The Reality of Being an IT Sourcing Pro in a Cloud-First World

By Don Addington

President, NPI

June 27, 2017

I recently read that some analysts are predicting Microsoft could beat AWS’s revenues in the second half of 2017. It gave me pause. The fact that IT vendors like Microsoft are being redefined by cloud is certainly nothing new. But the speed at which it has grown and the pace at which legacy enterprise IT vendors (like Microsoft) have sprinted to monetize it is extraordinary.

Here are some facts to digest:

  • Bain & Company predicts the global cloud IT market will increase from $180B in 2015 to $390B in 2020 with a CAGR of 18%
  • Gartner estimates the worldwide public cloud services market will grow 18% in 2017 – from $209.2B in 2016 to $246.8B
  • According to the BDO Technology Outlook Survey, nearly 75% of CFOs say cloud will have the most measurable impact on their business in 2017
  • In a 2017 survey published by RightScale, Microsoft Azure adoption surged from 26% to 43% while AWS adoption increased from 56% to 59%

Now, let’s forget about the facts and talk about the reality. The reality is that cloud is driving a relicensing of the IT portfolio and that has major implications on IT Sourcing.

Some of the businesses I’ve met with in the first half of 2017 are far along on the cloud adoption curve and have migrated a majority of their infrastructure and apps to the cloud. They are for the most part living, breathing and sourcing in a cloud-first IT ecosystem.

But most are not. They’ve got one foot firmly planted in on-premise, the other in cloud. It goes without saying that life is complicated for the IT and Sourcing stakeholders in these businesses. They’re having to manage a hybrid state that includes an evolving set of licensing and subscription programs, usage rights and pricing models – and that’s in addition to similar changes still happening with their on-premise investments. Decentralization is also a point of pain as cloud adoption – mainly SaaS – often happens in the shadows, largely driven by user communities rather than by procurement or IT sourcing.

And then there’s the ripple effect. Take security, for example. Security demands precipitated by cloud are driving more and more new products to be adopted quickly to ensure compliance. Audits are another example and one we discuss frequently on this blog. Microsoft, SAP, Oracle, IBM – you name the legacy enterprise vendor and we’ll tell you a story about how companies are undergoing more audits (and paying higher penalties) as these vendors turn audits into a revenue stream.