By Erik Berggren, Vice-President of Research, International Data Corporation, IT Executive Program (IEP)
In the past few years, the cloud has changed the fundamental nature of computing and how business gets done. The cloud’s underlying technology has been around in various forms for a long time; however, with recent critical evolutionary steps, cloud is fueling a new subscription-based economy and becoming the foundation of the global digital transformation. Every day new offerings are launched. New business models are developing, while companies operate with new cost structures. As everything gets connected in the cloud, the competitive landscape is changing for both new and incumbent players. This shift is not driven from IT, but from changed consumer behavior enabled by new cloud connected technology.
IT will increasingly dictate how an enterprise will compete. All organizations will be impacted by the digital revolution we are witnessing in the economy today. More and more organizations are leveraging cloud as a vehicle to drive their digital transformation. By 2018, over half of enterprises’ IT infrastructure and software investments will be cloud based, reaching 60–70% by 2020. Pursuing digital strategy initiatives without a cloud foundation will be virtually impossible. Within the next three to five years, most large enterprises will have much more data in the cloud than in their own datacenters. Companies are driving innovation at scale from two different areas.
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The first is from leveraging PaaS as an enabler for accelerated innovation, ranging from the integration of SaaS offerings with legacy IT, to building new SW products without the need for hard core developers. With better tools there is 10x more talent available to build SW than it used to be. The other innovation area is the formation of the emerging industry clouds, which will disrupt the market and provide opportunities to change and lead the competitive landscape. Industry clouds will form through joint ventures or partnerships between business enterprises and one or more IT or cloud service providers.
By 2020, clouds will stop being referred to as “public” and “private” and will ultimately they will stop being called clouds altogether. Cloud will simply be the way business gets done and how IT is provisioned. Convergence between what we today talk about as IaaS, PaaS, and SaaS will happen. By 2020, six or fewer cloud platform vendors will control 75–80% of the PaaS market. I’d suggest that by 2018, an organization that has failed to create and implement a formal hosting methodology including cloud, in essence, does not have an IT strategy.
It’s easy to have a cloud first approach to new IT because the analysis of cloud options for new investments for new IT is relatively straightforward. However, the bigger question is how to transition the existing legacy IT. At IDC we’ve seen an increased demand for advice on how to develop a comprehensive cloud transition strategy. We’ve seen that thriving companies are taking a comprehensive approach with a structured methodology. Striving companies are fumbling with how to approach their transition.
Developing a cloud transition strategy can be a complex endeavor. There’s a need to simplify the decision-making process. The cloud transition strategy should encompass new, as well as existing legacy IT. A transition to the cloud requires specific decision making in three distinct phases. Each phase deals with very different issues and challenges. As a result, each phase requires its own unique knowledge, skills, and decision-making authority.
The goal of the first phase is to define an overall strategic direction and answer profound strategic business questions. Without a clear overall strategy, cloud computing will be implemented on an application-by-application basis. This will be centered around short-term needs and personal preferences, rather than based on an overall strategic plan, organizational need and corporate direction. The key questions to be asked during this phase are:
- What are the goals of the cloud transition strategy?
- Why go cloud?
- What part of the business will be impacted?
- What potential external data sources should be included?
- What business model should IT use?
- Should we provide cloud service to external parties?
Line-of-business (LOB) executives (and their budgets) will become more involved in IT cloud services decisions and investments as cloud becomes part of their businesses. By 2018, two-thirds of IT budgets will be controlled by LOB. This phase should be developed as a collaboration between the IT leadership team and their LoB colleagues.
The second phase is about designing the cloud architecture. In essence, there are basically three choices for each of your workloads. First, you can replace the workload with a BPaaS or SaaS solution. A modern SaaS or BPaaS solution can provide a superior TCO, while allowing the IT function to focus on more strategic workloads. It can also provide a great deal of process improvement value. Second, you can migrate the workload and host it in an IaaS solution. This leverages PaaS solutions to rebuild the workload for cloud hosting. That rebuild offers an opportunity to not only use components that are already built to provide a better TCO but also to build out functionality that was previously inaccessible or cost prohibitive. Finally, you can condense and move (or rather keep) workloads in dedicated, purpose-built datacenter servers. This will allow your datacenter to support the workloads it was initially intended to serve.
We see many organizations that adopt a cloud-first approach to net-new workloads and leave existing workloads hosted in existing datacenters. This makes a lot of sense at first glance; however, bear in mind that to keep your datacenters efficient and secure, you have to keep up with investments in hardware and operations. It’s a tempting play to simply run it out, but the true cost increases with aging technology. Status quo is not always an option.
The key questions to ask during the cloud design phase are:
- What workloads should be deployed in the cloud?
- What workloads could be served by a SaaS offering?
- What specific needs do we have that would require a private cloud buildup?
- Should we build up our cloud in our DC or look at colocation options?
- What PaaS solution should we use for databases (DBs), integrations, and middleware?
- Where can we use public cloud offers?
- What vendors should we use?
The third phase is to set up the operations for the new cloud infused world. IT organizations will operate in diversified IT environments encompassing a range of deployment models (on-premise and off-premise) and a broad portfolio of SaaS and IaaS cloud services. IT organizations must manage distributed assets across multiple internal and third-party datacenters. Hybrid cloud architectures will continue to dominate enterprise cloud strategies. Increasingly, the need to integrate traditional non cloud systems with modern cloud infrastructure and cloud-native application will create friction and operational challenges across many IT organizations.
Cloud is the catalyst for significant shifts in IT staff talent priorities and datacenter locations. By 2018, 65% of companies’ IT assets are expected to be located offsite in colocation, hosting, and cloud datacenters, while one-third of IT “staff” are expected to be employees of third-party service providers.
It’s critical to look at the future talent needs for this hybrid world, starting now.