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Year in review: Shifting from a monocloud to a multicloud and hybrid cloud landscape

2019 has been a notable year for the cloud and software markets, shedding light on the cloud landscape as it becomes progressively complicated. From customers’ increasingly complex use cases to vendors’ sustained but slowing growth, along with acquisitions, new challengers and new ventures, the market continues to transform.

Join Allan Krans, Meaghan McGrath, Jack McElwee and Catie Merrill from TBR’s Cloud and Software team as they recap the most salient events of 2019 and look ahead to what those changes hold for the coming year. 

Don’t miss:

  • Shifts in cloud consumption
  • Cloud vendor adaptations
  • Expectations for 2020

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

Cloud marketplaces are small in revenue impact but mighty in market impact

Cloud marketplaces are more of a slow burn compared to pronounced market impacts in books, retail and music

To predict the impact of cloud marketplaces, it is worth evaluating how similar changes in go-to-market strategies have impacted other markets. Sears (Nasdaq: SHLDQ), Amazon (Nasdaq: AMZN) and Apple (Nasdaq: AAPL) are three very different companies that illustrate just how profound an impact sales motions can have. Sears rode the impact of its mail-order catalog for nearly 100 years in a wave of success that only recently petered out. Amazon and Apple have much broader business strategies, but both owe a considerable amount of their success — which has them jockeying for the title of the world’s largest company in terms of market capitalization — to their selling methods. Both Amazon and Apple entered well-established markets and disrupted them, not by competing on the merits of their offerings but by challenging the existing sales motion with a marketplace approach. Amazon’s online approach to the book market is a very pronounced example of marketplace disruption, as Figure 1 illustrates. Amazon began selling books online in mid-1995, overtook traditional market leader Barnes & Noble less than eight years later, and subsequently expanded and dominated the market. Today, Amazon controls over 50% of the total book market in the U.S., including both physical and digital titles.

Market overview: Online marketplaces, where customers can browse, search and then buy or subscribe to software titles, have been around for quite some time. Salesforce (NYSE: CRM) rolled out the first cloud app store in 2005, and a wide variety of new options have been introduced since. Despite their longevity, the impact of these marketplaces is still uncertain. Salesforce AppExchange is a standout success, but the impact is more nuanced for most other marketplaces and the industry overall. Marketplaces have not yet become a prominent distribution model for software and cloud services, but they play a niche role in overall go-to-market strategies that include traditional direct sales, partner-driven sales and customer self-service sales. Although marketplaces currently hold a small portion of overall cloud and software revenue share, trends could bolster their role in the market moving forward.

IBM helps customers extend IP ‘inside out’ to anyone, anywhere

TBR perspective

After shifting the format from multiple events in years past to one major customer event in 2018 at a single venue, this year IBM (NYSE: IBM) moved its massive customer event, IBM Think 2019, from Las Vegas to San Francisco with far fewer logistical glitches than last year. Analysts were guided by a reinvigorated analyst relations team due in large part to IBM’s decision to shift Harriet Fryman from overseeing internal marketing functions to serving as VP of analyst relations.

In many ways shifting an IBM executive from internal marketing to this external-facing role aligned with the overarching theme of the event that coursed through CEO Ginni Rometty’s keynote speech. The theme last year focused on how the “axis has flipped” on business best practices, while this year the theme cascading throughout the sessions was “inside out.” IBM noted that until recently, much of the transformative power of technology had been dictated from an outside-in perspective in an effort to redesign customer-facing engagement. This, IBM asserts, is why only 20% of the data under management has been transformed to better inform enterprises and why the heavy work ahead will be from the inside-out perspective as enterprises choose which assets to transform beyond just sales and marketing elements. This theme plays well with IBM’s best-in-class reputation for building trust and for understanding the complexities large enterprise IT instances cause in terms of technical debt in need of refinancing and redesigning as enterprises strive to become true digital businesses, beyond the influence of outside-in feedback.

The theme last year focused on how the “axis has flipped” on business best practices, while this year the theme cascading throughout the sessions was “inside out.” IBM noted that until recently, much of the transformative power of technology had been dictated from an outside-in perspective in an effort to redesign customer-facing engagement. This, IBM asserts, is why only 20% of the data under management has been transformed to better inform enterprises and why the heavy work ahead will be from the inside-out perspective as enterprises choose which assets to transform beyond just sales and marketing elements. This theme plays well with IBM’s best-in-class reputation for building trust and for understanding the complexities large enterprise IT instances cause in terms of technical debt in need of refinancing and redesigning as enterprises strive to become true digital businesses, beyond the influence of outside-in feedback.

To address inside-out innovation, IBM’s marketing message tagline of “Anywhere” flows throughout its management control planes, analytics enablement technologies, and the emerging blockchain technology. Many businesses are now capable of transforming from the inside out, or from (oftentimes) Z-based on-premises instances out to the multicloud world. IBM’s “Anywhere” mantra is a big bet that resonates with existing accounts, and the challenge will be to simplify the access and interaction potential new accounts will have with IBM IP assets to prove that IBM understands all elements of the customer experience on a persona-by-persona basis, beyond trust, security and market making for emerging technologies.

IBM Think 2019 brought together tens of thousands of IBM partners, customers and employees to showcase recent portfolio expansions and updates that underscore the company’s continued innovation in cloud-based emerging technologies.

Obstacles and triumphs on the journey to cloud

Insights from TBR’s Cloud and Software team

Customer adoption of cloud services is maturing as enterprises pursue next-step cloud adoption, implementing lessons learned from their own initial experiences and those of peers. With this maturity, cloud adoption strategies and decisions are becoming both more nuanced and hybrid-oriented, and vary widely by CIO, industry and company scale. Join Allan, Cassandra, Meaghan and Jack as they discuss the most recent insights from TBR’s Cloud Applications Customer Research and Cloud Infrastructure & Platforms Customer Research.

Don’t miss:

  • Cloud adoption intricacies
  • CIO cloud perspectives and strategies
  • Industry considerations

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

Technology Business Research, Inc. announces 1Q19 webinar schedule

Technology Business Research, Inc. (TBR) announces the schedule for its 1Q19 webinar series.

Jan. 9            Virtualization flips the axis on technology monetization and adoption

Jan. 23         IoT is getting a lot easier

Feb. 6           The pendulum swings: Customer demands reshape how infrastructure vendors do business

Feb. 13         5G will be an evolution, not a revolution

Feb. 20         Customers care less, vendors buy more, and both sides become more intelligent

Feb. 27         Consulting’s robot army: How RPA changes the consulting business model

Mar. 20        Enabling stakeholders across the healthcare ecosystem to navigate the path to value-based care

TBR webinars are held typically each Wednesday at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.

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IBM builds out concierge services so internal IT departments can satisfy the business

TBR perspective

The recent IBM Cloud Analyst Day continued a theme introduced at IBM Think 2018, with numerous IBM executives reiterating “the axis has flipped” in the market for IT solutions. Nowhere has the axis flipped more than in the relationship between IT and lines of business (LOBs). Where IT hardware and software were once costly components, the IT department served more as a security guard meant to ration the business use of IT. Today, with virtualizing compute and storage turning computing ubiquitous and 5G set to disrupt network virtualization, IT must shift to the role of concierge — listening to LOB demands and then stitching together the requisite IT assets to enable successful execution.

At IBM Cloud Analyst Day, IBM Analytics General Manager Rob Thomas discussed the concept of data virtualization, made possible by adhering to specific run times that allow for abstracting the requisite data from where it resides and transporting it to where it is needed with pervasive encryption, to deliver the business insights required for the LOBs. That vision is what IBM described as the “ladder to AI,” or the climb the business must make to infuse its operations and integrated IT stack with artificial intelligence (AI) insights, deploying all IBM AI assets from SPSS to Watson.

 

At IBM Cloud Analyst Day, IBM Analytics General Manager Rob Thomas discussed the concept of data virtualization, made possible by adhering to specific run times that allow for abstracting the requisite data from where it resides and transporting it to where it is needed with pervasive encryption, to deliver the business insights required for the LOBs. That vision is what IBM described as the “ladder to AI,” or the climb the business must make to infuse its operations and integrated IT stack with artificial intelligence (AI) insights, deploying all IBM AI assets from SPSS to Watson.

 

 

AWS shakes up the private cloud infrastructure market with Outposts

Outposts enable AWS to meet clients’ demand for private cloud

Amazon Web Services (AWS) unveiled at re:Invent in Las Vegas its new Outposts on-premises cloud infrastructure, which will enable AWS to become the sole cloud infrastructure provider for its clients. The underlying Outposts infrastructure closely resembles AWS’ public cloud data center infrastructure. Since the infrastructure will be similar, it is conceivable AWS will be able to tie customers’ public and private clouds together seamlessly, fulfilling customers’ desire to deal with one less vendor for their IT needs. AWS will deliver, install and maintain Outposts for customers.

The sheer volume of AWS public cloud customers creates a large base to sell Outposts to and takes aim directly at private cloud data center providers. Outposts will also directly compete with Microsoft Azure, and will generate accretive hardware revenue for AWS.

An advantage AWS has over infrastructure vendors is economies of scale, which will enable AWS to sell massive infrastructure volumes for low margins — much like an original design manufacturer — and become a price leader against OEMs such as Dell EMC and Hewlett Packard Enterprise (HPE). AWS also plans to arm its channel partners with the necessary capabilities to sell these infrastructure solutions, further enabling large sales volume. Moreover, AWS is better equipped than other infrastructure vendors such as Dell EMC and HPE to attach the necessary services to provide connectivity between public and private cloud environments due to its expertise in the public cloud space — and will gain the higher-margin sales to boot. IBM has strong services capabilities but lacks the commoditized infrastructure and customer volume to match AWS’ strategy. TBR notes that pricing details of Outposts have not yet been determined.

VMware gets a piece of the AWS Outpost pie with the VMware Cloud variant

VMware and AWS collaborated to provide VMware Cloud on a variant of AWS Outposts, which will be offered by VMware as a managed service. As this creates a conflict of interest for Dell Technologies, TBR believes Dell Technologies has its sights set on the higher-margin sales generated from VMware Cloud and will forego the loss of lower-margin hardware sales to gain it.

Although AWS’ announcement may seem like bad news for the private cloud infrastructure OEMs, the good news for them is that AWS’ Outposts will not hit the market until 2H19, giving the infrastructure players some time to develop solutions that can compete with AWS as it moves into the data center hardware market.

Customers care less, vendors buy more, and both sides become more intelligent

An exclusive review of TBR’s 2019 Cloud Predictions

The entire cloud market is becoming more defined, consolidated and focused on the business value being delivered. This increasing maturity is prompting acquisitions by leading vendors, which will intensify in 2019. Not only are big purchases being integrated, but more large purchases will be announced in the race to meet rising customer investment in cloud solutions. Even as customers spend more on cloud, they increasingly care less about the specific delivery method, resulting in widespread hybrid implementations. Lastly, the rise of integrated analytics, artificial intelligence (AI) and machine learning will move customers further along in their journeys to transform their processes and technology to become more intelligent businesses.

Join Allan Krans, Cassandra Mooshian, Meaghan McGrath and Jack McElwee as they dig into developments in the cloud market through 2018 and expectations for 2019.

Don’t miss:

  • The risk and reward for additional cloud acquisitions
  • How customer decision making is evolving to focus more on outcomes than delivery methods
  • How the integration of emerging analytics and AI technologies is helping customers implement more intelligent solutions and growing revenue streams for vendors

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed at anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

Oracle implores enterprises to adopt its uniquely architected cloud stack

Oracle reinforces its cloud stack to accelerate enterprise cloud adoption

Oracle has a strong portfolio of cloud applications that are proving competitive in the market against more narrowly focused or less integrated SaaS competition. Oracle’s core platform and infrastructure businesses, however, are proving a harder sell, implied by financial results and qualitative context, despite significant innovations over recent years. The tone of Oracle OpenWorld 2018 mirrored its overall performance: The company is well positioned and executing in cloud application adoption initiatives, and is well positioned but facing stalling sales in the infrastructure business.

Applications updates were minimal but valuable

As Oracle executives pointed out, Oracle has been able to position itself well in the SaaS market by buying and building applications across both front- and back-office functional areas, leaving few holes in its horizontal applications portfolio. This relatively comprehensive portfolio, particularly across the back office with integrated ERP and Human Capital Management (HCM) suites, positions the company well as more customers look to adopt cloud applications — both voluntarily to achieve efficiencies, and under duress to plan migrations as other vendors’ on-premises products are given end-of-support deadlines. Strengthening the value of its applications at the annual event, Oracle announced artificial intelligence (AI)-based capability additions to its ERP and HCM portfolios, including chatbots, recommendation engines and process automation. Oracle also enhanced select supply chain management applications with blockchain-enabled tracking and controls to increase value for customers. These advancements add value for customers but do not significantly alter Oracle’s back-office portfolio.

 

 

Oracle’s (NYSE: ORCL) annual conference, Oracle OpenWorld 2018, took a different tone than in recent years. With corporate focus narrowed around the cloud portfolio, and key product foundations already in place, keynotes and announcements were more focused on improvements to existing applications and the database and infrastructure architecture underpinning all cloud services. This year’s event doubled down on themes of past years, including Oracle CEO Mark Hurd’s previous keynotes concerning macroeconomic trends and predictions for the cloud market, and introduced a panel of distinguished U.S. and U.K. security personnel that painted a bleak cybersecurity picture, subtextually in support of a secure, single-vendor cloud stack that Oracle is positioning itself to best address.

Whether by R&D or acquisition, money can’t buy SaaS performance

The SaaS market appears to provide an easy opportunity for vendors to garner significant revenue and growth. SaaS is the largest segment of the cloud market — bigger than the IaaS space, which draws so much attention due to leaders Amazon Web Services and Microsoft Azure. The SaaS market is also much more fragmented, littered with thousands of providers, which would seem to imply that consolidation is a foregone conclusion. However, even for three of the largest leading SaaS providers, the investment level required to compete in the space remains high, and even spending billions of dollars in R&D and acquisitions does not guarantee success.

This is not to say that these billions of investment dollars are all for naught. Despite being around for more than a decade, the SaaS space remains quite immature. Customers are still figuring out which of their applications can be moved to cloud delivery, and how, when and with which vendors those moves can take place. Until a longer track record exists for making these decisions and vendors consolidate disparate offerings into packages more closely resembling integrated solutions, the market remains very much in flux. It’s not the functionality holding back the adoption of hybrid solutions, it’s the difficulty of integrating and managing the multicloud and multivendor solutions. In the meantime, vendors such as Oracle, SAP and Workday have no other choice but to continue accelerating their investments. Their dollars will not buy SaaS performance in the short term, but this is the only way these vendors have a shot as the SaaS space becomes more predictable.