What’s next in Cloud?

Post-pandemic modernization

Looking at the performance of the hyperscalers - cloud has been a beneficiary of the IT response to the pandemic. In 451 Research’s survey, “Voice of The Enterprise, Digital Pulse, Budgets & Outlook 2021”, it finds that spending on information security and public cloud services will drive IT budget increases in 2021.

However, it is the larger theme of transformation and technology modernization which is spread out across the other categories marked for increased spending, including analytics, AI and cloud native technologies. It seems that COVID-19 has made it more possible to justify spending on transformational projects, not only because the disaster is a ‘proof of concept’ for key technologies, but because it helped to illustrate the non-financial benefits of these investments in non-disaster situations. For many organizations, “transformation” involves cloud, but that’s a jumping off point for a variety of other technologies.

Even as businesses in general move toward greater adoption of cloud, a key challenge continues to be drawing a precise connection to ROI for cloud investments, especially for legacy systems. It’s difficult to draw a straight line directly from cloud spending to ROI (hence all the investment and M&A around cloud cost management). In addition to that, viewing cloud primarily from the POV of financial benefit risks overlooking harder-to-enumerate benefits such as agility, innovation, customer experience, employee productivity, becoming a more attractive place for developers to work. Cloud continues to be the technology considered most transformational.

Hybrid IT has won the architectural war

Hybrid IT is the reality of today - it is both an architectural construct and a strategic initiative. As cloud matures from its teenage years and embeds itself into the mainstream of enterprise IT, organizations attention extends beyond tactical IT cost considerations toward a broader vision of incorporating public cloud resources and platforms into integrated IT estates. 58% of organizations have implemented or are planning to implement hybrid IT environments that integrate on-premises and off-premise public cloud/hosted resources, with only 18% planning to take an ‘all-in’ public cloud approach, according to 451 Research’s “Voice of The Enterprise, Digital Pulse, Budgets & Outlook 2020”.

Despite years of propaganda that it was the ‘wrong way’ hybrid/multicloud has won the IT architecture war and is the new reality, offering the best of all worlds. In the early years of cloud, hybrid was something that just ended up happening, like life. But now it’s an explicit IT strategy design point as users seek to use the best capabilities from each supplier to optimize use of existing IT.

Growing complexity

Enterprise workloads are on the move and the re-platforming to cloud and cloud native is reaching the mainstream of the market. Organizations are moving workloads away from on-premises environments toward public cloud. As a result, I’m often asked: “So won’t hyperscalers simply eat the world?” My answer is no. Even with acceleration to the cloud, many organizations still have on-premises infrastructure and will likely keep it in place for specific uses. Moreover, when you become a teenager (like the cloud) you think you know everything, but it turns out you don’t. And in the cloud, users are now finding out what they don’t know. There’s an awful lot of complexity to deal with.

451 Research’s Cloud Price Index now tracks more than 2.5m products (SKUs) that can be purchased from the major hyperscalers. Given the breadth of goods and services available in the market, its little surprise users want to find the best of these to meet their needs. The key to success will be finding the right combinations and operationalizing them to deliver the benefits being advertised by their suppliers. We have a way of describing it - BEV strategies center on the notion that every class of IT-related business need has an environment where it will best balance performance and cost, and the IT organization should be able to select that environment as part of the general practice of IT. Here it is managed service providers (MSPs) which now have a tremendous opportunity to deliver this. Another MSP opportunity is sovereignty.

Hyperscalers are their partners – more than 90% of the Fortune 500 access AWS via a partner. Hyperscalers don’t want the margin thin, labor intensive business, nor do they want to put any of this jumble together for customers across multiple venues, nor manage and optimize what customers build. But MSPs do. Moreover while hyperscalers are building out in regions they lack the kind of local expertise MSPs can provide. So, there is a big role for MSPs can manage complexity, identifying the right environments in which to run workloads, and migration support.

Cloud Native

While cloud infrastructure underpins it, successful transformation depends on the applications running on it. Every company needs to raise its software IQ to transform successfully to compete in the digital economy and cloud native is the platform for this. Cloud-native technologies are used in the design or redesign of applications built to run in public, private and hybrid cloud infrastructure. Most use the open source model and are implemented using DevOps techniques.

Cloud-native technologies include containers, service mesh, microservices and serverless functions, all of which can be independently updated, controlled, scaled, or reconfigured to deliver a coordinated application experience. Kubernetes has effectively moved addressable infrastructure up a layer into its distributed application platform – it’s becoming invisible. The point is that it is increasingly the developer which is the creative workforce that can solve business problems and create hit products for customers. So much so that access to developer talent is more of a constraint than access to capital. Moreover, the virtues of Kubernetes and DevOps are that they are change agents that break down institutional barriers and let organizations adapt and morph to take advantage of the possibilities of cloud and flexible IT foundations.

As approaches such as cloud native render the cloud infrastructure increasingly invisible the question is not if, but how long it will be before cloud is no longer described as a separate IT category.