Enterprise IT faces a raft of technology shifts in the coming years. The deep penetration of mobile devices into the enterprise, the impact of social media and the technology to extract intelligence from greater and greater quantities of data, are a few important ones. But what stands out for the disruptive nature of its impact is the Cloud. The Cloud is truly paradigm-shifting for Enterprise IT.
What is so different about the impact of the Cloud? It is not so much about the opportunity of value creation. While the size of the prize is massive, that is true about the other technology shifts as well.
The Cloud is disruptive. It upends the current order of things in Enterprise IT. It shifts control away from IT towards Business. It dramatically changes the role of the CIO and her organization. And it changes the way we manage the business of IT in profound ways – like managing by business outcomes rather than by costs and intermediate IT outcomes.
Why is this so? Since the beginning of Enterprise IT, IT infrastructure, particularly the data center, has always been firmly rooted in IT. Even when outsourced, the outsourcing contract has been managed by the CIO’s organization and they remained accountable for its results. But today, Cloud service providers, run their own infrastructure that is common across all their customers and charge a fee for use. Sometimes they provide infrastructure services only. Often, its more. But always, using Cloud services means transplanting IT infrastructure outside the domain of the IT organization.
IT infrastructure may not directly create value, but business leaders understand the risks involved. Something that could bring your company’s order processing system to a halt is not to be trifled with. So why would an enterprise undertake the risk of such disruption?
Economics, for one. From what we have seen with our clients, the potential for savings range from attractive to downright stunning. But there are other reasons as well – flexibility, developer productivity, time-to-market – and as you get up to the application layer, soon, state-of-the-art functionality will exist only in SaaS applications.
But the biggest reason why the Cloud is unstoppable is because running a data center is not “core” to anybody’s business, except a handful of Cloud service providers. These providers run mega data centers at locations and at a scale where every element of performance and cost is carefully optimized. No company can match that. Enterprise IT will find it difficult to justify “build” over “buy” when it comes to data center infrastructure.
And the future will hold even greater specialization. For example, Intel is running trials with oil-cooled servers (photo above) which need only 2-3 % of their power for cooling (against the usual 50-60%). Today’s data centers are all set up for air-cooling. Can Enterprise IT deal with such shifts in technology?
No, I don’t think so. The Cloud is written in every Enterprise IT organization’s future.
Like most paradigm-shifting technologies, the switch-over may never be complete (I still have a VCR or two at home). But it is inevitable and once it gathers momentum it will be unstoppable.
Cloud adoption will be gradual at first. CIOs will start with new development on IaaS or PaaS. Some will migrate small, non-critical applications to the Cloud. SaaS applications have some momentum. But the bulk of the core enterprise applications still run in the data center. There is a long way to go.
The Journey to the Cloud will be long. There will be risks, and many challenges on the way. There will be existential questions like what is the role of the CIO in this brave, new world. But “there is gold in them thar hills”. It will be worth the ride.
Cross-posted from infosys.com with minor alterations. [link]
6 am pacific 
Hi Basab,
While I completely agree with you that Cloud is the future of Enterprise IT, it may still take a while before it becomes fully entrenched. Particularly with SaaS, which I feel still needs proof-of-concept before it reaches a stage of widespread adoption.
However, the more important question here would be how would the role of a traditional System Integrator change with the adoption of cloud?
The whole business of a SI was built on the premise that the IT department of an enterprise did not have adequate competency to install and customize a complicated ERP system, which necessitated the creation of an entire industry – that of System Integrators.
But cloud is now changing the very notion of what an ERP system should look like. Simple to use, easy to install and maintain, flexible and easy customization are all features of cloud based software where the after-sales service too is taken care of by the cloud provider themselves.
Earlier the IT value chain was quite distinct – Hardware companies, Software product companies and System Integrators broadly speaking. With hardware companies like IBM and HP now providing services, software companies like Google and Amazon making hardware and with the advent of cloud amidst all this, the line has only become very blurry. What’s more, the traditional SI’s have also started offering cloud services in competition with other SaaS vendors. Everybody from a hardware vendor to a software or a services vendor is trying to become a one-stop IT solution for the enterprise.
While all this is fine, the bigger question to think about is –
Could the cloud phenomenon challenge the very existence of the traditional SI model?
If a large chunk of the installed base of ERP/CRM systems is replaced by web-based software over a period of time with a guarantee of regular maintenance and upgrades by the cloud provider itself, what role does a System Integrator have to play? At-least 25%-30% of revenues of these SI and services providers would come under threat. Maybe the number is a bit exaggerated as we would certainly not see such a mass scale replacement. But still the role of a SI would certainly get diminished to a good extent. And by getting into SaaS and other such cloud based products, would the SIs be able to replace the lost opportunity in their traditional business? Is cloud big enough to bring about the next wave of double digit growth rates for the large companies?
My guess would be perhaps not.
But then what other opportunities does the SI need to explore/how does the SI model change in order to counter the competition from this new generation of cloud providers?
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Priya – all good points. SaaS does have a smaller the services footprint. But the Cloud offers plenty of opportunity for SIs and service providers. Along the way – on the journey, as it were. But also as a provider of solutions offered using the Cloud. The boundary between software and services, as you correctly point out, is blurred. It is up to the service provider to make this into a net gain or a net loss for themselves.
From the client’s standpoint, the Cloud is all net gain. Which means that we as service providers must advise and aid our clients on how to get there – be good travel guides.
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Well about time that CIOs saw their real role – “Chief Insights Officer”!
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Using the cloud lets you focus on your true value addition for the business you are supporting. In a way it levels the playing field. It frees up the bandwidth to build to build out what is unique about your business.
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IT service companies need to step away from “one size fits all” type of buzz or recommendations. I think Basab’s advice may find takers only within top 20 percentile of the companies pyramid. The remaining 80 should not settle down on ‘a’ trend but continue to nail down what is relevant for them. IT service providers should remain grounded. They should be able to judge when to Cloud and when NOT to Cloud? I think most will turn with up with contradicting suggestions given a case to analyze.
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