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Summary:

Many vendors pushing so-called enterprise cloud computing are really targeting those businesses who develop lots of their own software. But there are a whole lot of — maybe too many — companies to whom that description doesn’t apply.

I have been discussing, writing about and working on cloud computing for almost seven years. It takes a lot to shake my basic beliefs about the importance of cloud computing, and how its adoption will radically change — heck, has radically changed — the IT industry. However, every once in a while something happens to remind me that there are more nuances to cloud adoption than any one person, or even group of people, can fully ascertain.

Most recently, I was reminded that “cloud adoption” isn’t a single path, and we as industry practitioners (vendors, service providers and customers alike) have to be very careful how we generalize the use of cloud computing in business.

About three months ago, I was asked to speak at the Insight Integrated Systems Real Cloud Summit in Long Beach, Calif. IIS is a value-added reseller of hardware and software solutions, and they kindly asked me to come speak about cloud and its affect on operations models. The RealCloud audience was primarily medium size businesses (between 500 and 10,000 employees), and I jumped at the chance to meet a segment of the IT industry with which I rarely interact.

About half way through my talk, which was a variation of the “Big Rethink” and “Operations in a Cloud World” messages I’ve covered for other audiences, I came to a point I thought was very important to most software developers. On a whim, I asked this audience how many of them saw custom software development as a key part of their IT strategy. I expected about half the room of 100 or so to respond positively.

One hand went up at the back of the room. (It turns out that was someone from NASA’s Jet Propulsion Laboratory. Well, duh.)

Boom. Any discussion about why developers were bypassing IT to gain agility in addressing new models was immaterial here. The idea that Infrastructure as a Service and Platform as a Service were going to change the way software was going to be built and delivered just didn’t directly apply to these guys.

I came away from that experience with a new appreciation for several things that I’m working hard to not lose sight of again.

1. It’s the services, stupid

Try as I might, I struggle to remember that cloud computing is more than just recasting IT to better meet the needs of software developers. Part of that is the fact that I live and work in the Silicon Bubble … er, Valley … and work on a product that targets the intersection of IT operations and software development.

But some of it is the insistence that companies selling infrastructure and platform services are targeting “the enterprise,” when in fact they are not and cannot and should not target every enterprise. What AWS and Pivotal and Dell and others are largely targeting is enterprises that are developing software services.

I define software services in this context as software that is designed to be run and accessed over the network, and is built for a dynamic set of consumers (human and/or other software). Certainly if you are building an application for personal use, or for the use of your immediate department, you can leverage cloud, but that’s not the major market opportunity.

So, if you are a business selling cloud platform or infrastructure technologies or services to the enterprise, you likely aren’t wasting much time on these medium businesses that aren’t doing software development. So-called “virtual private clouds” can be used as computing pools in any business, but if they don’t serve developers, they don’t revolutionize the use of IT at nearly the scale as if they did serve developers.

Now, if you offer a software application as a service (aka SaaS), that’s a different story entirely. Common business systems and platforms are where the opportunity is with these mid-sized businesses that don’t write much code.

2. Most medium-sized businesses (and probably many large corporate IT departments) are ill staffed to handle the change in operations models that cloud will drive

The scary thing about the transition from a server- or infrastructure-centric operations model to an application-centric model for businesses that don’t do software services development is how radical the shift in required skills will be from one model to the other. Most IT departments were created and staffed (from the client-server era on, at least) to do one thing first and foremost — make sure there are computers available on which to run software that the business requires.

Look at the IT staffs of most non-web businesses. One of the dominant skill sets that has been built up over the years is data center, server, network and storage operations. And, if you lump in operating systems and virtualization (which I consider part of the infrastructure, not the application software), system administrators.

In an application-centric world, deep understanding of switch and router operations, NIC and BIOS configuration, filer configuration, data center cooling and so on give way to understanding how application architectures can leverage the services offered by cloud providers and cloud platforms to combine connectivity, services, consumers, computation and data.

Since those skills are light in many of these organizations, it will probably delay movement from infrastructure-centric to application-centric operations models — which in turn will likely delay the realization of the value of cloud computing to those operations teams.

Furthermore, if the move to software application services increasingly occurs in these companies, it will likely displace many of these infrastructure jobs. The good news is that it will also create many new application-administration jobs.

3. If you aren’t developing custom services for your business, why the heck not?

Perhaps the most perplexing question to me, however, is why more hands didn’t go up in that room that day. As far as I can tell, the Internet and the power of mobile computing are disrupting every industry (except maybe certain face-to-face service industries, like beauticians or psychotherapists).

Heavy equipment manufacturer Caterpillar provides an online data collection and analytics service to keep track of equipment condition. Early pioneers in online learning platforms included several colleges and universities. Even political campaigns have gotten into the custom software act.

So, is it really true that no new revenue could be generated from at least some simple online service applications? Certainly the effect of mobile on your industry has to have been top of mind for the last five years or so, but what about APIs? Data analytics related to your products or services? Automating your supply chain?

Granted, some of these things might be becoming “standardized” enough to warrant acquiring the capability from a SaaS vendor. But, as has been said time and time again, shouldn’t IT do more than just keep the computers and networks running? Shouldn’t technologists add value to the business by identifying ways technology can expand the business?

That’s certainly not to say that custom software development is for everyone, but it certainly should be strategic for more that just the guys sending one-of-a-kind research instruments into space.

All of that said, I’d welcome your opinion. Do we really understand the differences between selling software services to mid-size manufacturers and selling infrastructure and platform services to online businesses? Should there be more custom software development in businesses that have focused on building data centers to support SAP?

As always, let me know in the comments below or at @jamesurquhart on Twitter.

James Urquhart is director of product for cloud management systems at Dell. He was previously vice president of product strategy at Enstratius, which Dell acquired in May 2013.

  1. Serge Meeuwsen Sunday, July 28, 2013

    Most IT departments of enterprises I encounter as a consultant (from financial service industry to discrete manufacturing and process industry) either have mobile as top of mind or simply finding better ways to run business applications. Some of them don’t even have the luxury of turning to the cloud (security). As such many are still coming to terms with virtualization. Those companies that do develop software (f.i. financial industry) are doing so to be able to reach increasingly mobile customers. I.o.w. building mobile storefronts to their businesses. Those in manufacturing simply buy the software they need to run their business and are concerned with deploying those on virtual platforms.
    In short, I’d have to agree with the statement that the Enterprise Cloud is something different for every Enterprise. Personally I don’t think custom software development is going to gain importance for those Enterprise that focus on running SAP (or whatever business app) in their datacenters. Those Enterprises however should evaluate whether they should continue to invest in their datacenter or ‘simply’ run SAP in the cloud…

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  2. I suspect you can get to the crux of matters if you ask people whether their IT organization is run as a cost center (measured primarily on budgets and deadlines) or as a strategic enabler for the business.

    Even at tech companies that build infrastructure, the IT departments are frequently treated as pure cost centers. In this environment, the work item discussion is usually around a prioritized list and some cut line. There is never enough money to go around, so once you get to the bottom of the “keep the lights on” activities, there is maybe 1 or 2 items that get funded.

    In IT, those items usually have some acronym like ERP, CRM, or HCM. The truly innovative stuff – no matter how small – is unlikely to get funded. So it sits there, perpetually a few items from being an Above The Line project.

    It might be interesting to see sales teams work with IT teams to get their projects funded. This implies MUCH longer sales engagement, so it is unlikely IMO for most teams, but it might bear the most long-term fruit.

    Mike Bushong (@mbushong)
    Plexxi

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  3. Given the explosion in Open Source software I wonder why anyone in IT would consider building software. Lashing FOSS together with legacy data or packaged software seems far easier than rolling your own. Doing that on AWS seems easier still.

    Mid market enterprises have far smaller IT organizations and they are far more overwhelmed by keeping the lights on. These are not the cloud customers you are looking for.

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  4. Giri Fox, RightScale Sunday, July 28, 2013

    I’ve been reflecting on this recently too, James.

    One of the dimensions to this is that software-developer users like script-based configuration management such as Chef and Puppet, whereas traditional enterprise infrastructure managers have a long tradition of virtual machine image management. Teasing this out further, if you assume an application is needing to scale horizontally and has been designed with a service-orientation, then script-based infrastructure management makes sense. On the other hand, in enterprises, if the application is barely-ever changing, and not subject to scaling events, and already has a nicely-run server, then there’s debatable value in migrating it to script-based management.

    This is another example of where cloud-era technologies shouldn’t be assumed to be a better (or even relevant) alternative to the status quo management practices of an enterprise.

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  5. Marco Meinardi Monday, July 29, 2013

    Maybe when IT will stop just being used just for supporting business and will become a true business enabler instead, then custom software development will become key to any industry to innovate and differentiate on the market.

    But you’re right, the infrastructure-focused current skill-set in the enterprise will slow down dramatically the adoption of cloud services. I believe one day they’ll all wake up and make a drastic move from their current in-house unsustainable data centres to consuming SaaS applications. This thanks to someone else who will try to make money by solving industry-specific problems and releasing specific SaaS applications… but again, this as long as IT will just be seen a something to support business and not the key driver of that.

    Yet much will remain to be done with regard to integration. All those SaaS pieces will eventually have to communicate with each other as well as to integrate with whatever will remain in-house, due to jurisdiction, security or whatever other reason. RESTful API developers welcome.

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  6. Brajesh Goyal Tuesday, July 30, 2013

    Great article James! My takeaway is that there exists a big market opportunity in mid-sized businesses for cloud management tools that are designed for non-developers.

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  7. Really good article James – and calls out a challenge with fast cloud adoption by medium businesses. Although SAAS is tempting, its tough for under resourced businesses to wholesale adopt the change. However there is a second option – a large proportion of existing apps can be migrated to the cloud using some of the newer cloud technologies (gaining dynamic, scalable and multi-tenant efficiency) so we’ll probably see this partial migration as a likely interim step for many of those businesses. {Full disclosure I work at virtustream which focuses on exactly this type of business and have a lot of customers who fit your description above} Skilled 3rd party cloud management can help the migration. Doesn’t change your conclusions above but will help the people in that room!

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  8. Could not agree more, James – great article

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