles of IT governance is ensuring the enterprise’s needs are not compromised by the individual’s pursuit of cloud solutions. As we will explore in our next entry in this series, IT governance organizations have to find smart and sound ways to say yes, or run the risk of losing visibility into their users’ consumption of IT.