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Shifting IT Gears into 2015 Budgeting

October 21, 2014

If you are an IT executive still dabbling with cloud services, or if your management abhors the prospect of change, or if the potential for IT to drive business value creation is underappreciated, then your time has come to make a difference.

With the advent of budgeting season now upon executive management comes an opportunity to make a business case to move more IT services, more routine management responsibilities and more of your operational IT challenges (data security, disaster recovery, replication, technology refresh, or compliance to name a few) to the cloud.

Why now in particular? Le roi est mort, vive le roi ! (The king is dead, long live the king). The previous king of IT was the distributed client/server model. With its decline, cloud computing ascends to the IT throne. Not mere hyperbole, technology lifecycle models, industry innovation and the rate of cloud services adoption spell the eventual demise of client/server computing, or at least a depreciated presence.

The distributed computing model has had a two-decade long transformational run powering business, industry, healthcare and financial markets around the globe. From a lifecycle point of view, it’s on its last legs as it transitions through the maturation phases of exploration and rationalization fades into the distant past. It’s now well into the technology-optimization phase, which has been characterized by commoditization, consolidation and virtualization, just as IT is becoming more services oriented.

In other words, no innovation, squeezed sales margin and milking the installed base for all it’s worth to help fund new technologies, new products and services, and new service delivery types that will be gratefully taken up by customers gasping for relief. Having all but exhausted the potential of traditional IT models to provide long-term avenues for speed, performance, scale, flexibility, data storage, mobility and a host of other essential IT metrics to drive business success, the industry shifts its focus and its resources elsewhere.

Stepping up to the plate is cloud computing, which has passed the exploration phase and moved into the rationalization phase of maturity, according to Forrester Research Inc. The technological orientation is mostly set and competition focuses on service value. This is why purchases of cloud services worldwide will grow from $72 billion in 2014 to $191 billion by 2020, at the expense of on-premise systems investment.

Consider the competitive cloud landscape for more evidence. Microsoft, IBM, HP and Dell are all building out cloud platforms as quickly as they can. Cisco is investing billions of dollars into creating a federation of cloud service providers to form its global Intercloud, which is taking shape quickly and includes Peak 10. New IT computing models in high demand are producing an industry metamorphosis.

The SaaS cloud model accounts for a majority of this cloud growth, however the IaaS/PaaS growth ramp follows a similar trend line. The market is readying itself. Forrester asked enterprise code developers, “How much of the server-side code that you write is deployed to cloud environments today? How do you expect that to change in the future?” The answers came back 6 percent compared to 30 percent in 2015.

A common complaint among IT executives and departments concerns the increasing complexity of their platforms and infrastructures. Mobility, Big Data, government and industry regulations and user expectations for services are exponentially exacerbating IT complexity even more. Glass’ Law – akin to Moore’s Law – states that for every 25 percent increase in software functionality there is a corresponding increase in software complexity of 100 percent. One would hope the opposite was true, but not so.

The cloud service providers (CSPs) are passing through phases of their own. Forrester classifies them as cloud washing (renaming existing services), cloud on the side (a secondary or tertiary business) and true/hybrid cloud providers. The latter is characterized as “full citizens” of the cloud services community, offering a balance of cloud and managed services, and an explicit mission to help customers leverage cloud where it fits.

Of course, cloud industry players are not maturing in lock step. Cloud washing has run its course pretty much, however the other two categories are flourishing. The significant difference between the two can be summed up by how each conducts business … here is what I have vs. what are you trying to accomplish?

Vendors heavily invested in products and services for distributed computing will be reticent to admit to customers that they, too, are in the midst of rationalizing one model – cloud – as they try to extract every last drop from the other. As you move into planning budget allocations for 2015 and reorienting your IT organization to focusing on business challenges, now would be a good time re-evaluate the path you are on.

Forrester Research, Inc. Webinar: The Future Of Cloud Computing — Part 1, James Staten, Vice President, Principal Analyst, July 9, 2014.

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