Two recent pieces of data to consider; firstly, a report on the future of the IT Services market by UBS http://bit.ly/1XtmIxi which included this commentary "Most respondents expected investments in the cloud to leave their IT services budgets untouched, while one third expected budgets to increase due to the cloud. This is in line with our view that digital services are unlikely to shrink IT budgets per se." [NB: the report is based on primary research amongst buyers of IT Services]. Secondly, last week Amazon’s latest quarterly results showing that AWS is on course to reach $7bn of revenues this year.
The cloud isn’t reducing IT services spend. The Cloud (well, at least AWS’s version of it) is booming.
Riddle me that Riddler...
Well the answer (my friends) is this (and blowing in the wind); core, central, mission critical enterprise IT is changing very slowly. Decentralized, federated, edge, individual, departmental, new initiative, minimal viable product-esque IT is changing very fast.
The infrastructure supporting installed (heavily ERP centric) production systems – typically still instance specific – is not, it appears, being replaced with public cloud infrastructure. Though there have been many prognosticators (yours truly amongst them!)who have called for Obliteration 2.0, the combination of existing investment and skills and hard coded business process logic means few risk-adverse large businesses appear to have the appetite for radical surgery.
Bottom line; the Cloud is not a cost saving strategy for existing IT.
But... the Cloud is entirely central to the next generation of IT. It’s almost impossible to imagine, now in late 2015, that any new internal IT initiative would require the acquisition and provisioning of new single tenant IT hardware. It’s certainly entirely impossible to imagine that a VC funded start up would build its own data center to run its service offering and business. The Cloud is the de facto operating model for new technology. Amazon is clearly right in the middle of this dynamic.
All of the interesting things going on in technology currently stem from this next generation, consumerized, cloud based form of IT. From Uber to Palantir to Wealthfront to Domo to UpWork to Zest Finance to Predix everything is predicated on the Cloud.
In my old Gartner days I used to use a chart that analyzed the growth of SaaS and showed the types of applications that were gaining traction. After I’d talked about CRM and HR etc etc I’d point people’s attention to the "Other" segment; this, I would suggest, is where the real action will be, given time. It was hard to say exactly what would be in "Other", and folks often seemed to be disappointed that I couldn’t be more specific, but IMHO it was important to simply point out that the Cloud was not about old functionality delivered in a new way it was really about new functionality delivered in a new way.
And so it came to pass...[That’s enough of the self-congratulatory stuff – Ed]
Talking of Gartner, you may be familiar with its notions of "bi-modal IT" and "pace layering". And of course if you’re familiar with Cognizant you’ll have heard the phrase "the dual mandate". What this data from UBS and the market reinforces is that the Cloud doesn’t stretch across both mandates, in the way that some folks have perhaps believed. The two types of IT – pre-Cloud and post-Cloud – are in fact totally separate ideas and approaches. Of course in any large enterprise they will co-exist (for the foreseeable future) and overtime they will blur and overlap and the new will bleed into the new and eventually replace it. But – if you’re interested in the future of your work now rather than off in the distance – it is better to see the Cloud as a platform for innovation in the new rather than as a way of retro-fitting the old.
A city is a good metaphor to think about how this change is occurring (this thought brought to you care of the view out of the window of the Collaboratory on 42nd Street NY NY); Frank Gehry isn’t commissioned to work on an existing building or an existing wing of a building but to build an entirely new building altogether. Gehry uses modern tools, techniques and materials to create entirely different types of buildings and internal space. Yet, his buildings up end standing right next door to old buildings.
The future and the past are both here, just unevenly distributed.
To channel (but mangle!) my inner Bruce, the interesting things – the exciting things – don’t seem to be happening in mid-town; they’re happening on the edges of corporate IT; the brightness is on the edge of town. Corporate IT is what it is; conservative, consensus driven, suspicious of the unproven, paranoid. Expecting this culture to change would be like me expecting West Ham to win the EPL. Much as I hate to say it, it isn’t going to happen! Instead, the future is racing at big businesses through individuals and groups doing their own Cloudy thing; through the apps and web services they use to get to the airport, to manage their money, to hire new recruits, to segment their audience, to collaborate, to meet, to book hotels, to ship goods, to access bandwidth and CPUs. All of this abundance – functionality delivered at price points that are blowing away incumbent competition – is the light of innovation, of new ideas and approaches, of the future, that is there for everyone to see and follow and use.
As the Amazon results demonstrate more and more people are seeing it and following it and using it.
Just not corporate IT...