Cloud is CapEx Intensive, Just Not Your CapEx

CapEx Investments Secure the Hyper 3 Winners

Remember in Alice in Wonderland, when the White Rabbit looked at his watch and proclaimed, “I’m late, I’m late,” followed by, “The hurrier I go, the behinder I get”? In an odd sort of way, these quotes describe the state of most companies’ move to the cloud.

“The hurrier I go, the behinder I get”

The pace of cloud-related change and innovation is remarkable and only accelerating. New cloud vendors continually arrive on the scene, and new cloud services and solutions are introduced by the thousands every year. Yet many companies continue to put off a large-scale move to the cloud, and that’s now a big problem. The longer they wait, the further they fall behind those competitors that are embracing the cloud and its massive potential.

Why are they hesitating? A myriad of factors are at play. There’s the technical debt companies have been saddled with for years that’s difficult to write off. There’s the lack of people with strong cloud skills. And then there’s the age-old obstacle of reluctance to change and fear of risk: Companies are comfortable with what and whom they know.

Think about it. The very skills, processes, tools and vendors that an organization knows and perhaps loves (or loves to hate) are the very same legacy elements preventing most from moving on to something new: the cloud.

These are all valid issues. But they shouldn’t be an excuse for not moving to the cloud. In fact, despite the pockets of legacy supporters within a company, moving an IT estate to the cloud is no longer a choice. It's a do or die imperative simply to remain competitive, let alone to keep pace with business needs.

Then the question becomes, which cloud provider does a company choose? It’s a tough question.

THREE CHOICES TO REDUCE UNCERTAINTY AND RISK

The cloud provider market is dominated by three vendors: Amazon, Microsoft and Google—or, as the market calls them, the Hyper 3. Each of these behemoths is investing about $1 billion a month in capital expenditure (CapEx) to build and scale its global footprint1. Alibaba is a distant fourth, although one could argue that its low costs effectively narrow the gap. The others that follow are smaller or more niche cloud providers that will never be big players simply because they aren't making the same level of investment that the Hyper 3 are.

The extent of the Hyper 3’s investment enables the group to develop and roll out new capabilities and services at a pace no other provider—or, for that matter, no corporate IT organization—could match (Amazon alone launched 1,700 new services in the past year). This means the Hyper 3 are setting, and continually raising, the bar for what the cloud can do—and that’s a win for any company that wants as little uncertainty and risk, and as much potential upside, as possible.

So, which one should a company pick? In reality, which of the Hyper 3 a company chooses for its cloud transformation isn’t the question—just that it actually does it; taking the step is what matters most. Each company offers access to unprecedented innovation and scale, and the stability and certainty that comes with them. That said, a few factors may swing the decision in favor of one over the others.

For instance, if a company is concerned about vendor risk or pace of innovation, Amazon—with a commanding 52% share and history of innovation—is the clear choice. However, a company in an industry like retailing may perceive AWS aiding and abetting a competitor, which might narrow the choice. Perhaps a company already has strong ties to Microsoft in the form of prior investments in products like Office 365 and SQL Server. Picking the Redmond giant could keep the company in that ecosystem. Or, maybe a company is looking to create new, data-rich workloads at a lower cost but with attractive performance. In this case, Google’s technology leadership and simpler cost model might be most attractive. Google’s technology extends to its robust network, which might sway a company looking for near zero latency in its applications.

The point is, when it comes to stability, security and innovation, all three options hit the mark. Best practices suggest that an organization qualify at least two vendors to further moderate risk and comply with internal policies.

FOCUS ON OUTCOMES AND EXPERIMENTATION

To truly benefit from its choice—i.e., capitalize on all of the innovation coming from the Hyper 3—a company needs to make sure its cloud strategy is aligned with a specific business outcome. The objective may be to cut technology costs by a third, accelerate innovation or penetrate new markets —whatever the goal, it and its related metrics should be explicitly tied to the use of the cloud.

A company also needs to give users the freedom to experiment. After all, what’s the use of all of the new services and capabilities the Hyper 3 provide if a company doesn’t take the time to figure out how to use them and where they could generate significant business benefits? Consuming all of this new functionality means moving away from the traditional Information Technology Infrastructure Library (ITIL) and six-month approval cycles—taking months to vet a new capability before allowing users access won’t cut it in the cloud. Instead, a company needs policies that clearly govern the use of new features and functions in a way that gives users the latitude to tinker while also enabling them to monitor what they’re doing.

For instance, a company could allow users to test new functions as they’re available but restrict how and when the functions move into production. Or, a company could narrow down the new services to only those relevant to that particular company, thereby avoiding spending manpower and resources on things that don’t matter to the business.

Freedom to experiment is critical to finding innovative ways to use the Hyper 3’s services to add business value—and to staying ahead of competitors. There’s little value in using these providers if you aren’t using the new services.

IT'S TIME TO MOVE

Despite all of the promise the cloud offers, many companies are still stubbornly sticking with the status quo. In fact, on average today, most organizations are only around 10 percent in the cloud. That could be a costly mistake in more ways than one. If companies insist on staying with legacy technology providers, they’ll only continue to add to their technical debt—all while the Hyper 3 steadily drive the cost of compute, storage and network toward zero.

Where are you or your industry on the road to cloud adoption?

At the end of the day, the choice comes down to disrupting the competition and an industry or being disrupted by a clever upstart. It’s entirely a company’s call. Now is the time for all companies to choose, and we hope, pick the former. Every company needs to avoid continuing down the legacy rabbit hole by knowing where to go and helping the rest of the organization to get on board with whichever of the Hyper 3 it thinks best suits the company. Opportunity awaits but only for those that move forward with speed and focus.

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Source: Cleveland Research.