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Cloud, digitalization and mobile are changing the game by accelerating the pace of change, and tech vendors tied to legacy premise hardware will likely face years of unprecedented margin and growth pressures. Some will likely not survive in their current form while others will make the shift.
This announcement was pivotal because it defied conventional cloud wisdom. Most analysts described SaaS as the ultimate evolution from premise-bound computing, with IaaS as a necessary middle step for many existing apps. That all changed when leading SaaS player Salesforce.com announced that they would move onto AWS, mere days after a major Salesforce outage. Apparently the move to AWS caused some consternation within Salesforce’s high profile IT department.
==> A JP Morgan report in April cited the cloud as a strategic consideration for the future of dozens of tech companies
The report was only made available to JP Morgan’s clients, but you can read about it here and here. I put the report within the greater context of digitalization and cloud in: “Who will be crushed by Digitalization and Cloud?”
==> An Oppenheimer Report called AWS a massive efficiency flywheel for IT
Larry Dignan at ZDnet put the report in perspective here: “Amazon Web Services is likely to have 1.3 million servers that are more than three times more efficient than enterprise systems, data centers that use space better and generate better returns of about 20 percent.”
Since January I’ve published a pair of articles at Seeking Alpha on what I consider to be early signs of a massive transformation of enterprise IT. Who will be crushed by Digitalization and the Cloud and Two Recent M&A Moves both addressed the new CIO chasm of digitalization and cloud.
Employees, partners, customers, etc. are accessing that infrastructure through endpoints that have as much software/functionality loaded into them as the early software stores. This represents an unprecedented level of scale, complexity and criticality, even for the largest of IT shops.
The Internet of Things as it’s called is becoming a misnomer. It’s really an Internet of Applications. That may seem like a trivial distinction, but it makes all the difference in how one frames the disruption that has already destroyed the growth projections of most hardware vendors. You’ve seen the forecasts for infrastructure growth. Mark Thiele, for example, recently predicted that the world will need 400 million servers by 2020. There is also an explosion in endpoints as the Internet of Things (IoT) redefines the meaning of “end-user” in the age of machine-to-machine communications. Thiele cited predictions ranging from 20 billion (Gartner) to 50 billion (Cisco) endpoints in the near future.
A recent survey found that the average Android user has 95 apps installed on their smartphone, supporting about 100 daily interactions via an average of 35 apps. Yet the explosion in apps has not translated into enhanced growth and margins for many of the hardware vendors. Software is continuing to drive hardware.
The growth in software that enables enhanced usability, agility, scalability, availability, manageability and security. Commoditization of the “things” is already underway, as software and apps become as strategic to endpoints as they became to PCs.
We’ve Seen This Before
The branch office boom and the enterprise web had a similar dynamic. They created pressures for more application layer (referencing the OSI layers, especially 4-7) innovation to support increasingly diverse, specialized networking challenges. Companies like F5 and Riverbed focused on addressing these demands and companies like Cisco, Juniper and Citrix augmented their capabilities with the acquisitions of FineGround, Redline Networks/Peribit and NetScaler, respectively. The server load balancing market cratered as the demands shifted toward traffic management first, and then evolved toward secure application delivery.
Application delivery challenges today are more complex and exponentially more critical than they were ten years ago, when digitalization and smartphones were in their infancy (in terms of numbers shipped and, more importantly, installed applications). Today, there are more apps in a single smartphone interacting 24/7 with an enterprise server and other apps than there were interacting from a branch office to HQ during business hours a decade ago.
The apps trigger the orders and the queries. They determine who is ordering what from whom. They update key supply chain and analytics.
Don’t Forget the Cloud
In terms of app and service delivery the cloud becomes more than a necessity; it becomes an eventuality. Enterprises cannot cost effectively manage the 24/7 demands, including scale and complexity of this new world of digitalization. Even Salesforce, perhaps one of the most advanced and well-managed SaaS offerings has capitulated and switched from their own cloud to a public IaaS cloud.
The cloud will drive an even larger app delivery disruption than the branch office and enterprise web boom because the stakes are even higher and the complexities greater. Instead of another appliance (a cloud front end – lol) it will be software: cloud automation and orchestration software. This emerging category will include cloud management and optimization, cloud recovery and Dev/Test, cloud migration, cloud security and cloud discovery solutions. These technologies will drive IT into new levels of resilience and productivity as these new digitalization and cloud demands emerge.
We will likely see the emergence of innovative cloud “brokerages” that will help CIOs address these exploding complexities. New approaches will be needed in much the same way as exploding volume and complexity forced the financial services industries to evolve from 1990’s era infrastructures, applications, policies, and governance structures. Comparing Wall Street’s transaction volumes of two decades ago against what it does today, you can see that digitalization and cloud will have an even greater impact on a broader range of corporate operating models.
Enterprises are still trying to tackle these changes with yesterday’s tools. For example, they continue to throw scripts and manual processes at the problems they are facing. The challenges will mushroom as enterprises try to fulfill CIO directives without automation. See The Trillion Dollar Cloud Question. And that is just the beginning.
The Resilient Enterprise
Gartner in 2015 determined that 80% of outages are caused by either operation errors or app failures. The remaining 20% included hardware, OS, security, power and disaster events. Put that within the context of this greater mesh of the Internet of Applications (robust endpoints with dozens of apps interacting more frequently, including micro-transactions).
CIOs will have to arbitrate the growing conflict between static, manually scripted actions needed to address increasingly dynamic demands within ever complex app environments in hybrid clouds. Software is the best answer.
It’s no wonder that Gartner is already tracking business resilience and increased spending, especially on second and third tier apps. The first critical mission for the cloud for existing apps, therefore, may be to automate manual processes related to resilience, as IT today already cannot keep up with accelerating demands. See, for example, DR is Broken, Just Don’t Blame IT.
This also extends to security. Enterprise security teams must shift from further futile investments in legacy prevention technologies to more real-time, software-centric automated behavioral analytics and incident response technologies for greater resilience to recover from attacks they cannot stop.
It is natural for traditional IT to think initially of scripts and manual processes to tackle the problem. Yet as delays and issues manifest themselves automation will become a necessity. The alternative is CIO blindness during perhaps the greatest transformation in IT since the advent of the network. Investing in key capabilities will also help CIOs take their seat at the strategy table by finally aligning with and enabling the business rather than being a mere cost center.
A special congratulations to the Exar team for accomplishing what many thought impossible. They migrated their Oracle stack onto AWS in days. Read more at InformationWeek:
The provisioning of servers needed by business users was speeded up by a factor of 4-5X and the speed of projects relying on the Oracle applications was also faster, he concluded.
“IT will look like a profit center instead of a cost center,” he claimed.
To do this in a short timeframe, he turned to a third-party knowledgeable in the migration of legacy systems, CloudVelox. The firm was able to “migrate us very fast, over two days,” he said. The move included the movement of 2TB of data between Fremont and the AWS West facility in San Jose. That transfer was accomplished over the high speed networking available to companies in the Silicon, not by trucking disks, Siljeg told InformationWeek in an interview.
A recent JP Morgan report predicted a massive uptake in enterprise cloud adoption in the next five years based on a recent CIO survey. Within a few weeks a May 2016 Forrester report indicated that migration into the public cloud involves considerable manual processes:
By Forrester’s estimate, the cost of public cloud is relatively small compared to the much larger cost of labor involved, which accounts for over 50% of total migration costs. As detailed in the brief, “[L]abor costs dwarf infrastructure and platform services costs in most of the migration projects we’ve reviewed.”
Adding more icing on the cloud migration cake, Salesforce recently announced that it is moving to AWS. In addition to enterprises moving workloads to the cloud, AWS has landed one of the leading SaaS players. That’s a big deal.
For years conventional wisdom has advised that SaaS represents a progression of app delivery from IaaS. That is, workloads would eventually move from IaaS to SaaS delivery. Now it looks like SaaS providers will be using IaaS to deliver SaaS. This has huge implications for the growth of IaaS and the cloud migration market.
While it may not make much difference for SaaS customers (other than improved resilience perhaps- sorry, I couldn’t resist), this has considerable implications for AWS and Azure and a host of secondary IaaS players.
IaaS gets closer to looking like the future pillar of IT, which poses a question: Are there enough IT pros in the world to migrate the workloads that CIOs in the US want to migrate in the next five years?
This deep conflict between CIO demands and trained labor supply casts the spotlight on recent news about Exar Semiconductor’s automated cloud migration project as demand for automated cloud migration escalates:
It turns out migration wasn’t so painful after all. “We were surprised at how CloudVelox was able to mimic what we have on premise in the cloud,” Seljig said. “They figured it out in one day.”
Things should get interesting. Very interesting. The AWS partner ecosystem has been dominated by manual process body shops. That has to change if CIOs will be able to accomplish what they want, especially in an era of careful IT spending.
Digitalization and cloud are disrupting enterprise IT and operating models.
The impacts will produce a new generation of winners and losers.
Companies like Amazon and Microsoft stand to benefit.
Some established tech leaders are at risk.
Seattle: From a Jobs Shortage to a Housing Shortage
In 1971 an iconic billboard went up south of Seattle, across the street from a cemetery: “Will the last person leaving Seattle – Turn out the lights.” Within a month The Economist called Seattle a City of Despair.
Less than a decade later things would start to change, and set the stage for a boom of historic, global proportions. A small startup named Micro-soft relocated from New Mexico. Over the following decades the software-centric economy led to massive economic growth. Seattle by 2014 would be among the nation’s fastest growing cities.
Today the once dismal city is now at the center of an even larger and potentially more profound boom; a boom large enough to threaten the livelihoods of some of the most established and powerful tech companies, many of whom are located in Silicon Valley.
When Microsoft Azure CTO Mark Russinovich came to Silicon Valley I joined him for coffee (at a [Seattle-based] Starbucks, nonetheless) to catch up since our last discussion, which led to my earlier blog: The New Microsoft and the New Cloud.
We had a short chat about the future of tech, especially the ongoing churn and consolidation ahead for traditional tech hardware companies as the cloud goes mainstream. Mark predicted that one of the biggest surprises in the next 3-5 years will be a shift to cloud within companies which are today anti-cloud.
He sees the regional and 2nd tier financial services players leading in cloud adoption and pressuring the more established players with greater agility and better performance. In addition, Mark predicted explosive cloud adoption growth in 2016.
“It’s too late for cloud washing,” Mark advised when we talked about one of the recent mergers of traditional tech companies.
Tennis as the Cloud War Metaphor
Mark offered an interesting analogy for the cloud war. Instead of a horse race it would play out more like a tennis match, with two powerful companies (both based in Seattle) absorbing most of the growth while other players are marginalized. (I immediately thought of Ellison’s role in the revitalization of US tennis, especially in Indian Wells. He might be the first to fully understand the metaphor.)
At this point it’s hard to disagree. Azure’s global OS footprint and stack consistency, dark fiber connectivity and focus on hybrid cloud deployment and portability put it in a very powerful, enterprise-friendly position. Microsoft’s shift from being software-centric to cloud-centric is truly remarkable and will likely be taught as a case study in business schools for decades to come.
That leaves perhaps a dozen cloud players outside of Seattle on notice, most notably Oracle, Google and VMware. VMware could bring an interesting dimension to both Oracle and Google. With Diane Greene now leading Google’s cloud business, she could have a Steve Jobs-like return to the helm of the company she successfully led for a decade.
If Mark is correct, then they might have 12-24 months to make it a doubles match. Otherwise it looks very likely to stay a singles game, at least for the foreseeable future.
Getting in the game will require a deeper connection between IaaS vendor APIs and premise-bound workloads. That brings us back to the role of software (versus cumbersome, costly and risky manual scripts and configs) in accelerating growth in the enterprise market. Think automated cloud migration and cloud recovery.
The rise of Seattle as an economic miracle enabled by a shift to software and the consolidation of tech hardware-focused players (starting with mainframes, then servers and network gear) poses a disruptive shift for many of the old guard in Silicon Valley. A new generation of cloud software and security players will become global tech brands while the big brands of today consolidate for mere survival.
Not Really… if you accept the results of a recent survey.
We just finished compiling the results of a disaster recovery best practices survey of more than 300 IT pros (read about the most notable findings). Besides discovering that most firms are not following disaster recovery best practices, one particular finding stood out like a bolt of lightning: 55% of those IT pros surveyed said that they would adopt the cloud for disaster recovery if they could address security and networking requirements.
That bodes well for the cloud providers as they continue to deliver more robust security and network functionality. Many will say that they are already on par or better than most firms when it comes to security.
Other findings included infrequent testing of DR environments by most firms and the causes, which include insufficient internal resources and complex processes. You can read about the survey at DR is Broken but Don’t Blame IT.
Read more about this the cloud and IT at: Will the Cloud Destroy IT Careers?
After talking to VMblog and InformationWeek I’ve come to the conclusion that most companies are suffering through obsolete approaches to disaster recovery. I’ve gone so far as to explain Why the Cloud will Crush Traditional Disaster Recovery in a recent CloudVelox blog.
Following are two recent interviews where I discuss cloud DR more specifically (as a hybrid cloud use case) as well as how CloudVelox addresses the demands of complex legacy app environments with both physical and virtual workloads better than manually intensive, first gen cloud migration tools..
The level of automation for these mixed environments is what sets CloudVelox apart from the first generation tools developed for app environments already (100%) virtualized.
From the interview: “For most organizations the traditional disaster recovery model is broken: the DR environment is expensive and cumbersome, and infrequently tested. That means should an actual outage or disaster happen, a recovery could take days or even weeks, since the DR site needs to be a close match to the protected site, and for most environments that requires extensive and complex manual processes. In between (infrequent) tests or dry runs these steps can be inadvertently missed. A duplicate site is equipped, powered and operated for the prospect of use less than 5% of the time, if at all. That is incredibly wasteful. Cloud DR is a superior operating model to backup and traditional warm or cold standby models: it offers better protection and often much lower costs.”
“Secondary data centers are unwieldy, costly and difficult to test.”