Transforming enterprises through cloud infrastructure

AWS provided the Enterprise Summit audience with a real treat. Lydia Leong, Gartner VP and Distinguished Analyst, shared her views of the cloud infrastructure market and implications to enterprise IT. Her valuable insights are solidly backed with 15 years at Gartner and 22 years of industry experience. Two messages in her presentation resonated with me in particular. Her first main theme was the concept of a bi-modal strategy for enterprises’ approach to cloud infrastructure as a service. The second message was how the IaaS market is likely to develop.

A Bi-Modal Strategy

The foundation of the bi-modal strategy is that enterprise IT has two very different drivers.
  • Mode 1 or Traditional:  Focuses on costs, efficiency, security and reliability in IT operations.
  • Mode 2 or Agile: Typically business line funded and focuses on taking calculated risks in developing new applications and new business rapidly.
Each mode reflects different expectations and perceptions of the cloud. The recommendation for enterprises is to establish a strategy that embraces both Modes, rather than trying to find “The One Solution” that really fits no-one. For enterprises there needs to be a transformation process. Small cloud islands - meaning new applications or separate businesses - are used to gain insights and experience on what the required organisational structures, processes and tools are. An enterprise would then create a Cloud Center of Excellence, acting as a broker to the rest of the organisation, providing cross-functional leadership and clear policies, whilst also advising on best practises and vendor management. Small cloud islands should be grown to new areas through replacement and extension. The target of the transformation is to eventually establish a new IT core based on agile methods. This will support the organisation and processes as well as cloud native platforms and tools. Ms. Leong stressed that the process is truly a transformation, not a gimmick - “You can’t sprinkle a bit of agile to Mode 1 to get Mode 2.”

The Power of Scale in IaaS

But what about the IaaS market itself? There is a very rapid evolution of the major cloud providers. Leading cloud IaaS providers are innovating like there is no tomorrow, delivering new functionalities, services and management capabilities. The distinction between IaaS and PaaS is becoming increasingly blurred. The leading cloud IaaS providers are also driving public cloud price erosion at an estimated 20% year-on-year, even if the massive price cuts have not been in the headlines. The cost reductions are delivered in a similar fashion to car or computer manufacturers, and even if the spend remains largely the same, the buyer gets so much more for their money. “He who dares, wins” seems to apply also to the cloud IaaS market. Ms. Leong reflected on the Gartner Cloud IaaS Magic Quadrant participants and their positioning. She estimated that 95% of the public and private cloud infrastructure market is currently captured by AWS and Microsoft Azure. Apologies, I have to repeat that - 95%! More than 50% of the companies on the Quadrant are planning to get out of the business. The market is just too competitive for the runners-up. The leaders are reaping economies of scale in three ways:
  1. They squeeze more efficiency from infrastructure operations.
  2. They are able to invest more in software development.
  3. They are able to build a wider and deeper ecosystem around themselves.
Ms. Leong expects niche cloud IaaS providers to remain, but largely to serve the needs driven by data sovereignty or other legislative and regulative requirements. There is also the possibility of any given enterprise developing, maintaining and operating their own Do-it-Yourself cloud IaaS. From what I understood, Lydia Leong would not place her bets on that alternative as a viable and sensible option. I have to say I agree with her.
Nordcloud ninja

Get in Touch.

Let’s discuss how we can help with your cloud journey. Our experts are standing by to talk about your migration, modernisation, development and skills challenges.

Ilja Summala
Ilja Summala LinkedIn
Ilja’s passion and tech knowledge help customers transform how they manage infrastructure and develop apps in cloud.