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Enterprise Cloud Adoption Is Changing the Playing Field

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Cloud computing has played a starring role in the technology press for the past 2-3 years, but it’s now moving from the haven of startups and random corporate side projects seeking flexible and cheap computing on Amazon’s (s amzn) Web Services to enterprises figuring out how to use on-demand compute capacity to change their IT cost structure and eventually link their internal applications to public clouds. So get ready for another round of acquisitions and maybe investments.

IBM (s ibm) today purchased a cloud computing startup called Cast Iron, that helps tie internal software to applications running in the cloud, and Intel (s intc) contributed to a $40 million funding round to an infrastructure-as-a-service provider’s first round of funding. Both investments are aimed squarely at helping enterprise buyers adopt cloud computing by addressing some of the shortfalls that have so far kept enterprise IT from doing so.

One reason IBM was so keen on Cast Iron is that it has three different business offerings: one that links on-premise apps to other on-premise apps, one that links on-premise apps to the cloud and one that links clouds one another, said Promod Haque, a managing partner with Norwest Venture Partners, a Cast Iron investor. He noted that IBM liked that Cast Iron wasn’t focused on one small aspect of the cloud computing opportunity, but could help enterprises support apps across a variable environment.

That’s a wise move, as enterprises aren’t going to hop wholesale into the cloud. CA (s ca) has also recently decided to acquire several startups aimed at performing a similar support function for corporate customers trying out infrastructure, platforms or even software as a service. Most enterprise customers will have a strategy that covers on-premise clouds with other service providers, be they infrastructure providers like Savvis or software such as (s crm).

Backing up the internal cloud idea was a note I received today from a Deutsche Bank analyst that said enterprise IT buyers are now trying to think in terms of virtual machines rather than servers — an admission that terms associated with virtualization and cloud computing are infiltrating the vocabulary of enterprise IT buyers. It also a boon for Cisco’s (s csco) Unified Computing Systems gear so far, according to the note.

Our industry contacts note that Cisco has meaningfully changed the competitive dynamic, especially versus HP, by discussing price quotes for the Vblock package in terms of number of virtual machines (typical quotes in the 1000s of VMs) instead of in conventional terms such as number of x86 blade servers, number of switches, etc. We note from our first-hand experience in this topic that large enterprise CIOs are more receptive to engaging in dialog involving upgrades to their datacenter infrastructures on a ‘number of virtual machines’ basis than conventional server centric metrics.

The shift toward virtual machines on the hardware side is also joined by the rise in platforms as a service — such as Microsoft (s msft) Azure or Google’s (s goog) AppEngine — aimed at enterprise customers. Last week Salesforce and VMware launched their VMforce cloud with a bang providing reluctant enterprises with an easy on-ramp to multitenant, on-demand computing, without them ever needing to care they were buying access to cloud computing rather than a platform for home-grown apps (GigaOM Pro sub req’d).

The adoption of true on-demand computing and enterprises buying into the platform and infrastructure-as-a-service models will change the services demanded of the large technology vendors. As those vendors adapt to their customers’ wants, expect them to continue buying cloud startups to meet that demand. The best positioned will likely have something easy to deploy (like a SaaS or an appliance) and will also recognize that enterprises need products that can work for the hybrid environments enterprise customers will likely have for years to come.

12 Responses to “Enterprise Cloud Adoption Is Changing the Playing Field”

  1. I believe you’re ultimately suggesting that customers evaluate their IT service requirements and look for areas where they can make changes that embrace “true cloud”, which is good advice. It aligns IT’s strategy with every other aspect of the business, where they often separate Core vs.

  2. There is an interesting sidetrack for enterprises in their journey to the cloud: Private Clouds. Private Clouds are being pushed by the traditional infrastructure vendors as they don’t make much money when enterprises shift their computing to players like Amazon. (Amazon uses largely very low cost boxes and Open Source software, which means low/no dollars to the leading infrastructure players.)

    Private Clouds are also a comfortable choice for IT organizations that have their own data centers, as they represent far less change and risk. However in the long run, I believe they represent a poor sidetrack for enterprises, as no enterprise will be able to run their own clouds as cheaply or effectively as a player like Amazon, and the costs and management issues will prove that out in the longer term.

    The faster that enterprises get started on moving some early apps to the public cloud, the better. They need experience in understanding the issues and how to solve them.

  3. Vendor consolidation, public/private hybrid pilots, pricing by usage, and ease of use services all point back to customer’s frustration about their lack of control over their IT vendors. Cloud is changing this for those that are strategically taking control of their architectures and demanding scaleable, commodity cost structures. The implication is that a big battle for control is shaping up between the tech big-boys trying to protect their profits and the leading enterprises trying to fundamentally change their IT cost structures. Randy Clark CMO Platform Computing

  4. IBM purchased Datapower the XML box people, and drove that one into obscurity by making better performing general purpose servers that can transform and validate XML better than any set of fixed gate arrays.

    The Cast Iron play is just another way to sell a slightly less flexible means of integration, having nothing to do with cloud computing, except for the weak and closed connectors that are often part and parcel of the CI box.

    They do somethings well, I have test the unit, and I still prefer integration servers with a full stack, such as Capeclear, OpenLink Virtuoso, Mule ESB. You get the picture.

    When you offer a “BOX”, you are saying to the management that writes the PO, “here, can you understand it when it is packaged like this?”.

    I Cast Iron exec responded to me in the affirmative when I asked, “why sell a box? Why not just run racks of servers running your BOX software, and sell the integration, which is what Snaplogic and Boomi do, essentially. Boomi is way better, functionally that CI.

    The CI box, the CI box
    like bagels and Lox
    Like Bagels and Locks. :)get it?