Going into the second half of 2018, TBR’s Cloud and Software Practice anticipates providing additional research around a few issues that have been top of mind among TBR’s clients and our analysts. The common theme across the three issues highlighted in this report is the growing focus on how cloud and software are jointly being used to deliver real solutions for customers. Highlights of the research center on how establishing hybrid capabilities is a primary challenge for enterprises and a growth driver for vendors, from the initial design and integration through to the ongoing management and optimization of the increasingly complex environments. Additionally, offering multicloud is the first priority for customers and creates opportunities for vendors other than category leaders such as Amazon Web Services (AWS) and Salesforce. Lastly, partnerships that were previously threatened by cloud are now realigning for new opportunities created by on-premises hybrid delivery and solution bundling. Look for more insight into these topics in our upcoming research.
Hybrid enablement is an increasingly critical predictor of vendor success
There is no question that cloud and software solutions are being increasingly deployed into hybrid environments and have been for some time now. The real customer pain point in regard to a truly hybrid environment — one or more cloud assets integrated with one or more on-premises assets for the seamless flow and sharing of data — is around enabling each of the solutions to fit into the environment and integrate with the others for optimal utilization.
Cloud and software vendors alike are investing to capitalize on this growing opportunity around empowering enterprise IT departments to integrate sprawling environments on their own, with the help of automated tools and platforms. Salesforce’s acquisition of MuleSoft is one of the more noteworthy examples as it has vast implications for both Salesforce and the market. This is because MuleSoft offers licenses alongside its subscription offerings despite Salesforce’s “No software” mantra, and because many organizations utilize one or more of Salesforce’s cloud offerings, which will soon feature and/or be integrated with Salesforce Integration Cloud, a solution that will be based on MuleSoft’s well-known Integration Platform as a Service (iPaaS).
Software vendors are making similar investments, such as Red Hat announcing its own iPaaS — Fuse Online — and VMware’s continued updates to the vRealize cloud management suite. Additionally, many continue to expand their partnerships with cloud vendors and systems integrators to improve their hybrid technology and hybrid enablement portfolios, increasingly going to market with a software-led services approach.
Cloud brokerage and hybrid integration pure plays continue to generate buzz as well, providing attractive solutions for enterprise IT departments struggling to keep pace with integrations, orchestration and skill sets. We expect some of these vendors to be acquired over the next couple of years as cloud and software vendors look to quickly build out their hybrid integration and enablement tool sets.
Consolidation around leading PaaS & IaaS vendors does not reduce competition
The public cloud IaaS market, substantially made up of businesses that complement scalable infrastructure with general purpose PaaS, has consolidated around the four leading U.S.-based cloud vendors — AWS, Microsoft, IBM and Google — and one international vendor, Alibaba, which has been successful in the highly exclusive Chinese market and is diligently focused on effectively competing with these U.S.-based vendors on an international stage.
Among the insights gleaned from TBR’s upcoming Cloud Infrastructure & Platforms Customer Research, it is becoming evident that even in discrete use cases and niche industries, the general-purpose nature of these vendors has enabled them to be considered across needs. Many customers agree that there is a delicate equilibrium yet to be found in first balancing on-premises and cloud deployments, and then balancing vendor lock-in concerns, usage volume discounts, vendor specializations and multivendor environment complexity. TBR will closely watch and assess how each vendor overcomes its perceived downfalls and positions itself to help customers best weigh the benefits and drawbacks of increasing cloud adoption.
In particular, customers almost universally recognize Google Cloud as the third option behind AWS and Microsoft Azure, citing TensorFlow as a key technology that will drive Google’s growth into a more prominent cloud vendor, but in the same breath identify that Google’s enterprise vision has not matured from “talk the talk,” particularly outside of the executive office of Google Cloud CEO Diane Greene. Meanwhile, Azure has become a viable alternative to AWS for many customers that note general ubiquity in each vendor’s ability to support various enterprise needs. TBR expects the closeness in AWS and Azure functionality, strained by the maturation of Google’s enterprise vision and Alibaba’s increasingly competitive entry into Western markets, will cause the converging market to grow quickly around this competition.
Partnerships are being both stressed and created as the cloud market evolves
The increased focus on cloud delivery methods has certainly stressed many long-held partnerships between traditional hardware, software and service vendors. The model of solution creation, distribution, installation and support was one that had multiple participants in the traditional model but became more focused on the cloud provider in the transition to cloud. Cloud is also an opportunity for new or nascent vendors to take share in markets such as business applications, where SAP and Oracle have been dominant. SaaS vendors fill portfolio gaps and augment vendor offerings for verticalized use cases, enabling legacy players such as Microsoft and SAP to adapt and compete with born-on-the-cloud providers. An example of this shift in vendor landscapes comes with the release of Dynamics 365 Business Central, which will help Microsoft gain footing over SAP in the SMB space for business applications and provide new opportunity for Microsoft’s SaaS partners. However, as each vendor expands its cloud portfolio, its respective ecosystem will be required to adapt. SAP’s acquisition of CallidusCloud will improve the vendor’s position in the cloud front-office space, but it also places SAP in direct competition with its ecosystem of Configure, Price, Quote (CPQ) providers. Now more than ever, the market will see vendor shares susceptible to ongoing changes as the market for core business applications remains relatively immature for cloud.
Hardware and services partners were previously hard hit in the transition to cloud but will have more opportunities with a growing mix of public and private cloud options becoming available. Microsoft will continue to leverage hardware and services partners to deliver and implement its hosted private cloud, Azure Stack, which has already doubled its geographical reach in recent months. This new opportunity for longstanding hardware partners such as Dell EMC and Hewlett Packard Enterprise to collaborate in delivering Microsoft’s Azure Stack offering does little to offset the erosion those vendors have seen as Microsoft built out its own Azure public cloud offerings, reducing customer demand for hardware.
Note: TBR provides extensive, sustained coverage of the strategies and select performance metrics of all the vendors mentioned above, as well as their competitors and key technology partners. Contact the authors for additional details.
By Allan Krans, Practice Manager and Principal Analyst; Cassandra Mooshian, Senior Analyst; Meaghan McGrath, Senior Analyst; and Jack McElwee, Research Analyst