'Uberification' - the cloud as an agent for digital transformation

'Uberification' - the cloud as an agent for digital transformation
Analyst: William Fellows

Uber has revolutionized the experience of calling a cab. Open the app, choose the service, and use it. And Uber's not alone. Hailo, Lyft and others have similar services – it's disruption on an industry scale. Now, as the 'Uberification' of industries and work forces continues apace, we examine how the cloud industry can emulate or take advantage of Uber's model to increase the rate of adoption and to cement the role of the cloud as an agent for digital transformation. After all, Uber and its peers, as well as disruptors across the industry, are taking advantage of the cloud and cloud applications to innovate and digitally transform industries.

We believe that enterprise users, as consumers of third-party IT services and providers of services to their own IT staff, should be able to enjoy the same experience in service selection or delivery. The keys to Uberification are the user experience, the service model and business-model innovation. It is consumption-based, service-driven and on-demand, with a retail-model discipline. Sound familiar?


The 451 Take

Collectively, cloud management services enable users to apply cloud decision criteria in the selection of cloud applications and services. This includes (but is not limited to) cost, compliance, utility, governance and auditability. The point is that rules are applied to every application. The impact of this on the internal IT operating model is considerable, because it addresses many of the adoption issues with the cloud. Because it is a software-defined model, users do not need to physically touch everything they want to deploy. Besides individual connections to services, direct connection hubs such as Equinix or Interxion that federate a large number of services will mean that, on balance, availability goes up and latency goes down. At a high level, it will mean that users begin to move from compliance in selecting multiple individual services, to risk assessment in selecting federated services to meet a requirement ‚Äì with the knowledge that cloud management services has this covered. Removing barriers to scaling applications can allow product and marketing teams to take calculated risks and reach new markets before opportunities are lost, as well as allow new employees to hit the ground running with access to the applications they need from day one. But this flexibility needs to be controlled, or else companies risk receiving a bill they can't afford from an economic, governance or security point of view. 

Context

In six years, Uber has become the world's biggest car company that owns no cars. Its latest round of investment values it at more than $50bn – roughly the same value as Amazon's AWS unit after it published its numbers. The company is hiring Google engineers and Wall Street bankers alike (and is known as 'Goldman West' in some circles). Uber is changing the economics of car ownership, and is also set to disrupt the logistics sector by delivering things (Uber Rush) as well as people. But there are disruptors in all industries. Think about Airbnb: the world's largest hotel company that owns no hotels – find the city, review the listings, choose the accommodation, and book it. The enablers here are by and large the cloud and cloud applications (with thanks to Emergence Capital Partners).



Consider the world pre-Uber, which was hardwired. Taxi firms could only hire licensed drivers, and then leased them vehicles. Regulations governed bookings and pickup rules, and fare-setting. Customers were effectively held for ransom. People didn't even realize there was a better way – then Uber came along. Couldn't the same shift happen in IT?

To be sure, the 'old industry 'is fighting back. Regulators in cities (or in some cases, countries) are taking on Uber and its workforce practices. Some municipalities are creating their own Uber-like services. But this is a side show. Just as the cloud is disrupting the existing major market players that are trying to fight back, the genie is out of the bottle – and it's not going back in.

Uberification and cloud management services

In the Uber world, passengers are connected with drivers. Uber manages a network of drivers and passengers via an app, and it brokers options. Uber owns no cars, but provides the right car to meet the right need. It offers what we might think of as single- and multi-tenant options – UberX and UberPool. It even supports 'surge pricing' – burst pricing in a dynamic pricing model where demand is high.

It is our belief that cloud management services can, like Uber, help enterprise IT users navigate to their destinations by improving their ability to find, access and use cloud services. They can help answer a variety of questions:

- What tools can help me implement a digital infrastructure strategy?

- How do I make internal services as flexible as an AWS or Azure?

- How do I make our business look at us like a service?

- Am I paying too much, and what are the other options?

They can also help users achieve business outcomes from technology inputs. There are a wide range of cloud management services available – a comprehensive segmentation of this market is provided in our recent Cloud Management - Components and Service Delivery Market Map 2015. Here we will consider a handful of them.


Decision engine

Cloud service brokers (aka cloud brokers) have been the subject of much industry discussion. The first thing to clarify is that this is not about financial brokerage. While operators may be able to enjoy some arbitrage as they aggregate services on behalf of customers, financial arbitrage is not the organizing principle here. It's about matching workloads and resources. A cloud-broker function provides access to multiple cloud suppliers, giving users access to a wider range of venues and services than they would ordinarily be able to take advantage of.

A cloud broker can also take care of aggregation, integration, fulfilment, security, compliance, auditability and governance. It can apply rules to every application. It can also take care of other complex tasks such as API handling, configuration management, and resource-behavior differences. A cloud-service broker can be externally hosted, or used internally by the IT department as it becomes a service broker and service supplier to its own organization.

A cloud broker is the decision engine empowering best execution venue (BEV) strategies. Users expect to be able to make decisions about how and where to run applications and tasks, and source services, based on workload profile, policies and SLA requirements. As the worlds of outsourcing, hosting, managed services and the cloud converge, the options are growing exponentially. BEV strategies will enable users to determine which services are right for their specific needs.

A decision engine provides a data-driven way for organizations to select and optimize resource and service choices based on the particular need of the application or workload. It should surface pricing, packaging and availability options. If, for example, a user requires a 99.95% SLA, a decision engine can automatically send jobs to a public cloud such as AWS. It can also access services with a higher SLA if specified. If the cloud is the on-demand version of computing, brokering is the on-demand version of IT procurement.

Transformation engine

A transformation engine can help customers plan for moving from a current state to a desired state with integration and migration services. Given the investments being made, success for cloud-service providers will depend on their services being destinations – not only for new application deployments, but for existing applications (or parts of), and the re-platforming of applications and servers.

This is the opportunity that migration and integration companies with transformation-engine services are targeting. It's true that today's migrations are expensive and difficult – just imagine if they were free and easy. There's certainly an innovation opportunity. Every application has a best execution venue. Some are mature, others are evolving, but much of it is headed toward 'the cloud.'

Consumption management and optimization

Without exception, cost is a driver for using the cloud. Ensuring that the benefits are ongoing and realized will require the use of tools for cloud cost and spend management, and consumption management and optimization. The organizing principle here is that economic pressures and the rise of the cloud have IT departments thinking more like businesses, and looking to turn themselves from cost centers into ITaaS-delivery organizations. As such, they are seeking more comprehensive price-forecasting tools to plan capacity requirements. Moreover, these tools could potentially aid IT teams as they look to move from system management functions to account manager roles, in order to service users' needs.

Consumption planning, optimization, measurement and chargeback are increasingly becoming preconditions for launching a cloud initiative. Runaway costs are a real fear for many organizations, and end users are seeking more predictable pricing models. In fact, a new term has been coined – bill shock – which describes the moment when a CFO receives a cloud invoice, only to discover that an errant application or a spike in demand has created a huge financial liability.

Tools to measure quality of service that provide increased transparency of costs and performance are important in enabling consumers to make a realistic evaluation of delivered business value. Resource consumption has, of course, been metered for decades on mainframes for timesharing, so it's hardly a blue-sky industry. It's little surprise, then, that it is the vendors in this group that are enjoying the greatest current revenue and investment opportunities.

Cloud Price Index

The Cloud Price Index – 451 Research's industry benchmark of the market price of the typical cloud Web application in public and private cloud deployments – was created for exactly this reason, to aid consumers and suppliers with the transparency needed to assess value. It can help end users assess the relative cost of doing things in different kinds of hosted and on-premises environments, and whether they are enjoying a dividend versus the market rate – or if they're paying a tax ('am I paying too much?').

>>>Learn more about our Cloud Price Index!<<< 

Conclusions


Uber, Airbnb and others are using the cloud and cloud applications to disrupt their industries; but at its core, it is being used as the means of production to make a profit. We are still waiting for the cloud Uber app. Better access to cloud services will enable companies to accelerate the use of the cloud as the means of production and to increase profits. No one vendor or any one approach has a leading position here. The market is in its infancy.

However, the cloud is quickly becoming the enabler for industry disruptors, as well as the agent for digital-transformation strategies (the new business-process reengineering). This category of services may not be very meaningful in absolute revenue terms, but the change it is driving is profound and will be long lasting. Successful approaches will be those that can deliver new user experiences and service models from a technical point of view, but at the same time, support innovation at the business-model level. Brokering across multiple service and supply chains will be table stakes.

Becoming a 'cloud first' organization will require a full set of cloud management services tools, which is why so many suppliers are offering all of these capabilities. However, not many users are at this point of maturity yet. As the market evolves, current momentum in terms of revenue and investment into this sector is strongest in the consumption management and optimization sector where results are real and tangible – cost, utility and economics.

ROI is king of this castle right now. There are fewer measurable benefits for the other cloud management services. The current trend is for the major suppliers to be using a number of partners in each sector here to determine what the opportunity is, and what domain expertise each has. Ultimately, many point players will be acquired as major vendors assemble their portfolios.

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