“Don’t believe everything you hear” is a good maxim for our hype-soaked media landscape, but it’s also good sense to pay attention to what the smart people say, and where the smart money goes. A few very smart analysts from JP Morgan made comments in early April foreshadowing changes in the IT services sector. They further noted that traditional IT is starting to fade as firms demand better cloud solutions.
In the article in Barrons analysts Mark Murphy, Doug Anmuth, Sterling Auty, Rod Hall and Philip Cusick were credited with releasing a 50-page memo on the state of cloud computing business. First indications, according to the piece, are that Amazon and other marketplaces are going to enjoy greener, richer pastures while traditional IT vendors might have a rougher go of it.
To be fair, the basis for these comments is a survey of some very rich companies. Those with CIOs who wield budgets north of $600Million annually. But the underlying patterns seem to apply to any companies looking to be smarter about SaaS and cloud strategy. In fact, the telling line in the Barron’s recap is this:
“One of the main takeaways is that use of the public cloud, meaning services offered for a fee from Amazon and Microsoft‘s (MSFT) Azure and the like, is set to rise dramatically in coming years.”
From where we sit, this is quite evident. Of course services from hyperscaled clouds are going to result in recurring, consumption-based billing. A key part of the shift to cloud is the advantage that comes with consumption billing. Customers want to pay for what they use and are voting with the dollars. Cloud eliminates dead waste sitting in a datacenter – it’s the next evolution of datacenter consolidation.
Some interesting figures from the article and the JP Morgan report underscore these beliefs. Such as…
“CIOs report that 16.2% of workloads are currently running in the public cloud, and that in five years 41.3% of workloads will run in a public cloud. This suggests at least a 20% CAGR in public cloud workloads over the next five years.”
Beyond the obvious changes, this represents a huge shift in how IT departments procure the services they deliver to end-users. To capitalize on the advantages inherent in cloud services, IT has to be smarter about how it purchases and governs these services. Further, the rest of the ecosystem including software vendors and channel providers must adapt to offer their services in similar model, or risk being outcompeted by those who can.
It’s still smart to know how the cloud commerce landscape is changing. It’s still very smart to know what’s offered in the Azure and AWS marketplaces. And it’s uber smart for your technology team (and your sales team) to understand how all these pieces can work together to deliver a more actionable and successful cloud sales strategy.
The team at Orbitera has been watching these developments closely and as the market for cloud services grows, it’s important to assess how your company is equipped to handle the shift. The cloud is here to stay. What you do with it – for yourself and your customers – is how the profitable companies are going to widen the gap between themselves and the also-rans. See more about the specific ways cloud commerce can set you apart by reading our latest ebook, The ISV’s Guide to Doing Business in the Cloud.
Thanks for reading. We welcome your comments below and invite you reach out to the Orbitera team on Twitter @orbitera.