The Cloud Revolution: Adapting to Changing Realities
Cloud evolution is facing pivotal truths. Explore the changing dynamics of cloud technology in the enterprise landscape.
Abhishek Singh, cloud transformation expert of Everest Group, uncovers the essential truths and trends shaping the future of cloud technology, guiding businesses toward strategic readiness in the ever-changing digital era.
“67% of enterprises believe they do not realize the expected value from cloud.”
When Everest Group published the above data point a year back, it created much controversy. With the public cloud market growing north of 20% year-on-year for the past seven years, this “value realization” question did seem like cloud denial (a colloquial label for any argument that questions the value of cloud). Soon, however, more data points started to trickle in around cloud economics, commitment vs. consumption, and change management.
See More: Why Choose the Hybrid Cloud Over Full Cloud Migration
Unmasking Cloud Challenges: A Closer Look at Enterprise Realities
For example, for the first time in three years, cloud price and cost pressures ranked as the number one challenge cited in the key issues study. Enterprise leaders ranked “adapting to evolving customer needs and business models” as the second most challenging aspect of their cloud journeys.
Another indicator of the cloud value struggle is the deceleration of growth among 20 top IT service providers in 2022, a trend consistent across all major industry verticals except energy.
The struggle is also evident in our conversations with enterprise leaders. One CIO of a U.S. manufacturing company admitted, “We failed in our first cloud initiative a couple of years back because we just wanted to move to the cloud without much thought about what it meant for the business.”
The CEO of a multinational life sciences company shared a similar story. “If we had a better idea of likely challenges, possible budget leakages, and compliance-related complexities in the beginning, we would have started with defining value from the cloud for our business and tracked progress made at each stage. We were overcome with unexpected costs and plan to recalibrate our entire strategy now.”
Similarly, the director of a U.S.based project management company shared, “After a multi-year digital transformation journey, we are currently hosted on a hybrid-cloud environment. Over the next 12-18 months, our key focus will be to streamline cloud infrastructure management, cloud cost management, and cloud governance.”
As these leaders attest, what we’re seeing is not so much cloud denial but rather a convergence of practical issues that any technology trend goes through in an enterprise environment. Every market witnessing heady growth needs its moment of truth to reinvent and pivot to the next phase. This moment has come for the cloud as a market. That is why I intend to share three truths about the cloud market:
1. Simply lifting and shifting applications from on-premises to public cloud is a Band-Aid, not a permanent fix.
In the early days of the cloud, large organizations achieved significant upfront value by offloading compute and storage redundancies to the public cloud. While the value was clear on Infrastructure-as-a-service (IaaS), complex workloads (combination of legacy and digital stacks – for example, insurance claims management) needed significant re-architecting of applications. virtualization and containers took the dysfunction of application and data architectures, wrapped them in a blanket, and swept them under the cloud rug. That is why — repeat after me — “cloud is NOT digital,” unless you deal with the question of the application.
2. Cloud is neither cheap nor cheaper
This is probably the worst-kept secret of the enterprise tech industry – the cloud is not cheaper and does not rid you of redundancy (you buy something but do not utilize it fully). The two basic cases for the public cloud we were all convinced of about ten years back. Cloud economics in a complex environment means multiple lines of spend accompanied by observability and change management challenges.
Price transparency and control is a challenge, leading to Total Cost of Ownership (TCO), which is at times higher than the pre-cloud days. The talent required to retrofit, change, and migrate also increased the cost of the cloud. Hyperscalers made it sound as if it was all self-service. In reality, it was not as seen in the thriving businesses that system integrators (Accenture, Deloitte, PWC, TCS, Infosys, and the like) have made out of it.
3. Generative AI will do to apps what the cloud did to infrastructure
This is a new question: Over the last ten years, so much has happened on the IaaS stack, but the applications stack largely remained untouched by innovation. If you see today’s large Applications Managed Services (AMS) stacks and the engineering behind it, things appear to be in a time warp. Generative AI and its potential impact on software development (code generation, model training, and impact on talent) asks the same question of the enterprise applications stack that the cloud asked of the infrastructure stack ten years ago: are you going to change or will you get eaten by this unforeseen change?
How Is This Likely to Play Out?
I have no crystal ball, but the above truths indicate impending change. Currently, GenAI and cloud are closely intertwined. One of the big questions around GenAI is its cost (enormous amounts of data processing are needed for it). Currently, original equipment manufacturers (OEMs) (the NVIDIAs of the world) and cloud hyperscalers are the only ones with the capital and processing power to do it. That is what is preventing the scaled adoption of GenAI.
However, there is hope that the cost equation of GenAI is optimized.
- OEMs produce exponentially cheaper processors.
- Enterprises collaborate directly with OEMs to implement GenAI for both micro and edge cases.
- Micro use cases precipitate adopting small language models (SMLs), significantly cheaper than large language models (LLMs).
If and when the above happens, enterprises will ask: Do I keep my digital strategy fixed on the cloud as a bedrock, or do I pivot to a differentiated GenAI strategy in walled-garden or edge environments? That is the future controversy that cloud players need to deal with. Will you fight it or embrace it?
What steps have taken to stay ahead in the dynamic world of cloud technology and future-proof your business strategies for the evolving cloud landscape? Let us know on Facebook, X, and LinkedIn. We’d love to hear from you!
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