As the Gigaom Research research director for cloud and analytics, Ashar Baig is always finding new “as a Service” offerings in the market. With the likes of desktop, security, disaster recovery, and printing all as a service, he has tallied over 60 offerings beyond the usual software, platform, and infrastructure as a service. Separately, a typical enterprise already has an average of 60 cloud products—including the likes of Salesforce, Marketo, Box, and Dropbox—in use across the company. I talked with Ashar this week on what these trends means for the enterprise and how they can best be negotiated.
Recognizing the direction of the market
Ashar doesn’t pull any punches on the direction or speed of the market change he sees. He’s a true believer in the cloud, which he defines broadly as, essentially, off-premises computing, though it is usually powered by virtualization. He goes so far to project that 95% of applications in the enterprise will be moved to the cloud within three years, or by 2017. For small companies, he expects that figure may reach 100%, and for larger companies the number will be lower. Very high performance, proprietary, and compliance-constrained applications will be the prime candidates to remain on premises. He sees the North American market as behind Europe in this trend, but he expects it to catch up, with that 95% penetration, by 2017.
Moving up the stack
The key trend for these cloud-based services, however, will be that they move up the stack from simple IT functions, with higher-level service level agreements to match. Thus, a company will not simply purchase backup or backup capacity, but it will contract for full business continuity as a service. SLAs will be based on the needed business metrics, such as full business continuity, and for that particular segment companies increasingly will not even charge for their services unless and until there is some sort of an outage to recover from.
Although the big IT and cloud services providers make up a first tier of providers, Ashar sees second and third tier providers, including new entrants, carving out a niche with vertical industry specialization. For example, he says he knows of at least a dozen small companies, typically started by investment bank IT veterans, that provide very specialized recovery and continuity services to the banking community in lower Manhattan. The better a provider knows the particular needs and practices of a narrow industry sector, the better it can differentiate itself from its more generalist competition. For the customer banks and traders, such industry knowledge allows them to offload more of the management responsibilities of maintaining their operations.
A danger in too many providers
With so many SaaS offerings, especially, already in use in the enterprise, there is no practical way to put the genie back in the bottle. Many of these applications will simply have to be managed in terms of security, access, compliance, data standards, and the like.
Still, Ashar sees a danger in the enterprise relying on too many providers for the proliferating “as a Services”, especially, however. Rather than diffuse the enterprise’s buying power across dozens of vendors, he recommends that enterprise buyers settle on five top service providers to become preferred vendors to the firm. That way, each provider can be a strategic partner that better understands the business of the enterprise—and one that has more incentive for responsiveness, as well.
Bundling is making a concentration of suppliers more practical
The service providers have jumped in on this proliferation trend as well. Providers ranging from Accenture and IBM to Rackspace and CenturyLink have been adding more and more “as a Service” offerings to their portfolios. This makes it easier for an enterprise to concentrate is business with fewer providers. Ashar recommends that service providers be judged not only by depth of portfolio, but also by the level of their SLAs, when being considered as preferred providers.
Extending the firewall
However dramatic a shift to the cloud Ashar sees, he stresses that the business impact will in some ways be quite limited. He expects cost savings and more responsive service levels will both provide improvements over typical, traditional in-house delivery. Conceptually, the impact is simply one of extending the firewall farther outside of the physical business location.
Among the research Ashar’s group has upcoming in this area is:
- A Market Landscape report on security in the cloud, particularly for the multitude of SaaS applications, and
- A Sector RoadMap report on the Desktop as a Service.
The Market Landscape report is scheduled for publication in May, and the Sector RoadMap will be released in conjunction with Gigaom’s Structure conference to be held in San Francisco on June 18 and 19.