March 28, 2014, 3:40 PM — It's easy to dismiss analyst firms and their output. There's a widespread belief that many of them "play for pay" and that much of their work is superficial and reflective of conventional wisdom and not the deep incisiveness that, presumably, clients pay for. I don't subscribe to the former perspective, but the latter has more merit and is often quite justified.
In the past, I've criticized IDC (perhaps the largest of all analyst firms) because I felt its quantitative orientation often overemphasizes existing markets and vendors and, because the survey samples used are too legacy-focused, tends to miss new, innovative offerings. For example, I feel IDC missed the rise of Linux because many of its original use cases escaped notice of traditional infrastructure and operations groups.
However, a recent IDC report, IDC Predictions 2014: Battles for Dominance - and Survival - on the 3rd Platform, puts to rest these kinds of reservations. While understated, its analysis and predictions provide as much drama as any novel, and its denouement is the kind of cliffhanger that makes it, as the saying goes, unputdownable.
Simply stated: You must read this report and think about what it means for your company's future. This is true whether you're an IT user a vendor or, for that matter, a company that thinks of itself as in another business altogether.
IT Is All About Cloud, Mobile, Social and Big Data
The theme of the report is that what IDC calls the third platform will disrupt information technology profoundly.
What, you might ask, is the third platform? It's the next-generation IT software foundation:
- Cloud computing
- Big data
- Social (systems of engagement that integrate company stakeholder communities to more tightly communicate and drive mutual value>
From IDC's perspective, what we call IT is rapidly shifting to the third platform. This succeeds the first two platforms - mainframe and client/server/Internet technology, respectively. Its capabilities will transform who provides IT solutions, who applies them and how they're used.
The report identifies 10 trends for 2014; all, from my perspective, ring true. I want to discuss several in some detail, since they represent such a disruptive impact on business-as-usual as it has been practiced over the lifetime of what we call the Information Age.
Put another way, the trends represent the true emergence of the information age - what went before was really just nascent information technology tacked onto a relatively undisturbed Industrial Age.
All IT Growth Will Come From Third Platform
According to IDC, the 5% IT growth it sees for 2014 is comprised of two elements: Stagnant legacy infrastructure growth (0.7%) and a high third-platform infrastructure growth (15%). Just to bring the point home, IDC asserts that a full 29% of 2014 IT spending and 89% of all IT growth spending will be in the third platform; of the latter, a full 50% represents cannibalization of traditional markets.
This means that legacy IT is going forward largely unchanged and will experience little additional investment. IT investment is skewed toward third-platform initiatives, even to the extent that some of the investment toward third platform is being funded by ripping out existing legacy environments - presumably by on-premises legacy systems being replaced by software as a service.
If you're a legacy vendor, your financial prospects are bleak. Look at this week's announcement from Oracle that its quarterly results fell short. (At least this time the company blamed currency issues and not, as it did a couple of quarters ago, on an incompetent sales staff.)
If you're an IT user, your strategic issue is how quickly you can reorient your spend. I've spoken recently about how legacy systems are the biggest issue enterprise IT faces, since they're such a budget sinkhole. If 80% of your IT budget is spoken for before the year starts, how can you aggressively pursue third platform initiatives?
This also implies that third-platform providers (more on this below) will be on fire as enterprise IT wakes to its critical need to identify, select, learn and implement new platforms. Finally, it means that IT organizations must reskill rapidly - and those IT employees who fail to embrace the new way must be weeded out. Look for lots of employee churn in legacy vendors and users as they adjust to this new infrastructure reality.
Public Cloud Strong, Will Only Get Stronger
In addition, IDC essentially (though not overtly) declares the private vs. public cloud computing war over, with a decisive victory in favor of public cloud computing. In terms of total spending, IDC predicts that 2014 will see $100 billion invested in cloud use, with fully 75% spent with public CSPs.
On the face of it, this flies in the face of what private cloud advocates often state - that much of total IT spend occurs in private data centers and, therefore, private cloud computing will eventually emerge as the most common application deployment location.
It seems likely that IDC's assertion of an imbalance between public and private spend has occurred due to rapid public growth - that public cloud adoption is growing so rapidly that it's outstripping what's being spent on internal private environments. If that's the case, the imbalance will be even larger in 2015 and later years. In other words, the skew toward public cloud investment by IT will become even more pronounced in the future, making public cloud environments the de facto winner in the private vs. public debate.
Elsewhere in the report, IDC describes the dramatic change public cloud computing is having on the server market: "In 2014, an astounding 25-30% of server shipments (including shipments from ODMs) will go to cloud service providers' datacenters. This will grow to 43% by 2017."
IDC adds that this change will affect server companies, with new server designs increasingly focused on CSP requirements.
In part, this illustrates the shift described above: IT organizations bias spending toward the third Platform and away from legacy systems and even designs.
As Private Cloud Drifts Away, Several Public CSPs Will Rule
More important is what this means for private cloud prospects. Clearly implied in this prediction is that a significant amount of IT spending - perhaps even a majority, when software development costs are added to server spending - will be directed toward public cloud computing environments. If you're an IT manager or individual contributor hanging your hat on your company's internal cloud, well, then IDC believes your career prospects are limited.
It will be interesting to see how this plays out. I commonly talk with both vendors and IT organizations who confidently state that public cloud computing adoption will tail off as people begin to realize issues with data privacy and security. The feeling is something along the lines of, "Public cloud computing got a good start while we were sorting things out, but now that we've figured it out, things will shift in our direction."
I'm not so sure. Often accompanying these "workloads will come back to us" pronouncements is a conviction that public cloud environments have mostly been used for testing, developments and applications that are relatively unimportant - that is, experiments and small-scale early-stage projects. This is associated with a belief that most public cloud use is by startups and small businesses.
From my experience, this perspective vastly underestimates and misinterprets what's actually being done in public cloud environments. There are important, large, enterprise production applications being run in public cloud environments, with more being deployed every day. Given the IT reality that, once deployed, applications are rarely re-hosted, this means that public cloud computing will undoubtedly have a strong future. IDC, at least, believes that public cloud computing will be the dominant platform going forward.
There's a sting in the public cloud computing tail, however, as IDC predicts that the market will undergo massive change in 2014 and beyond. Amazon Web Services will grow its data center footprint by up to 20% in 2014. Led by Microsoft and Google, AWS competitors will nearly double their datacenter count.
The downstream effect: The public cloud computing market will dramatically consolidate while it undergoes the dramatic growth discussed above. After all, IDC notes, public cloud computing is a scale and liquidity game that can only be played by companies with deep pockets.
By 2017, according to IDC, there will be just six to eight global IaaS players: AWS, Microsoft and Google, accompanied by three to five other companies building massive offerings based on one of the other ecosystem platforms (OpenStack, VMware, or CloudStack). Eighty percent of all new applications will be deployed with this small pool of providers. All the other CSPs who today proclaim future success based on customer relationships, regional knowledge or industry expertise will fight over the scraps left on the table.
Steve Ballmer Was Right: It's All About Developers, Developers, Developers
According to the small but highly respected Redmonk analyst firm, developers are the new kingmakers. That's to say that major software choices (and purchases) are made not at the IT executive level but, rather, down in the bowels of the organization at the individual developer level. The developer designs an application, seeks out components to support its functionality and then presents the finished prototype as a fait accompli to the CIO, who ratifies the decision and puts the procurement wheels in motion.
It's an intriguing notion, and one to which IDC wholly subscribes: "In 2014 and 2015, we'll see a battle for developers play out in the cloud, much like the one between Android, iOS, and Windows for mobile apps and developers."
IDC considers this so important that it devotes a lengthy paragraph to discuss the importance of developers; the section is headed, "A pitched battle for developers (and apps) in the cloud." It goes on to note that the companies seeking to be one of the six to eight large-scale CSPs will display "great urgency in this battle for developers."
This is all part of the ongoing shift of power from central IT to application groups and business units, the latter two represented by developers. I discuss this transformation. It's critical to recognize, too, that this shift is occurring not because IT executives have suddenly come to realize the intelligence of their developers or their contributions. The shift is occurring because developers are the vehicle by which new applications are created, and IT is - finally - coming to the fore in most companies.
[ Commentary: The New Cloud Application Design Paradigm ][ More: How Cloud Computing Is Driven by Mobile, Media and Marketing ]
The looming issue for most companies is the need to accelerate application development. Now that the friction associated with infrastructure provisioning has been reduced by cloud computing, the biggest impediment to rolling out new and updated applications is the development process itself. Addressing that bottleneck will be the issue du jour throughout 2014.
Therefore, expect to see the technology industry devote enormous energy to providing development tools, frameworks and lifecycle management systems that make developers more productive. IDC is right, in my estimation: Much of this will play out as the biggest CSPs joust to become the favored developer environment.
In the end, it all comes down to applications, and they all come down to developers who, finally, will have their day in the sun.
Third Platform Will Disrupt 'Every Industry in Our Economy'
The most intriguing prediction in an extremely intriguing report is IDC's prediction that every industry on our economy will see one-third of its top 20 companies seriously disrupted by new entrants and reinvented incumbents who deliver new offerings empowered by the third platform.
"Think of this as the long-anticipated period in which virtually each industry gets 'Amazoned' in its own way," IDC says. "These disruptions will manifest themselves as cannibalization of cash cows, slowed growth, squeezed margins and declining market share."
We have certainly seen the beginnings of this already: Uber disrupting the local taxi market, Airbnb restructuring the hotel market and Facebook's Whatsapp dislocating the telecommunications industry messaging market. According to IDC, these are just the hors d'oeuvre, served up before the banquet of transformation enabled by the third platform.
I agree wholeheartedly with this prediction. We're just now reaching the point that the power of the Internet, made exponential by the third platform, is taking hold in our society. Don't underestimate what this will bring. As incumbents realize how their core businesses are threatened by innovation, they will resist by every means possible. We'll see tremendous conflicts (as described in the Uber article above) in the market, in laws and government regulations, and even in formerly unthinkable alliances.
There will be a human cost as well. As industries and companies are disrupted, there will be mergers and bankruptcies, inevitably accompanied by layoffs and terminations. Innovation and disruption are dispassionate and intriguing concepts - except when they're happening to you, when they are pronounced "dislocation" and "disintegration." But IDC is spot-on in its assessment that the next decade will see tremendous change in every part of our economy.
I can't stress enough the importance of reading and considering this report. It isn't just an "inside IT" message. Every company is becoming a software company - and figuring out how each will integrate with the third platform is critical to its future.
Bernard Golden is senior director of Cloud Computing Enterprise Solutions group at Dell. Prior to that, he was vice president of Enterprise Solutions for Enstratius Networks, a cloud management software company, which Dell acquired in May 2013. He is the author of three books on virtualization and cloud computing, includingVirtualization for Dummies. Follow Bernard Golden on Twitter @bernardgolden.
Read more about cloud computing in CIO's Cloud Computing Drilldown.