80% of ITOs Will Pursue Cloud Strategy by 2018

April 28, 2013

News

80% of ITOs Will Pursue Cloud Strategy by 2018

“The writing is on the wall,” writes Wikibon Chief Analyst/Cofounder David Vellante in his latest Professional Alert: “Software is Eating the World: Will Amazon Eat Enterprise IT Infrastructure”? “Wikibon believes that by 2018, 80% of IT organizations will be pursuing a strategy that involves a public or hybrid cloud approach with a major emphasis on outsourcing infrastructure provisioning and management.”

In Wikibon’s April 23 Peer Incite meeting, Jason Mendenhall, EVP of Cloud at Switch Communications, creator of the SuperNAP colocation facility, said that the question is no longer “why cloud” but rather “which cloud”.

“Cloud”, however, does not necessarily mean Amazon. AWS is clearly the “800 pound gorilla” of IT cloud services today, and it is evolving and growing those services and the business models they support rapidly, making it both the incumbent and a disruptor in the marketplace. While Amazon does not break out its cloud services income, Wikibon estimates that AWS will generate roughly $3B in sales in 2013.

However, as Mendenhall says, no one cloud service can be all things to all people. AWS offers numerous strengths, but it also has a reputation for hidden expenses (some say, “AWS isn’t expensive until you use it”), getting data back out of AWS in particular is very expensive, it is not supportive of hybrid cloud strategies, and it is less than transparent about where it stores a company’s data and other basic issues.

While Amazon will probably always be a major cloud player, just as in other markets, no one company can maintain a totally dominant position forever. SuperNAP itself is growing into a challenger to AWS, and several of its tenants are themselves major cloud players. Microsoft Azure is doing an excellent job of building out infrastructure and competing with AWS, while both Open Stack and the VMware/EMC hybrid cloud initiative have promise of growing into major competitors in the future. And “the Google threat always looms large.”

This competition provides CIOs with strong alternatives, Vellante writes, particularly for moving legacy applications out of their data centers to allow their organizations to focus on innovative services that provide or support competitive advantage for the businesses they support. Those who attempt instead to maintain those legacy workloads in house are in a “race to zero” against the large scale IaaS and colocation service providers.

“CIOs must recognize that cloud should not be a strategy to simply lower CAPEX but rather a way to transform organizational processes to improve speed and further integrate IT into the business transparently,” Vellante concludes. Ironically, leveraging the cloud intelligently may be the best strategy for preserving the ITO, while trying to compete in the IaaS and mega-colocation providers’ wheelhouse of super-efficient, extremely inexpensive infrastructure for legacy applications is a recipe for failure.

Like all Wikibon research, this Alert is available in full without charge on the Wikibon Web site. IT professionals are invited to register to join the Wikibon community. Membership allows them to post their own questions, tips, and research, as well as comment on published research on the site. Members also receive invitations to the periodic Peer Incite Meetings at which their peers present on how they are using advanced technologies to solve business and technical challenges.

http://servicesangle.com/blog/2013/04/28/80-of-itos-will-pursue-cloud-strategy-by-2018/

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