IT as a service on the Cloud is not the end

[Long post] Read another intriguing post by David Vellente at Wikibon today about the emergence of IT shops becoming service organizations to their industries using the cloud to hosting these services.  I am not in complete agreement with Dave but he certainly describes a convincing picture.

His main points are:

• Cloud storage and cloud computing are emerging as a favorite platform for IT-as-a-service.
• Specialization and economics of scale will generate an IT-as-a-service capability for any organization’s information processing needs.

I would have to say another tenet of his overall discussion is that IT matters, a lot and I couldn’t agree more.

Cloud reality

For some reason I have been talking a lot about cloud storage this past couple of weeks, in multiple distinct venues.  On the one hand, I was talking with a VAR the other day and they were extremely excited about the opportunity in cloud storage. It seems getting SMB customers to sign up for a slice of storage is easy and once they have that, getting them to use more becomes a habit they can’t get rid of.

I thought maybe the enterprise level would be immune to such inducements, but no.  Another cloud storage gateway vendor,  StorSimple, I talked with recently was touting the great success they were having displacing tier 2 storage in the enterprise.

Lately, I heard that some small businesses/startups have decided to abandon their own IT infrastructure altogether and depend entirely on cloud offerings from Amazon, RackSpace and others for all they need.  They argue that such infrastructure, for all its current faults, will have less downtime than anything they could create on their own within a limited budget.

So, cloud seems to be taking off, everywhere I look.

Vertical support for IT as a service

Dave mentions plenty in his lengthy post that a number of sophisticated IT organizations are taking their internal services and becoming IT-as-a-service profit centers.  Yes, hard to disagree with this one as well.

But, it’s not the end of IT organizations

However, where I disagree with Dave is that he sees this as a winning solution, taking over all internal IT activities.  In his view, either your IT group becomes an external service profit center or it’s destined to be replaced by someone else’s service offering(s).

I don’t believe this. To say that IT as a service will displace 50+ years of technology development in the enterprise is just overstatement.

Dave talks about WINTEL, displacing mainframes as the two monopolies created in IT.  But the fact remains, WINTEL has not eliminated mainframes.  Mainframes still exist and arguably, today are still expanding through out the world.

Dave states that the introduction of WINTEL reduced the switching cost of mainframes, and that the internet and the cloud that follows, have reduced the costs yet again. I agree.  But, that doesn’t mean that switching cost is 0.

Ask anyone whether SalesForce.com switching cost inhibits them from changing services and more than likely they will say yes.  Switching costs have come down, but they are still a viable barrier to change.

Cloud computing and storage generates similar switching costs not to mention the time it takes to transfer TBs of data over a WAN.  Whether a cloud service uses AWS interface, OpenStack, Azzure or any of the other REST/SOAP cloud storage/cloud computing protocols is a formidable barrier to change.  It would be great if OpenStack were to take over but it hasn’t yet, and most likely won’t in the long run.  Mainly because the entrenched suppliers don’t want to help their competition.

IT matters, a lot to my organization

What I see happening is not that much different from what Dave sees, it’s only a matter of degree.  Some IT shops will become service organizations to their vertical but there will remain a large proportion of IT shops that see

• That their technology is a differentiator.
• That their technology is not something they want their competition using.
• That their technology is too important to their corporate advantage to sell to others.

How much of this is reality vs. fiction is another matter.

Nonetheless, I firmly believe that a majority of IT shops that exist today will not convert to using IT as a service.   Some of this is due to sunk costs but a lot will be due to the belief that they are truly better than the service.

That’s not to say that new organizations, just starting out might be more interested in utilizing IT as a service.  For these entities, service offerings are going to be an appealing alternative.

However, a small portion of these startups may just as likely conclude that they can do better or believe it’s more important for them to develop their own IT services to help them get ahead.  Similarly, how much of this is make believe is TBD.

In the end, I believe IT as a service will take it’s place alongside IT developed services and IT outsourced development as yet another capability that any company can deploy to provide information processing for their organization.

The real problem

In my view, the real problem with IT developed services today is development disease.  Most organizations, would like increased functionality, and want it ASAP but they just can’t develop working functionality fast enough.  I call slow functionality development, missing critical features with lots of bugs development disease.  And it’s everywhere today and has never really gone away.

Some of this is due to poor IT infrastructure, some is due to the inability to use new development frameworks, and some of it is due to a lack of skills.  If IT had some pill they could take to help them develop business processing faster, consuming less resources with much fewer bugs and fuller functionality, they would never consider IT as a service.

That’s where the new frameworks of Ruby on Rails, SpringForce and the like are exciting. Their promise is providing faster functionality with fewer failures. When that happens, organizations will move away from IT as a service in droves, and back to internally developed capabilities.

But, we’re not there yet.

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Comments?