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Public Cloud Providers Are Causing a Tech Industry Climate Change Event

Talk to any CEO of a Global 2000 firm about their IT staff, and most say they would fire the vast amount of them if they had another, lower cost, way to deliver digital value. Most of this thinking comes from the fact that large enterprise technology providers are oligopolies within their segments and use this market power to charge large sums for their products and services. In short, the global economy has been locked into a small number of very large technology firms that dictate not only pricing but, what a company can and can’t do, thanks to the limits of their combined feature sets. In short, CIOs have been locked into the same firms for 30  years. Enter the cloud providers. Cloud providers have been advocating the different approach CEOs want to hear, that is lower cost IT with agility plus tools to produce great digital outcomes, without the staff. CEOs see their new way, but CIOs see a choice of being locked in by either the old or the new.

More than thirty years ago, Dr. Robert Kahn and Dr. Vint Cerf developed the TCP/IP protocols and created the internet, the first massively open approach to IT. According to the McKinsey Global Institute, “the Internet accounted for 21 percent of GDP growth in mature economies over the past 5 years.” An open approach to IT has proven to be a major underpinning of a growing economy. For the digital economy, an open approach is even more important than during the previous business cycle.  

Yes, CIOs will try to control cost by arbitrage between cloud providers and IT suppliers to mitigate total lock-in and to gain features needed in their business. But without an OPEN approach to IT, the future of the industry becomes an innovation race. The arbitrage tool available to CIOs will be a major market disruptor during this business cycle as tech companies and cloud providers compete and innovate to gain their largest share of the Global $4 trillion IT spend, until someone wins the race.

Accelerated innovation and arbitrage is culminating into IT’s “climate change event.” It’s a delicate balance. If public cloud providers win the innovation race then CIOs may very well get locked in and legacy IT suppliers become the dinosaurs. If an “open-source” private cloud stack becomes available then CIOs may have greater control and choices to maintain an on-and-off prem solution provider ecosystem balance. But the public cloud providers have accelerated their innovation while there is no open alternative approach in sight. Case in point:

Google Cloud Platform, being far behind Amazon and Microsoft in large enterprise cloud services consumption, has a secret program to deliver connectivity services that will cost one tenth that of Cisco’s gear but ten times easier to manage without the need of all those network engineers and operational staff.

Virtualizing infrastructure, the solution that VMware first brought to enterprise-grade IT, is no longer sufficient to compete, as public cloud providers are now providing significant additional value above the hypervisor layer. For example, many are providing software platforms and services like data analytics, AI/ML, etc.  Amazon’s “Alexa as a Service” and other similar services provide a human-like bridge from AI systems directly to the customer.

The pace of innovation of public cloud “hyperscalers” put them in the pole position to branch into private/hybrid on-prem cloud deployments such as Microsoft’s Azure Stack. In the federal government space, AWS has started to place an AWS stack in private data centers, too, that connects into their public AWS services.

Are Cisco, VMware, HPE and Dell’s efforts in the lower part of the IT stack enough to compete against AWS, Azure and GCP or will the public cloud providers displace them?    

Are the cloud providers’ feature set cadence just too great for legacy IT suppliers to keep up with? Are the cloud providers on pace to win the innovation race which will mute a CIO’s arbitration strategy? In this new IT world, do we trade off being locked in by the old for a new set of tech giants that will present a new generation of high priced vendor lock-in to CIO’s around the globe? Once locked in and arbitration offers little choice  or options, will innovation slow and along with it global digital economic output? Would an open-source private cloud stack deliver greater options and choices to enterprise CIOs as they navigate and compete in the digital economy?

At ONUG Spring in Dallas on May 7th and 8th, we invited the following people to discuss the future of an Open IT ecosystem and the digital economy that depends upon it:

  • Marc Andreesen of A16Z and IT visionary and disruptor
  • Diane Bryant, ex GCP and United Technologies Board Member
  • Dr. Douglas E. Comer, internationally recognized internet pioneer and Distinguished Professor of Computer Science at Purdue University
  • Don Duet, previously Head of Technology Division, Goldman Sachs, and currently Senior Advisor, McKinsey & Co.

Join the world’s most insightful IT personalities as we debate and plot a new IT future for the digital economy at ONUG Spring in Dallas.

 

Author's Bio

Nick Lippis

Co-Founder and Co-Chairman at ONUG

Nick Lippis is an authority on corporate computer networking. He has designed some for the largest computer networks in the world. He has advised many Global 2000 firms on network strategy, architecture, equipment, services and implementation including Hughes Aerospace, Barclays Bank, Kaiser Permanente, Eastman Kodak Company, Federal Deposit Insurance Corporation (FDIC), Liberty Mutual, Schering-Plough, Sprint, WorldCom, Cisco Systems, Nortel Networks and a wide range of other equipment suppliers and service providers.

Mr. Lippis is uniquely positioned to comment, analyze and observe computer networking industry trends and developments. At Lippis Enterprises, Inc., Nick works with entrepreneurs evaluating new business opportunities in enterprise networking and serves as an independent investor and advisor.