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Implications of the Cloud

cloud
(Image credit: Shutterstock / vs148)

The cloud is enabling the trends already inherent in the IT industry at a lower price point with standard services universally accessible. There are, though, five trends worth considering as we move beyond the cloud.

1. The Internet is the corporate network 

The corporate network and security have dominated much of IT in the past. However, in these enterprise cloud-enabled times; the corporate network has no further purpose. 

The pandemic has accelerated the trend with significant sectors now working from home and accessing corporate IT via a VPN. Even within the business, the last few services are being cloud-enabled, removing the last constraints such as printing, firewalls, proxy etc. Running a complex network for a few legacy use cases can rarely be justified.

The stepping stone for many was the Software Defined Network, which was a halfway house of moving the complexity of the network into the cloud. It still enabled traditional network management and routing, but with minimal physical infrastructure. Over time, however, this will be engineered out. After all, bandwidth costs, reach, stability, and geographical availability continue to improve. 

Network security is one of the most compelling reasons to move to the cloud. The security investments and quality of cloud security are already far outstripping anything that a typical enterprise can afford or replicate.

2. Software as a Service (SaaS) is the end game 

The move to SaaS has implications for the future of cloud and the enterprise and will continue to transform the market over time. Early demand for the cloud was based on storage and compute, providing variable capacity for the new media companies that required mass storage and the need to manage variable demand. 

SaaS changes the thinking for all as storage and compute is no longer relevant. Solutions such as Microsoft Dynamics come with all storage and compute power built into the pricing.

The future will see all software packages delivered as a SaaS requiring no underlying infrastructure. Those that don’t will have such a high marginal cost to provide separate storage and compute that they will be uneconomic.

Traditional enterprise software often comes with complex databases and infrastructure and pricing models that are poorly understood. To fit a specific business, the process needs to be mapped and understood, and then expensive customization is required. This has become a barrier to change.

In a SaaS model the software is evergreen, the process is predefined within limits, and the software is configured, not customized, and fully maintained. While the initial change process has similar costs, the future downstream frictional costs are removed.

3. The cloud is becoming the end-to-end ecosystem 

Cloud providers are moving towards providing a single solution for the enterprise. This is important when we consider that market consolidation is a key trend in a maturing industry. Microsoft is the key player and where they go others will follow. With Azure, Dynamics and 365 products it is now able to offer an end-to-end corporate solution including finance, people management, e-commerce, CRM.

Debates have often focused on best of breed vs single vendor. While the best-of-breed approach was often compelling, its costs and challenges were often ignored. The challenges and costs of integrating multiple different products together into a cohesive solution and maintaining software currency through version upgrades were often prohibitive. 

The cloud ecosystem addresses many of these challenges but still offers constraints on integration and business intelligence (BI) across vendors. As a consumer, I do not buy a car as a set of separate components – wheels, engines, body – from separate manufacturers and try and integrate them together. This challenge has not gone away with the cloud, even though new tools exist to make this easier.

For many customers, buying decisions will need to be based on choosing a platform, not just a product. This is being made easier as software vendors consolidate to provide the solution required.

4. The IT industry will de-skill 

IT is becoming simpler and easier to understand, meaning the skills required to use and maintain IT are declining. The earliest computers were programmed by PHD students in binary codes of 1 and 0’s. As technology moved on, more accessible computer languages were developed so that instructions could be written in English.

This trend is ongoing with the cloud. Today there are very few applications that cannot be bought off the shelf ready to use. This has driven organizations to adapt their process to the application rather than the other way round as the cost of bespoke development is prohibitive. Your accounting processes are not a competitive advantage.

This has resulted in the general deskilling of the corporate IT function meaning that it is becoming increasingly difficult to maintain all the skills in-house. 

The usability of technology has improved dramatically. It is no longer the dark art it once was. A competent person can build their own website using an out-of-the-box tool and have their site go live the same day.

In my view, the corporate IT function will transform over time to reflect this change further as the cloud reaches critical mass with future skills-based on service managers and user experience. 

This deskilling is also a catalyst for further deskilling. The XaaS model will become more compelling as the cost of highly skilled technicians becomes prohibitive for an average organization.

5. The IT supply chain is being rewritten 

As with all disruptive business models, the cloud will have an impact on the supply chain. At a simple level, the corporate market now rarely buys physical servers. This change is coming at every level on hardware, software, and outsourcing. 

The big outsourcers all developed their own XaaS models with varying success. It’s fair to say that some have struggled to adapt culturally to the new paradigm of a traditional IT workforce not used to the demands of the cloud. 

A new breed of suppliers is growing though. These are the ‘Born in the Cloud’ vendors who understand the cloud and are not constrained by a legacy business model being cannibalized by the cloud. They understand the demands of the cloud, how to make it work effectively and how to service the customer. They do not have distributed centers of excellence that cannot function together, or a suite of bespoke tools, because they know better but are able to operate natively within the cloud with the tools provided and operate an integrated service.

Adrian Davey, IT strategy consultant, Agilisys

Adrian Davey is a transformation leader focused on defining the business IT strategy and supporting services through to execution. Adrian has a deep understanding of the impact of change and how IT can transform organisations through business-led solutions. Adrian has developed a repeatable approach to transformation, building the case for change and delivering significant results in the market.