I recently attended ISG’s inaugural SICE Summit in New York City, which I co-chaired with ISG partner Doug Saylors. For two days we explored the secure, intelligent, connected economy (SICE) with enterprise business and technology professionals and thought leaders, innovators and pioneers from a wide spectrum of industries. What do they have in common? Their steady migration to cloud.
Cloud services continue to drive innovation and value for many enterprises. About six years ago, as technologies such as AI and machine learning and advanced analytics brought the cost of computing down and cloud became more secure, we noticed a trend. Infrastructure-as-a-service spending began to overtake traditional data center spending. As I pointed out in the 2Q22 Global ISG Index™ webcast in July, IaaS now represents about 90% of quarterly annual contract value (ACV).
You might think that, by this point, everyone would have shifted their workloads to the cloud. Why spend money on a brick-and-mortar data center and servers if you can pay only for what you use by switching to an as-a-service business model?
Unfortunately, in practice, it’s not that easy.
Of course, some simpler applications have been lifted from data centers and shifted to the cloud. For instance, almost all airlines now have an app that lets customers check flight status or change a seat or flight on their phones. But most enterprise workloads have yet to move to the cloud. Intense workloads can’t so easily adapt to a cloud delivery model. Some of their core applications may be written in legacy programming languages that no longer exist. Competition is fierce for people who know the legacy language and can reliably translate it into cloud without a major glitch that might risk losing critical data or functions, such as financial records or trading systems.
The Challenge of Migrating Workloads to the Cloud
The migration of legacy applications can be quite complex. Enterprises are figuring it out, but it’s taking a while. And some enterprises are reluctant to move a legacy system that’s still functioning well. They’d prefer to wait until a forcing factor such as an acquisition or a change in compliance and regulatory measures pressures them to invest in a new technology and rewrite applications.
All of this underscores the importance of having a cloud strategy early on. Some organizations dived right in to a “cloud first” mindset. Large organizations, in particular, have found that different departments have signed contracts with various providers. They end up with multiple types of cloud and no cohesive strategy.
Just as you wouldn’t build a house without deciding where you want to put it, how big it should be, how long you intend to live there, neither should you begin a cloud migration without planning how public, private or hybrid cloud might work for your organization, which apps to migrate over and who must approve provider contracts. Enterprises often lack a long-term cloud strategy, but the cloud is not a fad. Like sustainability or ESG, it’s an important topic that won’t go away.
What Goes Into a Cloud Strategy
In planning a strategy, understand that assembling a strong ecosystem of service providers can cover multiple variables of a migration to cloud. Each provider has different strengths and areas of expertise. Some enterprises are demanding industry-specific clouds. Particularly sensitive verticals with highly confidential clients — the CIA, for example — must have certain security measures and clearances that reside in the cloud. A private cloud would build these in. A third party’s cloud must adhere to the standards of that industry; hence, the industry cloud.
This means hyperscalers and providers can no longer focus solely on the technology. They must be nimble and possess industry knowledge and acumen. Providers must demonstrate both horizontal and vertical expertise to address the markets they serve or risk being left behind.
Be alert that hybrid cloud estates represent a larger attack surface for cyber criminals and ransomware attacks. Also, hyperscalers are teaming up with integrators to provide infrastructure and migration services. Most enterprises don’t have the skills to manage these complex environments.
Cloud technologies will continue to play an important role in a company’s journey to advance and become more competitive. The amount of spending on cloud gives me hope that companies will continue to leverage cloud services to make their businesses more competitive. The rate and pace of migration is strong. Apple, Microsoft and Google have built services to attain a dominant position in the market. Amazon wouldn’t be Amazon without it. Neither would Google.
Cloud strategy should be a topic in boardrooms around the world. Cloud should be embedded in the fabric of a firm’s overall strategy for success. ISG helps companies build cloud strategies that are specific to their business goals. Contact us to find out how we can help.
About the author
Bernie Hoecker joined ISG in September 2021. His role is to leverage ISG’s core competencies to expand and grow ISG’s presence in the cloud market. His focus will be to implement a cohesive cloud strategy across the ISG firm that results in incremental revenue and EBITDA growth. This also includes fostering strong relationships with service providers, hyper-scalers, and additional firms in the cloud ecosystem.