451 Alliance Report

Alliance Members-Only Report

Hosting, Cloud and Managed Services

November 7, 2018

By Tracy Corbo

As the fanfare of cloud subsides and becomes a core component of IT infrastructure, the real work toward digital transformation can begin. Public cloud is one of several deployment options. For younger organizations who wish to go straight to cloud with little or no investment in legacy on-premises technology - the transition will be relatively short. Organizations with large investments in legacy on-premises IT infrastructure will face a longer and more difficult journey.

Digital transformation is more than just a passing phase. It is about modernizing IT infrastructure so that businesses can respond to the rapid pace of change in today’s global economy. Legacy IT infrastructure is weighing companies down and keeping them from staying relevant, because it lacks flexibility.

Hybrid IT is emerging as a way to not only bridge the gap between old and new technology, but to also provide greater flexibility while leveraging key corporate assets. Public cloud is one of many deployment options that can make up that hybrid approach.

A September survey of 632 members of the 451 Alliance looks at cloud adoption and demonstrates that public cloud can be managed as yet another IT resource and does not have to be feared as the harbinger of runaway IT costs.

Modernizing IT infrastructure is not an option

For a business to remain competitive and responsive, the underlying IT infrastructure must be modernized. The depth and breadth of legacy infrastructure will have a direct impact on how quickly or slowly that transformation takes place.

Hybrid IT is the best route for companies that have accumulated a vast technology debt of legacy IT infrastructure. They also have the in-house expertise to integrate the on- and off-premises resources. These are typically companies that are more than 25 years old, run their own datacenters, and have more than 10,000 employees.

The ‘all in on public cloud’ is a fast path to digital transformation. It is a viable option for small, young organizations that have no desire to build out and maintain their own IT infrastructure.

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Cloud a work in progress

In 2017 smaller organizations with less than 1,000 employees were moving more quickly to cloud than larger organizations. For these organizations it will continue to be faster to deploy on public cloud rather than build out their own internal infrastructure.

The slower rollout for larger organizations is twofold. First, they have their own internal infrastructure that is already up and running. Second, transitioning to new technology has its own set of challenges for larger organizations, which has a direct impact on the speed at which new technology can be deployed

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It is important to bear in mind that while broadly deployed implies widespread adoption of a technology, in this case it is important to look at what percentage of overall workloads are actually running on these platforms. So, while 46% of respondents are making use of IaaS/public cloud services, only 8% of workloads are currently running on this platform.

The majority of workloads (44%) are still running on traditional on-premises IT infrastructure. On-premises private cloud, which currently accounts for 16% of workloads, offers a way to way to take advantage of the technology while retaining control of the underlying infrastructure.

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The low-hanging fruit for hosted private cloud adoption appears to be fairly well plucked when it comes to smaller organizations. While overall adoption is slightly lower in 2018 at 24% of respondents versus 30% in 2018, very large organizations are adopting close to the same rate as last year.

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On-premises private cloud provides the foundation for developing hybrid IT infrastructures that helps pave the way on the road toward digital transformation, especially for organizations deeply rooted in legacy on-premises IT infrastructure.

For verticals such as telecommunications and manufacturing, the appeal of on-premises cloud is about controlling workflow orchestration, performance management and automated resource balancing.

For the financial sector, the key feature of on-premises cloud computing is the ability to build a self-service infrastructure and application provisioning.

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Do not fear public cloud

Good news; half of the respondents report that spending on public cloud was on target for the past 90 days. A little less than a third did report spending more than they planned, but only 10% of the respondents experienced sticker shock; the rest report just a slight increase in planned spending.

This means that most respondents deploying on public cloud were able to keep usage and spending aligned. It is possible to plan and hit your target numbers, because at the end of the day, cloud is nothing more than another IT resource and there is no reason you cannot plan for it just like with other IT spending.

There should be no difference when procuring cloud resources than other traditional IT infrastructure. This will ensure that the resource is purchased and managed correctly so that there is no need to fear runaway costs when it comes to public cloud.

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Organizations with less than 250 employees (71%) are running mission-critical applications on a public cloud platform. Public cloud is a key deployment venue for smaller organizations, so they are more likely to be all in on cloud. It allows them to quickly gain equal footing in the marketplace without making a large up-front investment in on-premises IT infrastructure.

For very large organizations, less than half of the applications running on public cloud are mission critical. Larger organizations have their own internal infrastructure that they can leverage, so for them public cloud is just one of many deployment options to choose from.

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One of the benefits of moving to cloud and a subscription service model is that it allows customers to pick and choose solutions that best meet their needs. This model lends itself to purchasing products across multiple vendors.

Smaller organizations use multiple public cloud vendors as a way to optimize cost and avoid vendor lock-in. It also provides a solution for replicating workloads across vendor platforms as a failsafe.

Larger organizations have a broader range of issues that multiple cloud can address. Hybrid multi-cloud is emerging as the on ramp to digital transformation for these organizations.

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