Cloud strategies for digital transformation

Frost & Sullivan’s surveys of senior IT management show that cloud adoption accelerated in 2014. More than 50% of US-based enterprises are now using public cloud to some degree. And while Europe is around a couple of years behind the US, infrastructure-as-a-service (IaaS) spending is still growing at nearly 40% and will exceed $10 billion by 2019.

Enterprises understand the economic benefits of a flexible, virtualised infrastructure and a shift in cost structure from capex to opex. Yet the market is responding in its own time – as with any new technological proposition.

CIOs wait to see proven business cases deployed by their peers, then approach migration in stages, based on immediate business priorities and other commitments.

Budget then has to be found and deployment challenges addressed in order to scale up. As a result, market progression is ‘lumpy’ and not as dramatic as vendors’ marketing suggests it should be.

However, a new sense of urgency is taking hold as enterprises face the implications of digital transformation. From an internal perspective, this means aligning the company’s resources and strategic direction to respond to exceptionally dynamic and unpredictable forces in the competitive environment.

>See also: 4 megatrends that will dominate cloud computing for the next decade

Cloud is a natural ally as it embodies these requirements. Flexible IT resources enable business model innovation, rapid go-to-market and services that run on top of products, as well as the ability to experiment and fail fast – and to continually optimise the performance of operations and applications at a cost that scales with growth.

Customer experience is the second dimension. Too many enterprises still have limited understanding of their customers’ needs and their interactions with the company – whether B2B or B2C. This knowledge gap is an opportunity for aggressive new entrants to move in with low-cost offers.

A data-centric philosophy enables these disruptors to mediate between buyers and sellers with real-time dynamic pricing, and to use data creatively for personalised marketing.

It falls to the CMO and lines of business to respond, which involves shifting some budgets away from the centralised IT department. Small but cumulative victories in ‘shadow IT’ and software-as-a-service (SaaS) have instigated this quiet shift of power relations. Digital transformation is now accelerating the trend as the distance between business goals and technology solutions continues to shrink.

Hybrid is here to stay

Disruptors are typically born in the cloud, but many customers are of a different generation. They value their existing profitable businesses and established processes, and not all will be amenable to virtualisation.

Instead, a so-called ‘bi-modal’ company invests simultaneously in the maintenance of (typically declining) cash-cows alongside new growth businesses.

Many large but slow-moving companies want to disrupt their own or adjacent sectors and have set up internal innovation units as internal consultancies for lines of business and product development.

In less committed organisations, such a group may quickly become marginalised as being too far removed from the serious business of making profits. Others are benefiting from a certain caché and empowerment within the organisation.

The strategies of leading cloud services providers reflect this reality. Recent statements and acquisitions show they now acknowledge that enterprise environments will remain hybrids mash-ups of public, private, hosted, managed and on-premise, bare metal, containerised and virtualised environments, for several years to come.

Competitive differentiation therefore lies in integration and management across traditional systems and multiple cloud-based options. In doing so, they hope to ease enterprises towards migration, without forcing traditional applications into a cloud environment they were never designed for.

Strategic shifts of leading cloud services vendors

Cloud service provider

Strategic action



Acquired Blue Box

June 2015


Resale agreement with Microsoft Azure

July 2015


Multiple acquisitions: Tier 3, AppFog, DataGardens, Cognilytics, Orchestrate


IBM, CenturyLink and Rackspace couldn’t be more different in terms of size, market power, positioning and history. Yet all three are positioning to address the needs of the hybrid enterprise.

IBM itself is itself a bi-modal exemplar and is leveraging its heritage to act as a broker between the customer’s public and private clouds and traditional environments. Its acquisition of Blue Box, announced June 2015, followed a cloud spending spree that included its Bluemix platform-as-a-service (PaaS) solution and acquisitions of SoftLayer (IaaS) in 2013 and Cloudant (DBaaS) in 2014.

Blue Box manages workloads for private clouds built on OpenStack as well as providing a single, remote management interface across hybrid environments. The move therefore fits with IBM’s objective to get Fortune 500 companies on the cloud by whatever route is most appropriate.

IBM has the resources to make bets on practically any cloud service business model. Rackspace, in contrast, is inclined to focus on its core competence in customer service. The provider of hybrid cloud managed services has always emphasised its ‘fanatical support’.

Under new CEO Taylor Rhodes, the company has reduced its role as a co-founder of Open Stack to focus more on technology-agnostic services and higher value support, such as devops automation. Complementing its capabilities in OpenStack and VMWare, in July it extended its relationship with Microsoft to include resale and support for the Azure PaaS.

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CenturyLink tackles the market from a wholly different direction, as a telco cloud provider with a global network and over 60 data centres worldwide. Through a series of recent acquisitions, it gained assets in IaaS orchestration (Tier 3, Nov 2013), PaaS application development (AppFog, 2013), disaster-recovery-as-a-service (DataGardens, 2014), predictive analytics (Cognilytics 2014), and most recently database-as-a-service (Orchestrate, April 2015).

With its CenturyLink Platform, the company sees its interests in helping customers integrate their investments in third-party technologies. Rather than try to own the enterprise cloud territory, it is pragmatically providing APIs and orchestration. Furthermore, it recognises that lines of business are increasingly important customers who need accessible tools and automated functions.

All of these providers should accept that enterprises developed their IT over a long history and will not necessarily embrace a cloud first philosophy across the operation. Instead, they should offer a range of solutions and customisation suitable for particular workloads and priced accordingly.

Digital transformation starts internally. They should become a strategic partner that helps innovation teams experiment and collaborate with lines of business. And take care of the customer’s routine functions and complex configurations so they can focus on profitability of their core business.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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