The cloud space continues to evolve as hybrid/multi-cloud emerges as the key organizing principle for increasingly heterogeneous IT, cloud-native technologies enter into IT environments, and complexity (and lack of in-house skills) creates a new landscape for IT operations. Enterprise workloads are on the move, and they're transforming. The winners in the new cloud battleground – managing complexity – will be those that can deliver both integration and innovation.

The 451 Take

As the cloud playing field shifts from adoption and building toward consumption and management, vendor and service-provider focus must change as well. Cloud is simply becoming IT (instead of a separate special snowflake variation on IT), but clouds (on-premises and multiple off-premises hyperscale and sub-hyperscale suppliers) are now part of the IT integration, management, orchestration and optimization equation. The inherent complexity of heterogeneous IT estates will create opportunity for vendors and service providers that can manage this complexity with optimization and continuous development and innovation that accommodates the inevitable changes ushered in by the IT modernization efforts that organizations will implement to deliver on digital transformation. In our 2020 Cloud Preview report, we show that 2020 will be the year that enterprises seek to optimize this complexity to create best business value.


The Next Hybrid/Multi-cloud Challenge is the Control Plane

Hybrid/multi-cloud, once an unintended (yet in retrospect, totally predictable) consequence of unchecked technology sprawl, is emerging as the predominant strategic posture to manage digital-era IT and business transformation. In fact, 62% of enterprises today are pursuing a hybrid IT strategy, according to 451 Research's Voice of the Enterprise (VotE): Digital Pulse, Budgets & Outlook 2019. However, given the need for comprehensive IT estate management of the control plane, the expanded hybrid/multi-cloud remit for cloud management platforms is fueling large-scale reinvention (and a renewed burst of competition) within the industry, as well as M&A-driven land grabs to round out capabilities.

Complexity will Drive Managed Services

Rather than the simple 'plug in and consume' electricity analogy mooted a decade ago, enterprises are using hybrid cloud, cloud-native frameworks and innovative services like AI, serverless and the Internet of Things higher up the stack to build their applications. Rather than keeping things simple, enterprises are choosing complexity because it delivers value in the form of differentiated offerings, more efficient applications, happier customers and lower costs. Our Cloud Price Index now tracks a colossal 1.4M SKUs for sale from AWS, Google, Microsoft, Alibaba and IBM.

The solution, and the path to enterprise value, lies in the pursuit of 'optimization' rather than 'resolution.' What is the difference? Resolution suggests the dumbing down or simplification of complexity, but the result is that much of the value that complexity has created might be lost. Optimization means the complexity will remain but will be managed. Crucially, this optimization can't just be driven by tools. Tools provide data that can be employed to optimize but expertise must still be required. Yes, analytic tools can recommend when a resource is underused, and automation can buy a better-sized instance when this is detected. But human intervention is needed to understand that a resource is intentionally being underutilized as product management is about to launch a new service, for example.

More Flexible Consumption Models...but it's not like Electricity

The obverse of complexity is flexibility – enterprises are spoiled for choice in today's IT market, and providers from both public and private cloud domains are evolving to meet their demands. More private cloud suppliers will tout offerings with cloud-like models that let customers pay for on-premises resources via metered billing, thereby sharing the risk and reducing the TCO penalty of underutilization. At the same time, public cloud providers will continue to move beyond 'T-shirt sizes' for compute resources, not just for VMs but with cloud-native technologies that are truly pay-per-use rather than pay-per-provision. Hyperscalers are creating more products and services, rather than simplifying, but are developing new ways to consume them. The number of VMs available from Google, AWS and Microsoft has risen 317% on average over the past four years, according to the Cloud Price Index – hardly analogous to consuming simple KW from the electricity grid.

Access to Talent Continues to be a Key Cloud Roadblock

Faced with an increasingly complex technology landscape and growing demand for specialized IT skills, enterprises are reporting shortages in IT staffing, with many acute skills gaps related specifically to cloud platforms. Access to specialized talent is becoming a critical roadblock to effective use of cloud, and addressing these skills gaps is emerging as a key basis for managed services. According to our VotE: Digital Pulse, Organizational Dynamics 2019, 86% of enterprises are facing skills shortages with regard to cloud adoption.

Service providers are seeing an acknowledgement by a significant portion of the cloud user base that the skills required to execute effectively in the cloud may reside in a managed service. Providing access to specialized talent associated with implementation hurdles will become a critical framework for how providers bring managed services to market, how they engage with upstream technology suppliers (including public cloud vendors), and how they engage in partnerships between service providers.

Service Mesh will further Enhance the Value of Microservices

Enterprises can go faster with cloud and be more efficient with microservices, hence why 49% of enterprises rate it as their most important cloud-native technology, according to our VotE: DevOps, 2H 2019. However, as deployments scale up and complexity grows (meaning more than one Kubernetes cluster/application/team), a service mesh will be required to provide communications between all of the moving parts. What's next? The industry is making this up as it goes. It is new territory. In 2020, we will see the developer piece (distributed functions, modularization, multiple programming languages, IDEs) starting to come together with the operational piece (making sure stuff works). With the breadth of services available, the key to success will be finding the right combinations and operationalizing services to deliver the benefits as advertised by their suppliers – speed, scale and agility. Service mesh is crucial to this.

NOTE: the full list of authors for this report include Dr. Owen Rogers, Melanie Posey, William Fellows, Jean Atelsek, Nicole Henderson and Liam Eagle.

Owen Rogers
Research Vice President

As Research Vice President, Owen Rogers leads the firm's Digital Economics Unit, which serves to help customers understand the economics behind digital and cloud technologies so they can make informed choices when costing and pricing their own products and services, as well as those from their vendors, suppliers and competitors. Owen is the architect of the Cloud Price Index, 451 Research's benchmark indicator of the costs of public, private and managed clouds, and the Cloud Price Codex, our global survey of cloud pricing methods and mechanisms. Owen is also head of 451 Research's Center of Excellence for Quantum Technologies.

Melanie Posey
Research Vice President and General Manager, Voice of the Enterprise

Melanie Posey is the Research Vice President and General Manager for 451 Research’s Voice of the Enterprise: Cloud Transformation offering. She focuses on tracking, analyzing and anticipating the pace and nature of enterprise cloud adoption. Prior to joining 451 Research, Melanie spent more than 15 years at IDC in a variety of roles, providing analysis, forecasting and insight for the cloud, hosting, datacenter, managed services and telecommunications markets.
William Fellows
Founder & Research Vice President

William Fellows is a cofounder of The 451 Group and VP of Research for the Cloud Transformation Channel at 451 Research. The Channel provides a point of intellectual convergence for 451 Research around cloud computing, in much the same way that the industry is converging on cloud from all points. In addition to keeping tabs on players entering the cloud and IT services space with disruptive business models, new technology and innovations in service delivery, William has also created 451 Research's Digital Economics unit.

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