Forbes Technology Council Article with Boyan Ivanov of StorPool Storage.
“The tide raises all boats”
“Trend is your friend”
In both life and business I like to think in terms of fundamental or master trends driving the market at any given point in time. This is important, because strategy and timing are vastly dependent on the fundamentals. Execute a poor strategy on the right fundamentals and you may get lucky and do fairly well. A Great strategy executed on great fundamentals – magic happens. However, even if you execute flawlessly on a weak fundamental you may do ok, but the odds are more likely to lead to failure.
Master trends are overarching directions that shape and influence an industry. They have lasting impact and set the stage for other trends to emerge. Some are driven by global developments, such as climate change, geopolitics and pandemics. Others are due to the natural evolution of you and I, humans. Our changing needs, wants and goals.
In this article I will dive into some of the master trends driving the IT industry today. As you’ll see below, these trends are often related and feed off each other.
Тrend #1: Hardware-Centric Infrastructure to Software-Defined Infrastructure
For many years now, we have experienced this movement to the software trend and it is still going strong. Software offers advantages in terms of flexibility, cost-efficiency, scalability and operational efficiency.
In 2011, Marc Anderseen from Andreessen-Horowitz wrote an article titled “Why Software is Eating the World”. Many of the points he discusses are still trending strong today and taking on new trends with AI.
The growth of software in Enterprise IT has redefined how companies work and how they spend their budget. Activities that used to require specialized hardware devices can now be run on software leveraging standard building blocks. This Enterprise IT shift to software-defined technologies referred to as the software-defined data center design has touched every aspect of IT infrastructure. Software running the networking function can run on standard gear thus eliminating the need for expensive and specialized storage switches. In the storage domain, software-defined storage or SDS replaces old school traditional arrays also known as SAN and NAS. The Hyperconverged Infrastructure (HCI) integrates the compute, storage, and networking into a single, software-driven solution. The software trend provides companies the ability to simplify their approach to infrastructure management, enhance scalability and reduce overall costs.
Enterprise IT is generally about 5 years behind consumer IT.
For the consumer, you and I, I’m sure you recall the days when you went on a holiday you had to take a bunch of physical devices with you, for example, you may have needed your phone, and a physical map, and a GPS device, and a printout of your booking reservations, and don’t forget your camera. Today, with the growth of software applications, practically everything you need is accessible on your phone. It’s more or less a standard device with a bunch of standard components in it and software is running all of it, and that’s all you need to take on your holiday.
Essentially, for businesses and consumers, the old generation of technology required multiple specialized devices each with their own purpose. Today, the ability to store and access data using software technology has eliminated the need for specialized devices whether those be storage appliances, specialized networking hardware, or even a single purpose camera making the life of everyone involved just a little easier.
Trend #2: CapEx to OpEx
The shift paradigm from CapEx (Capital Expenditure) to OpEx (Operational Expenditure) spend has been made possible with the master trend of software technology growth. The SaaS (software-as-a-service) boom has provided subscription and even consumption based pricing, which we now take for granted. From your CRM and operating system, to Microsoft Office and ERPs…to your desk, the world of running on CapEx and perpetual software licenses is now disappearing. We have switched over to Everything-as-a-Service (EaaS).
Many people think it’s because it’s cheaper. This is usually not the case. In most instances the EaaS offerings are more expensive in the long run, compared to CapEx/perpetual options. Sure they look cheaper in the initial phases. Or, they are sold to us on the premise that we can right-size and thus optimize our spending. These are true, yet not the main factors driving the switch to OpEx.
It’s the other major advantages, simplicity, flexibility, and operational efficiency that draws the attention of IT teams and Business divisions within an organization. It is just so much easier for us as users to just pay for a system that just works. A solution that someone else takes care of on a regular basis, manages updates, keeps it up and running, and provides a good end-user experience.
The operational efficiency benefits are tremendous. Companies no longer have to build internal teams with specific expertise to manage and maintain their infrastructure. They can get a ready-to-use solution that includes the expert team behind it. This is what is driving the SaaS and even more modern offerings like Storage as a service (STaaS) for IT infrastructure today
Trend #3: Cloud Computing is the New Utility
A century ago, At the beginning of electrification it was normal for any major factory to have a local power plant, powering its operations. With the development of the electrical grid, the need for local or adjacent power facilities is greatly reduced and even obsolete in most areas.
The same is happening with Enterprise IT. From a PC under the desk or a few servers in the closet to large datacenters. Cloud computing is the utility, much like gas, water and electricity for the modern enterprise. This makes sense, as running a utility needs economies of scale. It needs a specialized skill set that is usually not core to the business of the Enterprise, even though it is a vital input in their value creation process.
Cloud Computing has become an integral part of daily operations for businesses, government agencies, educational institutions, and individuals. With the ability to rapidly scale up or down, this service is similar to how utilities charge based on usage. The pay-as-you-go or subscription based pricing model eliminates the need for significant upfront capital investment (CapEx) and allows organizations to budget more predictably.
Here we need to point out that a “100% public cloud strategy” is an unrealistic and impractical goal. With complex business needs and multiple use cases, companies inevitably end up with a hybrid cloud mix – public, private, at the edge and some other services like SaaS, IaaS, STaaS, etc. Still most of these services are actually delivered in a cloud-like, cloud-native fashion.
Lastly, the hybrid cloud mix is adjusted dynamically based on a number of factors – the general business environment and the state of the economy, financial market conditions, end user demands, and internal needs and projects. For example this is driving the rise of “cloud repatriation” where companies figure out that they have the scale and skills to manage their own IT and “repatriate” workloads from hyperscale public clouds to their private clouds, so as to optimize costs and other parameters.
Trend #4: IT Spend Shift from Traditional Enterprise to the Service Provider
Fifteen years ago Enterprises were the big spenders on IT infrastructure – think S&P 500 companies, Global 2000 companies and such. Today this is not the case, the amount of spend has shifted and major service providers are spending the majority of dollars on IT infrastructure. These service providers include a myriad of IT service providers – from the hyperscalers and the large SaaS and social platforms we use today to the second and third tier cloud providers, MSPs (Managed Service Providers), telcos and a vast ecosystem of system integrators, value added resellers and IT service companies.
Now, the majority of money is spent by all these service providers who have tremendous aggregate scale, as they are the utilities, aggregating the IT needs of hundreds and sometimes even millions of companies.
An interesting by-product of this trend is the demise of the two-tier distribution model – IT vendors selling through distributors, who are selling through resellers, who in turn sell to the end user.
We’ve seen similar things in consumer land – in the old days you’d have to go to a dealer to buy a new car. Now you go to the mall, buy a latte, visit a Tesla shop, swipe a credit card and have a new car delivered to your doorstep. And if you’re an IT vendor, you target these large power-users of yours directly. Moreover – these utility vendors are looking to work with you directly in many cases.
Trend #5: IT Talent Scarcity
The IT industry is increasingly facing challenges related to the availability of talented employees with specialized expertise. Technology is evolving at an unprecedented pace with new programming languages, tools, and platforms. And, there is a high demand for specialists in all areas from cloud architecture, cybersecurity, machine learning, data storage, and on and on.
Organizations face strong competition for IT talent and the ability to attract and retain this talent can vary by industry.
For example, the IT department within a legal firm will most likely not be as interesting and challenging as IT work for a major automobile manufacturer. And in turn, it’s hard for the automobile companies to have the scale and sophistication that draws top-notch IT talent to the leading IT companies.
Organizations have found themselves needing to outsource IT services in order to benefit from the IT expertise these companies offer. Robotic Process Automation (RPA), cybersecurity, DevOps, AI are some of the biggest drivers behind cloud adoption and everything SaaS. It doesn’t always come down to the cost. It’s the piece of mind of having someone else take that IT piece, bring the talent and expertise, and confidently run it for you, giving your team the ability to focus on your core business and automate and outsource as much as possible of the rest.
Trend #6: We, the consumers have changed
I still vividly recall the first time I saw someone using Google Maps, years back. It was a magical moment. Now I cannot imagine driving around, especially on a long trip on a road I’ve never been on and using a physical map. Or, having to travel for a day just to meet a customer, instead having a video conference call for an hour. Or, having to wait for 2 days for my bank branch to open on Monday.
We take these things for granted, but we, the consumers, now have very different expectations from the world around us. And, technology happens to be the common denominator for improving our lives.
Now, it is hard to imagine any other way.
Now the user expects sub-second response times from any business and typically online. And to get it means that the business of today has to become an IT company. This is what “digital transformation” is all about. Behind the abstract buzzword is the changing need of all of us as users to be living a better, richer life, which is in turn heavily dependent on technology and being online. It’s about convenience, speed, efficiency and better economics.
Think of your bank – before the biggest asset in retail banking was the branch network. Now it’s the mobile banking app of the bank. Customers can have access to their money 24/7, from everywhere. In a second. In this world retail offices are a liability, not an asset. What becomes an asset is the IT infrastructure running the IT systems of the IT banking company.
You can see how these master trends are interconnected and often mutually reinforcing. For example, with the growth of software-as-a-service came the ability of ease-of-use, pay-as-you-go and made it possible to shift budgets from CapEx to OpEx. The EaaS helped to develop Cloud Computing as it exists today with the experience of a utility service. Service providers are able to deliver on the EaaS with the level of expertise an organization requires and depends on. And, as far as us, the consumers, we are now accustomed to conducting a larger and larger part of our lives online or by the use of intelligent IT systems.
You can read the original version of this article on the Forbes Technology Council website.