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451 Research: The Cloud As A Path To Organizational Transformation

“Cloud is a waste of time” says Eric Hanselman, Chief Analyst at 451 Research, “if you’re not doing it right.” And he says there is a big difference between enterprises that are doing it right, and those who are not.

“If we’re using the cloud as just one more workload location, we’re wasting its abilities,” Hanselman told attendees at a 451 Research briefing last week in San Francisco. “We need to get to Cloud 2.0 – moving the cloud from infrastructure to something transformational.” His colleague, Nikolay Yamakawa, Senior Analyst at 451 Research agrees, “There’s a misperception in enterprises they should move to the cloud as a cost cutting measure but in reality the cloud is an enabler: It makes companies faster, smarter, and better than their competition.” So why does the cloud transition in most enterprises resemble the tortoise more than the hare?

According to Hanselman, the challenge most IT organizations face in going to the cloud is the complexity of the IT organization itself. He says that 80% of enterprises today face roadblocks when trying to make the cloud transition, and these roadblocks are “soft tissue” connectors like politics, budgets, and organization. “Technology,” says Hanselman, “is not the problem.”  Culture can be part of the challenge, Yamakawa adds, because it’s hard to realign groups internally in order to make the cloud transition. Cloud conversations involve different parts of the organizations, such as IT, security, and business units, and building these cross-functional teams take time and effort.

But still, organizations continue to prove they are ready to make the move. Yamakawa cites new 451 Research survey data that cloud expenditures are accelerating. 35% of organizations report that they will spend more of their budget on cloud services this year compared to last, and even those organizations that report spending the smallest portions of their budget on the cloud are shrinking rapidly. Enterprises move slowly, says Yamakawa, but quarter over quarter the cloud portion of the budget is increasing.

More notable though is the evolution of the cloud buyer. Gone are the days where it’s mainly early adopters in the cloud, says Yamakawa. He predicts that by 2017 over 76% of all cloud purchases will be for mainstream services. Furthermore, there will be three times as many applications in the cloud in 2017 as there are today. And what’s behind all of this cloud momentum? According to Yamakawa, it’s 3 things: security, predictability, and availability.

So how do enterprises move to the cloud successfully? Hanselman points out that there is no one-size-fits-all in the cloud, and that most organizations will take a blended approach and use different cloud models simultaneously.  Today, the majority of workloads in the public cloud are collaboration and enterprise applications, versus R&D and engineering workloads, which are the minority.  Private clouds, such as those that leverage OpenStack technology, are often a starting point for many companies to start down the road to the public cloud. Trust and comfort is developing with the public cloud, says Yamakawa, and as a result adoption will continue increase steadily. Part of getting to that point for organizations though is having those cross-functional teams assess needs internally and decide which services make the most sense to run from the datacenter or the public cloud (or somewhere in between).

There’s one other key consideration in this: selecting the right partner.  The three biggest factors that Yamakawa sees impacting cloud adoption are concerns around security, compliance, and control of data. Because of the cloud’s maturity, these shouldn’t be show stoppers anymore, but organizations need to select partners who will help them understand the technologies and make sure all concerns are addressed. Companies also need to to manage expectations internally – a successful cloud transition requires a lot of handholding.  This requires making sure that cloud vendors are able to provide the necessary support along the way to the cloud that will make the transition successful for everyone.

Ultimately, says Hanselman, we need to look at the cloud differently. He mentions the oft-cited “Hotel California” argument for cloud services, that once a workload has been pushed to the cloud, it can never be pulled out. The problem with this, he points out, is that we’re still looking at the cloud in the old infrastructure model. And if organizations just rebuild their datacenter infrastructure in the cloud, they’re missing the opportunity to transform not only their IT functions but also the organization.

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