by Peter Burrows
Public cloud providers like Amazon, Microsoft and Google may be destined to dominate the corporate IT world, but their final conquest is a long, long way off. That much was clear after spending a couple of days with some big-time CIOs.
I attended the spring meeting of the Open Networking User Group (ONUG), a group that represents corporate enterprise technology buyers—from the largest corporations in the global economy—with a combined IT purchasing power of over $100 billion per year. The main topic of the conference was to discuss how these companies can move to so-called hybrid clouds, with applications residing either on their own carefully-built private clouds or on commercially available alternatives such as Amazon’s AWS and Microsoft’s Azure. Judging from my not-for-attribution chats with some of these IT chieftains, this journey is barely underway. One executive with a billion-dollar annual budget says that while he’s got a number of pilots underway, “zero percent” of his applications currently live on the public cloud.
It’s no surprise that these big financials are taking their time. They face gnarly compliance, legal, and regulatory requirements that one-size-fits-all public cloud offerings are often not equipped to handle, and the damage to a corporation’s brand from an IT snafu – say, a lengthy outage, or God forbid, the hacking of customers’ accounts – is huge. Plus, there are cultural pressures. If you have anything close to a $1 billion budget, you’re used to doing things your own way. And who wants to give up budget, or potentially have to lay off workers once you’re outsourcing work to the public cloud providers?
To be clear, there’s little debate about the need to move to some kind of cloud. In a poll taken during the conference, one quarter of respondents said they planned to shift more than 50 percent of their infrastructure spending to the cloud over the next three years. That correlates with quarterly data from IDC. In the first quarter, spending on network switches, servers and other equipment for use in cloud deployments rose 9.2 percent, while sales of such gear for traditional data centers declined by the same amount. “We’re in the business of selling jeans. We’re not in the business of building data centers,” said Vismay Thakkar, senior director of IT for Gap Inc. during one of the panels. “Gap has adopted a ‘cloud-first’ mantra to move as many of its 50,000 applications to the cloud as possible,” he said.
The open question is whether those dollars will be spent on custom-built private clouds, or paid out to AWS and other public cloud providers. Spending on private clouds is growing faster currently, according to IDC, but ONUG members are betting that will change. In another poll during the conference, 71 percent of respondents said they had no plans to build any more data centers of their own after 2020.
Even if it costs more to run an app on the public cloud—which it often will, judging from pricing trends in recent years—it’s worth it given the stream of new capabilities and increased efficiency and flexibility in handling IT jobs. On average, an IT engineer at Google oversees 200,000 servers, versus just 200 or so for his or her counterpart in a typical corporate IT shop. Or there’s this: While it takes a few mouse clicks to order additional capacity on AWS or Azure, it still takes 42 days for a company to order a server and get it running in a data center.
So what’s the hold-up? As always, the devil is in the details. So, last fall, ONUG’s board created a working group to define what public cloud providers needed to do to win more of its member companies’ business. They sent a wish list to Amazon, Microsoft, Google, and IBM, and for the first time, invited them to speak at their conference. Of the big four only Google was unable to present. Despite recent comments about the increasing popularity of its public cloud with large enterprises, only 20 percent of ONUG Community survey respondents have applications running on Google’s public cloud, compared to 33 percent for Microsoft, 50 percent for IBM, and 70 percent for AWS.
The presenters earned kudos from ONUG members. Rather than give a canned sales pitch, they spent the time addressing the specific items on the wish list. Microsoft distinguished engineer Ulrich Homann seemed particularly anxious to work with customers. No surprise there. Microsoft has decades of experience catering to big enterprises, and has every incentive to woo customers that aren’t ready to turn over their entire IT shop to the public cloud. While revenues from Azure rose 93 percent in the first quarter, Microsoft remains a distant second to AWS. “We realize the cloud is more than just AWS and Azure,” Homann told attendees, before walking through each of main items on the ONUG wish list. “We will be wherever you need us to be.” For example, Microsoft is creating a suite of technologies called Azure Stack that companies can either buy or rent from other cloud providers, if they for some reason don’t want to use Microsoft’s Azure cloud offering.
Amazon’s Adrian Cockcroft, vice president for cloud architecture, focused more on how AWS was already solving some of ONUG’s concerns. “Overall, I think AWS products and programs address many of them pretty well,” he said. For companies worried about their ability to execute a smooth migration to AWS, he pointed to Amazon’s partnerships with consultants such as Accenture. For those not convinced of the ROI of moving to the cloud, he suggested a meeting with someone from the AWS cloud economics team. “We’ve been turning the crank [on improving AWS] for ten years, so I’m interested to see where people think there’s still friction.”
While attendees were generally impressed with his comments, one major fear remained: would they find themselves locked into AWS or one of its rivals. For decades, many of these executives have been complaining of having to buy proprietary software and equipment from Microsoft, VMware, Cisco Systems, and others. As of now, each of the cloud services is essentially proprietary as well. Each locates its data centers differently and has its own set of application programming interfaces to connect with client’s applications—just two of many reasons why it’s difficult to shift work between different clouds.
In a panel to discuss the vendor’s presentations, executives said they needed the cloud providers to work with each other to create more common standards. “They are innovating at an amazing speed, but this could all get very difficult to manage” if customers have to become experts in each of them, said Carlos Matos, senior vice president of Infrastructure Automation at Bank of America.
One more reason to “start small and learn” when inching toward the public cloud, said Shafeeq Shaikh, an IT executive with GE Digital, General Electric’s industrial software company.
Peter Burrows is a freelance technology journalist and content creator. During a 22 year run at Businessweek and Bloomberg News, he covered marquee companies including Apple, Cisco, Hewlett-Packard and Microsoft. Many of his hundreds of stories dealt with the evolution of enterprise computing and carrier networks, including the rise of the Internet in the 1990s, cloud computing in the 2000s and SDN and NFV this decade. Burrows wrote “Backfire: Carly Fiorina’s High Stakes Battle for the Soul of Hewlett-Packard”, the unauthorized story of Fiorina’s failed tenure at HP, and co-wrote Businessweek’s award-winning memorial issue to Steve Jobs in 2011. Burrows has appeared on PBS News Hour, Charlie Rose and Bloomberg West. Since leaving Bloomberg in 2016, he has written for publications including MIT’s Technology Review, and provided consulting and writing services to a variety of tech-related firms.