Going cloud, going offshore - it's all about IT automation

Two major trends impacting enterprise IT worldwide is

• The move towards cloud-based IT service delivery (from dedicated or virtualized server deployments inside customers data centers or with 3rd party DC operators), and
• Global sourcing of IT operations and service delivery, or off-shoring when handing over IT operations and delivery to "offshore" IT suppliers

Both of them are concerned with or aims to, I would argue, reduce IT cost through increased IT automation.

The journey from legacy, classic server environments to cloud-based IT service delivery models can be depicted as in fig 1 below.

Here, various IT systems with a enterprise customer or let's say with a IT service provider, are in various stages of being run on classic, legacy IT environments on virtualized server platforms or maybe has made the leap to a VM IaaS/PaaS setup with a cloud service provider.  

For legacy IT environments, typically one IT system are running on a dedicated hardware and database platform, and IT budgeting is usually done based on CAPEX upfront, 3-4 years write-off period.  Legacy IT environments would be based on IT systems popular 10-20 years ago, i.e. SUN servers running Solaris, HP servers running HP-UX, IBM servers running AIX etc, even pre MS WinServer pre 2012 server on COTS Intel servers.

Some of these IT systems or business applications running on them would be able to make the leap onto virtualized IT-platforms, either as part of a major server consolidation projects that most enterprise IT departments would be running since the dot.com era. Leading candidates or candidate of course being VMWare, with freeware hypervisors like KVM and Zen, additional hypervisors form Citrix, Parallels and others being utilized also.

When a critical mass of virtualized servers were reached, the creation and utilization of server instances could be viewed as OPEX and on a per month, week basis, the cost of each new VM being incremental.  Also when a critical mass of CPU cores on a number of physical servers were reached, it was each to provision VMs from a pool of available CPU cores, over-commit on VM cores that were scheduled to being put into production or assign cores to VMs for dedicated VM resources and instances.  At a higher price than pool-VMs. 

With virtualized servers, server or VM provisioning and configuration could be dramatically automated and lead times for VMs were/are dramatically lower than installing dedicated, physical servers - seconds and minutes versus days and weeks.  VM re-configuration could also be done on the fly with "instant" re-sizing of VM CPU cores, memory and disk-space changes and allocation.  A significant higher degree of automation and IT-production levels were achieved with virtualized servers, leading to lower IT cost overall (per VM, per IT employee, per production unit etc).

Some IT workloads and IT systems has made the transition onto private or public cloud infrastructures, leading to a even higher degree of IT automation than traditionally available from both virtualized or legacy IT environments,  Between highly virtualized and automated IT environments and cloud based IT-delivery there aren't really a clear cut switch-over or demarcation line, but I guess cloud based IT delivery are seen as having a higher degree of auto-scaling and capacity on demand than a single location VM-environment.  Plus a higher degree of self-serve support and options for IT management than a on-prem solution.  IT departments did server virtualization for themselves and to meet corporate cost targets, while cloud IT delivery are available to a wider audience with an associated price plan, service catalog and SLA accessible in a way not always seen with corporate IT departments.

For many end-users, business applications delivered as a SaaS-solution, represents state of the art in automated IT delivery, "just" insert the data and press play. While cloud IaaS or PaaS-delivery would be state of IT-automation for IT-departments and developers.

In many ways, outsourcing and offshoring of IT operations and service delivery, can be seen as an IT automation drive also.

If we apply a onshore (on-prem) and offshore dimension to illustration above, we have a lineup as depicted in figure 2.

Corporate IT systems are, in addition to various state of "physical to cloud"server platforms, in different states of being managed and operated onshore locally (on-prem with customer, with 3rd party local IT-provider) or with a offshore, seen from the customers point of view, IT provider performing day to day operations, maintenance and incident management.

These day to day operations and maintenance work are being performed inside or based on well-defined work packages and by personnel that has specific module certifications on various Microsoft, Oracle, SAP, HP, RedHat, EMC/VMWare etc IT platforms and systems.  In turn this means that IT management are removed from specific personal skill-sets or knowledge, and one set of work tasks lets say on a Oracle DB can be performed interchangeably by different Oracle-trained personnel, and one reaches a new level of IT automation where the personal/personnel factor is taken out of the IT operations equation.  Work tasks gets increasingly specific and well specified, customers avoid customer specific adaptations and developments as far as possible, i.e IT work and delivery gets boxed in and turned into work modules specified down to the minute.

Put another way, part of the cost benefit of offshore IT delivery are down to the modularization of IT work tasks and IT operations that offshore providers have achieved compared to in-house IT,

Thus the transition B in figure 2 is part of an overall mega-trend that uses IT automation to reach lower IT production costs, and it will be interesting to see how the IT service delivery business unfolds between offshore IT-providers and cloud-based IT delivery.  Or more likely, how offshore IT-providers use cloud-based delivery options (their own private cloud services, mix of public clouds) to reach new IT automation levels and increased market share.


Erik Jensen, 19.11.2014

Who are the cloud services buyers?

Already there are some stereotyping on who is buying, i.e. actually paying for, cloud IT services:

• Developers and upstarts buy Platform as a Service type of cloud services, i.e. development environments that can be tailored to meet developers needs or configurable platforms that upstarts can tailor to their needs
• CTOs and IT departments buy cloud infrastructure, Infrastructure as a Service, type of cloud IT services, i.e. compute, storage or networking as a service
• Everyone buys cloud app services and Software as a Service, but usually it's line of business units that buys a specific SaaS-service for their task or project deliverable at hand (and CTO or IT departement are out of the loop)

This is already seeing some change, for instance enterprise IT are increasingly looking at and buying PaaS kind of cloud IT services to cover business needs that can be met using "one size for all" SaaS applications and basic cloud IT infrastructure setups.  And for instance HR or finance departments that wanted that one, great, must-have SaaS application for their line of business, finds out that there are integration issues or data exchange issues once they have 2 or more SaaS apps up and running from 2 or more cloud providers.  Can the IT departement please help sort out this mess?

Bain and Company had a great break-down of cloud buyers in a 2011 report (The five faces of the cloud, by  Michael Heric, Ron Kermisch and Steve Bertrand), listing 5 CIO buyer categories according to cloud "adoption speed and willingness":

• Transformational: These early adopters already use cloud computing heavily to transform business IT and delivery to their business, with on average more than 40 percent of their IT environments relying on one or more cloud models.
• Heterogeneous: These companies are looking to evolve IT service delivery and capabilities and typically have an diverse mix of legacy systems and newer technologies like virtualization and cloud computing. Assumed to make up more than 40% of the buyers in 2013.
• Safety-conscious: Balancing security with growth, these buyers and companies are particularly concerned with the security and reliability of their IT environments. They understand the value that cloud computing offers, but are willing to compromise to ensure that their IT and business environment is safe and secure. Private cloud and hybrid public-private cloud models have the most appeal. Along with the transformational type of companies they are the biggest cloud IT spenders by 2013.
• Price-conscious: Have their TCO for IT services in place years ago, these bottom-line focused companies purchase cloud technologies and services primarily for cost savings and to deliver basic business functionality.
• Slow and Steady: This is by far the largest group of companies and IT buyers (some 44% of companies in 2011) and do not yet appear ready to adopt cloud computing in a progressive way, although they express interest in exploring offerings if a provider can slowly and steadily guide them.

The key thing in the report is the observation that "... early adopters generate ~50% of cloud spending today (i.e. in 2011), but ~90% of growth through 2013 will come from other companies".

Assuming, for many reasons, that Europe and the Nordics lags some 2-3 years behind the US in cloud adoption and uptake, a lot of the stories and hybris we are seeing in the Nordics for cloud take-up and usage today are coming from these transformational and heterogenous early adopters, but the real big money are on hold until the larger companies and enterprise IT starts adopting cloud IT in a forceful way. Which should be 2014 - 2016 in the Nordics approximately.  

A finishing note on the role of the CTO and IT departments, that in many cases are being bypassed by the CFO, CIO or CMO or developers buying cloud services directly themselves - what are they left with?  In many cases being very or too much focused on their on-prem IT platforms and services, they will be forced to take on on-prem and cloud based IT service delivery as well, evolving into an IT broker of physical or virtual application services for their organisation once the CFO or CMO realize that handling 2 or more cloud services and applications aren't that straightforward anyways when it comes to user support, login hazzles, performance variations, billing and security across different cloud providers.

Erik Jensen, 20.11.2013