Cost-cutting pushes innovation

Jay Greene on Cloud Computing May Be Hampering Tech Spending

The transition to cloud computing – at the current snail pace doesn’t warrant ‘transformation’ rhetoric – may be getting a goose because of tightening finances in the corporate world. A time when the purported risks of cloud computing are moderated by companies hungry for cost-cutting. And that may be part of the slow-down in tech spending right now.

As Jay Greene writes in the WSJ,

Hesitance [sic: hesitancy] among chief information officers to commit to long-term hardware and software purchases may reflect the gradual shift from corporate data centers to so-called public cloud offerings from companies such as Inc. and Microsoft Corp., Deustche Bank analyst Karl Keirstead wrote in a research report.

“It is entirely plausible that this is having at least a marginal impact on the desire of large enterprises to sign material and multi-year commitments to on-premise technology suppliers,” Mr. Keirstead wrote.

Gartner research chief Peter Sondergaard made a related observation at the recent Wall Street Journal CIO Conference, noting that budget pressures are pushing corporate technology managers to take a close look at their options.

“I think many [CIOs] have benefited from pressures in central IT budgets, in that it has created opportunity for looking at different alternatives,” Mr. Sondergaard said.

Take Ted Ross, CIO of the city of Los Angeles. He needed to upgrade the technology that powers the city’s Business Assistance Virtual Network, the site where vendors bid for projects from various city agencies. Ross considered buying new blade servers to host the site.Instead, he decided to run the site on Microsoft’s Azure technology.He’ll halve his costs, and the migration should take four to six weeks, he said.

“It really seems it’s more judicious to make the investment in the cloud,” Mr. Ross said.

The winners in this foot race? Amazon AWS is the market monster, with Microsoft a strong #2 with Azure and the company’s productivity products. Google is perceived as a trailing #3.

But the larger market of SaaS players are going to benefit from this windfall, and the more traditional enterprise hardware and software players – HP, SAP, and the like – will be facing increasingly strong down drafts in this turbulent and accelerating market.

Originally posted at on 17 February 2016.