What is Happening? On 15 February, Amazon announced broad availability and new partners for Redshift, a Cloud-based data warehouse offering. On 4 March, IBM announced that all of its cloud services will be based on an open source cloud architecture. And, in a more low-key fashion, Dimension Data has been increasing sales emphasis of services offerings for managing their customers’ Cloud-resident workloads.
Viewed individually, each of the above items denotes a significant strategy by a major vendor in the Cloud IT market. Saugatuck’s view is that, taken together, the above items indicate how the overall market for Cloud IT is maturing and evolving.
Why is it Happening? The evolution of any IT market typically takes the form of trends in user/buyer requirements and propensities and/or in vendor/provider offerings and strategies. Currently, Saugatuck has observed three trends in the Cloud IT market which have significant implications for Cloud IT providers. The trends and their implications for vendors are:
- Increasing focus on differentiation. Motivated by competitive pressures and more sophisticated/experienced buyer decisions, Cloud IT vendors are increasingly focusing on differentiation of their offerings. Since users are increasingly adopting Cloud-based solutions, the number of Cloud IT providers continues to expand and competition continues to heat up. Functional differentiation is a conventional means of creating an advantage in a market. Such differentiation is illustrated by Amazon’s Redshift offering and by Dimension Data’s services (e.g., Tech Ops and App Ops) for management of Cloud-based workloads.
- Growing impact of price competition. When differentiation is not compelling and/or a vendor is not adequately articulating a winning value proposition, vendors typically resort to price as a means of winning business. However, a strategy of “race to the bottom” in pricing may yield short-term benefits for the buyer. But, it will eventually yield long-term financial instability for vendors. Occasionally a product strategy can be crafted which provides lower costs for the vendor and offers attractive function to the user. IBM’s adoption of OpenStack for all Cloud offerings is an example of such a strategy.
- Expanded partnering. Similar to differentiation, partnering enables enhanced offerings. However, unlike differentiation, partnering also provides expanded sales coverage and potentially greater market penetration. Amazon’s partnering with Birst, Cognizant, IBM, Informatica, Pentaho, Pervasive Software, SAP, etc. for analytics built on Redshift illustrates this trend.
Market Impact Having tracked and analyzed Cloud services development, emergence, expansion, and adoption since 2003, Saugatuck is in a good position to gauge most trends involving Cloud, from our original SaaS market analysis through the much more integrative platform and business process-focused offerings now spreading through markets.
The bottom line? Cloud maturation is becoming very predictable, and it looks to be following our original “four wave” model first published almost five years ago, in July of 2008 (658SSR, Enterprise Ready, or Not – SaaS Enters the Mainstream, 28July2008). We reproduce that original four-wave trend graphic in Figure 1.
Figure 1: Four Waves of SaaS/Cloud Evolution and Impact, 2001 – 2016
Source: Saugatuck Technology Inc.
If we consider the totality of developments characterized by the recent Amazon, Dimension Data, and IBM moves – along with many others – we can see how, in 2013, we are right on the cusp of developments and maturation predicted in 2008 to occur right about now. The key developments in Wave III are reaching maturity, and we’ve already begun to flow into Wave IV.
At this point, Cloud IT has reached a level of maturity that allows it to readily integrate with almost all forms of traditional IT systems and operations. To us, this suggests that Cloud today should be considered as a viable alternative to, or extension of, practically any type or application of enterprise IT.
For enterprise IT leaders: If Cloud is not relatively significant in your enterprise portfolio, you need to re-examine and reconsider your IT strategy. Cloud in all its forms is the enabler of massive savings and business improvements in Mobility, Analytics, Social Business, and is increasingly the best source of Integration across all these and traditional enterprise systems (1075MKT, Integration: The Glue of the Boundary-free Enterprise™, 25May2012).
For providers, especially ISVs: If you’re not “all-in” and offering Cloud-based capabilities or offerings, you’re losing market share. Saugatuck urges every provider of Cloud IT offerings to consider the above trends as categories of product and/or marketing strategies. Every Cloud IT provider should map out a product strategy which utilizes the above trends as foundational guides.
Saugatuck has published a wide range of ISV-to-Cloud guidance for our clients; see our Research Library for more. Access to our library is open to clients of our Continuous Research Services; non-clients interested in our research should contact Chris Macgregor at +1.203.454.3900 or firstname.lastname@example.org.