More buying, less building in The Age of Consumption

The following is an excerpt of 4Sight, 451 Research's newly-released research framework. In the coming months, we'll be releasing a series of Spotlights on 4Sight and its major themes--Invisible Infrastructure, Pervasive Intelligence, Universal Risk and Contextual Experience.

William Fellows, Founder & Research Vice President, Cloud
John Abbott, Founder & Distinguished Analyst

Cloud has moved beyond being simply a technology and has transformed into a way of doing business. Enterprises can increasingly consume IT without the constraints of having to build and maintain its underlying infrastructure. Opportunities for service providers are seemingly boundless in this new age of consumption, but the rising tide will not lift all boats.

Driven by the cloud's consumption-based, service-driven model, the principles of Invisible Infrastructure are already profoundly reshaping the IT and communications landscape. Over the next decade, they will affect the full range of infrastructure elements, including hardware and software, hosting and managed services, networking and telecoms, and datacenter technologies. Technology consumers are demanding infrastructure that 'just works' – instantly available yet always invisible, operating and scaling regardless of specific requirements, and billed and metered in the manner the customer prescribes. Successful service providers – whether internal IT departments or external suppliers – will be those that can deliver an 'invisible' experience to clients across a growing spectrum of increasingly sophisticated workloads and applications.

Invisible Infrastructure: The Age of Consumption

Software automation: first, last and always

Central to the proposition of providers and partners delivering services and infrastructure is, as always, the core tenet of the original cloud computing revolution: software automation, first, last and always. Service providers of all types have to automate service delivery and process – infrastructure is an afterthought at this point – and continually improve their speed and efficiency of reliable, repeatable, profitable services.

It's the prefix to the demise of actual IT infrastructure as a value proposition. The focus is climbing always higher up the stack, as the basic assumption becomes that IT is always on, always available and always where you need it. It still requires operators and equipment, but getting access to a server, storage or even a full-blown, instant-on development platform is as easy as turning on the tap for a glass of water at this point.

It can be as cheap or as expensive as the buyer likes based on preference alone. It will (almost) never fail, and it requires the user to do nothing but make their own use of said IT utilities. Moreover, in the most beneficent paradox of economics, the cheaper a basic good or service gets, the more of it there is. Commodities become ubiquitous, and as infrastructure sinks into invisibility, what providers choose to do with it and how they deliver it becomes paramount.

At a high level, the abstraction of infrastructure by hyperscalers is now almost complete. This near-total automation of IT resource and service delivery has brought the consumer retail experience to IT. AWS was developed to provide a services infrastructure for Amazon.com (not as a way to sell spare IT capacity to customers), and it brought this disruptive innovation to a wider market with S3 and EC2 in 2006. In barely a decade, the cloud has become the benchmark for IT, and AWS is its lingua franca (at least for now). The impact has been profound, because in today's world, it only takes a good idea to enter a new market – not new infrastructure.

The rapid rise of the public cloud and the broader as-a-service consumption model has reshaped the way all organizations – be they Fortune 10 companies or 10-person startups – think about IT broadly, and infrastructure in particular. There are now real alternatives to building and operating a datacenter (or computer closet), or having someone else do it for the company. Why wait weeks for internal IT to provision the physical infrastructure for new services, when it can be spun up rapidly in the cloud at the click of a button?

Public cloud: expanding the use cases
Having acquired a taste for the public cloud via bursty/cloud-native apps and test/dev use cases, IT organizations are now evaluating other use cases this model can apply to. Should internal IT resources (and investment) continue to be used up on legacy or lightly used 'long tail' applications/workloads, or those that merely 'keep the lights on' versus actually differentiating the business, when they might operate more efficiently and/or at lower cost in public cloud environments?

As organizations plot a path to digital transformation, the process will involve decisions about which current applications/workloads are candidates for movement as-is to cloud infrastructure environments (lift and shift), modernization and refactoring for the cloud, transition to SaaS-based consumption or outright retirement.

At the very least, organizations now have the option to focus their own IT initiatives on the things that will help differentiate their businesses, and shift everything else to a SaaS provider or external cloud. In other words, the future is hybrid. But even for those profit-generating tasks, the massive projects that were previously a drain on scarce capital can be replaced by cloud-based alternatives on an opex-friendly, pay-as-you-go basis.

This doesn't necessarily guarantee that everything ultimately moves to the public cloud, far from it. Broader sociopolitical forces will loom large over the next five years. The US retreat from the global stage, increased Chinese influence, Europe's role, data protection, nationalism and national security concerns could have specific national, regional or global implications and may act as a brake on adoption, leading to a Balkanization of service providers – or as-yet unknown opportunities for other kinds of providers.

Looking ahead: the next 10 years
In the short term, more than 90% of organizations will be using some form of the cloud, with the balance of IT deployment tipping toward off-premises within two years. At the same time, organizations are pursuing more deliberate cloud and hybrid-cloud strategies. The pace at which new cloud services are being created and the complexity of mechanisms available – especially in relation to cloud infrastructure pricing, delivery and consumption – suggests a higher education in cloud economics will be needed for organizations to operate them efficiently and plan for future requirements.

As a result, the need for consumption management and cost optimization across deployments becomes a key requirement and the use of the cloud by financial administrators will increase. As of January 2018, AWS had 360,000 SKU items for purchase, Azure had 19,000 and Google 10,000 SKUs. A sea change in attitude toward the use of public clouds suggests the industry is only now at the beginning of a wave of mainstream adoption – with the majority of opportunity lying ahead.
Cloud-first strategies have already become the de facto IT strategy for new apps at most enterprises. As service providers (whether internal or external) become brokers of cloud services, cloud management platforms have become established for service acquisition, cloud tasking and cloud service broker enablement.

In the medium term, with most organizations now fully engaged in public clouds, new tools are removing the complexity of management and networks are becoming more software-defined. Telcos and cloud service providers are combining to deliver network as a service using SDN/NFV and virtual network functions – is this the opportunity for an 'AWS of networking' to emerge?

In the long term, the cloud will disappear as a separate IT category. IT staff are now innovating for the business rather than keeping the lights on, focused on service assurance and optimization, and the integration of new technology (MI/AI, sensors, nanotech) into business processes and customer experience.

Persona-based service delivery is taking enterprise IT toward the consumer-grade tech experience. When it reaches 21, AWS will be more valuable than Amazon.com. By this time, sector consolidation will bring cloud suppliers, telcos, service providers and distributors together. They will vertically integrate supply chains and tighten their grip on user and object data. The winning providers will operate like 'public utilities,' but not be subject to regulation.

‘The Age of Consumption’ is the theme for this year’s Hosting & Cloud Transformation Summit (HCTS), taking place September 24-26 in Las Vegas. HCTS is the premier forum for executives in the hosting, cloud, datacenter and managed services sectors, and the agenda is carefully crafted by 451 Research analysts and industry experts to provide timely, actionable insight into the competitive dynamics of innovation. Learn more.
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