The Cloud: A Market Force to Be Reckoned With

Arthur Cole
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How to Better Integrate Cloud Apps by Managing the Integration Lifecycle

It’s comforting to think that the enterprise is in control of its own destiny when it comes to data infrastructure, but in reality the industry is being swept along by forces largely beyond its control.

This is nothing to be overly concerned about, of course, as this is just a continuation of the state of affairs that has existed in high-tech circles for decades. But it does remind us that when it comes to macro trends like the cloud, the enterprise is as much a pawn as a player in the development and deployment of new data infrastructure.

According to Dell’Oro Group, cloud data centers will consume half of all server shipments by 2017, and in fact will represent the only growth market for this type of hardware going forward. This may not be a huge deal right now, as most cloud providers rely on the same type of servers that exist in the data center. But as time goes on it is reasonable to expect that vendors will start to optimize their products for the people who are buying them, which means form factors, architectures, networking support and a host of other design elements will soon favor cloud functionality over traditional IT. That, in turn, will force enterprises to deploy greater cloud functionality within their own data centers as legacy systems and architectures become less common and more expensive to build and maintain.


Fortunately, the enterprise has a lot to gain from this conversion. A private cloud is more flexible and scalable and provides better service to emerging dynamic data environments than legacy, silo-based infrastructure, so there is literally everything to gain from the new infrastructure and nothing to lose. This is one of the reasons IDC pegs the growth of private cloud spending at 16.8 percent this year to top $11.7 billion. Non-cloud spending, while still large at $67 billion, is expected to remain flat. For the rest of the decade, the private cloud will grow at a compound annual rate of 14 percent while traditional IT will fall by about 1.4 percent.

Clearly, the bottom for legacy IT will not drop out over night, but it does mean vendors will be under increasing pressure to adopt new cloud capabilities to compensate for falling revenue from legacy equipment. Some vendors are already starting to struggle with this as investors grow increasingly antsy in the absence of solid cloud-facing strategies. QLogic, for example, recently shed about 8 percent of its stock value following a decline in revenue and candid admissions by CEO Prasad Rampalli that weakness in standard server and storage markets was putting a drag on sales. The company is retooling its cost structures and product development, but it still begs the question as to why these actions are so late in coming, considering that the cloud has been a growing facet of the IT industry for at least five years.

Cloud30

Perhaps the only negative about the cloud so far is that there is still a strong current of concern throughout the enterprise industry that it is not ready for mission-critical applications. According to Forbes’s Joe McKendrick, a new study by HfS Research claims that more than 70 percent of large enterprises don’t expect core operations to transition over to service models for at least another five years. Among top executives, delaying factors include a lack of available plug-and-play services due primarily to unwillingness on the part of top vendors to cannibalize legacy product lines. Junior executives, meanwhile, put the blame on organizational resistance from within the enterprise.

At some point, however, the enterprise will reach a tipping point at which continued investment in legacy infrastructure will no longer be sustainable, even for core apps. Leading vendors may try to push off this day of reckoning to the best of their ability using integration with their legacy product lines as leverage, but this only puts their top customers at risk of being out-classed by nimble, cloud-centric start-ups. And this would result in the same loss of revenue and in fact accelerate the transition to an all-cloud IT industry as these long-standing buyers would either convert to the cloud or fade into history.

At the end of the day, the market forces unleashed by new technologies will dominate, and even the most powerful enterprise will have no choice but to cope with the world as it exists, not as they would prefer it to be.

Arthur Cole writes about infrastructure for IT Business Edge. Cole has been covering the high-tech media and computing industries for more than 20 years, having served as editor of TV Technology, Video Technology News, Internet News and Multimedia Weekly. His contributions have appeared in Communications Today and Enterprise Networking Planet and as web content for numerous high-tech clients like TwinStrata, Carpathia and NetMagic.



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