2014: More bad news coming for 'old IT' as cloud dominates

2014: More bad news coming for 'old IT' as cloud dominates

Summary: Cloud and offshore delivery continue to drive down cost as companies look to shake off the shackles of their existing tech infrastructure.


The tech market is splitting into two – a fast growing cloud sector and a declining legacy element as companies look to dump their ageing infrastructure

European analyst house Pierre Audoin Consultants (PAC) said that while cloud computing, big data and mobile remain hot topics, changes in operating and delivery models – in particular cloud and offshore models – will continue to drive down cost.

In a nutshell: users want to spend less on their legacy IT by moving to the cloud and are willing to invest the resulting savings on new projects.

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Many of the incumbent IT services leaders have seen flat or decreasing revenues for 2013 across the world, in particular in their European business, and PAC warned the IT market is splitting into two main segments heading in different directions; the legacy market that continues to shrink faster than before, and an innovation segment that will generate double-digit growth for a lucky few suppliers.

PAC is only expecting around two percent growth in the IT market in Western Europe, compared to six percent in the US and as much as 10 percent in the Middle East and Africa.

Cloud computing is causing all the upheaval here for suppliers. PAC said cloud computing has a similar impact on the business of IT suppliers as the internet had on the telcos in the last decade.

"While it generates a few new opportunities, it has above all a dramatic impact on the pricing model for infrastructure services," it said.

On the applications side, the analyst house noted that moving to SaaS usually also involves standardisation and simplification, which will have a negative impact on the application services market in the long term, even if in the short-to-medium term it will boost the consulting market because these new cloud applications need to be integrated both with each other and legacy infrastructure.

PAC's survey of 1,500 CxOs across 20 countries found that cost reduction and efficiency pressure are the biggest IT challenges – with both of them gaining in importance in the past months.

One area of opportunity for traditional suppliers is security; companies are increasingly ready to pay for securing their IT, making it a higher priority than mobility, CRM and big data, digital transformation and social collaboration. When it comes to cloud, CxOs said they plan to double the usage of SaaS and to triple the usage of IaaS within the next two years – and quadruple use of big data.

Further reading

Topics: Cloud, Big Data, Emerging Tech, Mobile OS

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  • Cloud computing

    While pudnits of cloud computing all write about the benefits in costs in using the cloud, one thing that Snowden has shown us is this; it's easier to mine for data on the billions who use the internet, when there are just a few cloud providers that hold all the data.

    The same holds true for businesses who store their data with cloud providers rather than on their own equipment. Criminals potentially only have to target a single provider to gain data from thousands [or more] of businesses and literally billions of consumers.

    And those who use cloud services pay a monthly fee, rather than pay nothing, every month, for storing it themselves.
    CG IT
    • Agree with you 1,000% but...

      at the same time, the future predicted in this article is coming.

      Think about on-line banking. Remember once upon a time in the late 90's when doing banking on the internet was one of the scariest things one could do. Now, not only is it done online, it can be done thru the phone and thousands have bought into the idea.

      I foresee the same happening with this "cloud" business. It's gonna happen. As the security concerns are addressed and standards begin to form around it (just like the maturity of the web), it will be adopted more and more. I see the current IT landscape like mainframe: will it still exist? Yes. Will you need as many in-house admins? No.

      I see this period as a time of transition for those who don't want to repeat what happened to the mainframe part of the industry.
      • Yet mainframes are still with us and in heavy use

        despite all the pundits saying they were dead as the dodo.
        Deadly Ernest
        • Dead Mainframes

          Still contain 75-80% of the world's data, run 95+% of the Fortune-1000 businesses, and are the backbone of a) the internet b) a lot of the upcoming cloud infrastructure (sorry, don't have a % on that yet). Yup. Still dead, after all these decades...
          • Mainframe

            What is a mainframe. I think the term is a little vague. To most it means, "real big computer".
          • I encourage you to read about mainframes

            They were the 1st "real" multiuser computers. Many companies made them in the past, but I believe only IBM makes them now (Unisys too?). I worked in a mainframe shop a few years back. Since the OS is so "primitive", you need to shut it down on each daylight savings change to set the clock ("falling back" messes up the transaction times).
            Roger Ramjet
        • prognostications are actually wish lists

          if you read all the lists of dead predictions it shouldn't take you too long to figure out that prognostications are really the Santa Lists of the Pundits

          cloud computing is facing a rain out. and this is due to the dismal state of computer security.

          "computer security" is as bad an oxymoron as "honest politician"
      • L. O. L.

        "at the same time, the future predicted in this article is coming."
        So is the day when the sun is going to hyper expand. It doesn't make either a good thing for society.

        "Think about on-line banking. Remember once upon a time in the late 90's when doing banking on the internet was one of the scariest things one could do."
        Yes. Now also keep in mind the insecurity of the Win9x variants of machines. Similarly, consider the security of WinNT Server. I'm sure the databases and back end were likely either OS/2, Solaris, or some kind of mainframe, but it doesn't mean that the front end didn't have reasons for concern. Meanwhile, the other part that makes your analogy fall flat is that the banks effectively went ahead and threw a logon page on there anyway, so the data was there, and you were paying for it in whatever fees you paid for your bank.

        "Now, not only is it done online, it can be done thru the phone and thousands have bought into the idea."
        On the heels of the last point, this one royally falls flat for two reasons. First, very few paid extra for internet banking. Similarly, few that use it now /would/ directly pay for internet banking. Second, you couldn't do your financial transactions exclusively on your desktop, and then banks came in and wrote fluff pieces indicating that it would all be done in the browser. Inherently, online banking had to be online, because the data being accessed, by definition, wasn't capable of being on your machine locally (yes, transactions records could be, but you couldn't shuffle money around that way). E-mail and IRC and AIM and Napster were always this way, too - the very nature of the tools meant that you were accessing data that depended on the connection itself in some way. Compare this with word processing - a problem that's been comprehensively solved for over a decade...and now we're going to get rid of local word processing because...cloudification of synergies?

        "I foresee the same happening with this "cloud" business."
        Couldn't have guessed.

        "It's gonna happen."
        Depends on how the first wave does it. Salesforce is great at cloud because it was inherently built that way, to solve a problem that has always been a nightmare for locally stored data...also, they're marketing to marketers, so that helps. Google does all their stuff in cloudy ways, because that's the nature of their beast...also, they make all their money by having as much of your data as possible. Adobe...not so much...for now.

        "As the security concerns are addressed and standards begin to form around it (just like the maturity of the web), it will be adopted more and more."
        The security concerns are progressively less and less technological, and more and more based upon human nature. "Who watches the Watchmen", so to speak? If the cloud vendors can't access your data, they can't deduplicate (and thus need more hard disks, and thus can't remain competitive), and they can't sync data across devices, and of course, they can't deliver relevant ads. If they can access your data, then it means that someone, somewhere, can throw it on a Western Digital Passport drive and sell it to a competitor. Paranoia? Sure. Impossible? If my data isn't encrypted, no.

        "I see the current IT landscape like mainframe:"
        From a functionality standpoint, what's the difference between it and "a server rack"? Not much. It changed form factor, and I'm sure the Dell servers in my racks won't survive a medium sized air strike like my AS/400, but it's still in active use and production today, doing most of the same tasks.

        "will it still exist? Yes. Will you need as many in-house admins? No."
        You won't need as many people to replace physical drives, but you'll still need people to make use of the raw power you're renting.

        "I see this period as a time of transition for those who don't want to repeat what happened to the mainframe part of the industry."
        Not. Even. Close. To the same thing. No one was selling mainframes to consumers. Mainframes got down to the point where they can functionally exist as 2U servers. Some stuff is still done on proper mainframes because of legacy stuff (and because they generally are running highly optimized code, for which a vanishingly small segment of people are writing exploits. Some people rent CPU time on their mainframe still, but most just buy the servers and run them. Consumers aren't uploading everything there. Businesses still have control over their servers, whether they're from Dell or they're mainframes still. Honestly, outside of "newer stuff sold better", I'm having trouble drawing a comparison.

    • RE: Cloud computing

      > rather than pay nothing

      Not to argue your larger point, but nothing is free. Hosting locally has a definite cost when you factor in the equipment purchase and manpower to keep it running and backed up.
      • And in most countries around the world hosting elsewhere as a much

        high cost due to download charges as few countries have unlimited free download.
        Deadly Ernest
    • g

    • Agreement

      I totally agree with you. This is why I left the IT Field. I see this going down the rabbit hole all for the mighty dollar. I was informed through out my IT career, to include in the military, never have all eggs in one basket. Example: Target's 40M fiasco.
    • Depends...

      First off, you analysis on cost greatly depends on what systems you're maintaining, at what level of redundancy and such (are disks running off an EMC, is it virtualized, etc). Then there is the cost of the server farm itself, power for systems and cooling, etc. DR contingencies can be expensive. Licensing costs for servers, enterprise AV, firewall, etc. Then there is the cost of all the employees to maintain all of this.

      Second its the "in and out" cost. My company currently is setting up a MDM solution. We choose a cloud based one as it had no infrastructure or on prem cost, we only pay for what we use, we don't have to worry about maintaining MS or Linux servers, disk space, etc. And two years from now if we want to migrate to another system, the only real cost is our time any any disruption to our users.

      Third is the BYOB movement and devices never connecting to the LAN. We replaced our old mail system with a Microsoft hosted Outlook Exchange service along with corporate 365 Office. Now you connect to your mail no matter where you are, you can access your SharePoint and SkyDrive shares regardless of OS. All of our CRM systems are being moved to the cloud or are cloud only solutions. Even the MS Lync system is our core communications for chat, voice/video, meetings, etc. And soon it will even integrate with a phone system so that you can make calls from a "corporate phone".

      Our next step is to start looking at cloud based Windows client VDIs. We would like to federate our network and AD to include these VDIs and just give our remote users a stipend to buy and maintain whatever devices works for them as long as it can RDP into these. That way we can spin up and retire and snapshot and restore and upgrade, etc all we want without touching a client device.

      Cloud it the future. The only major problem I see is that you need a warrant to search a on prim system but a cloud based one you just have to present those request letters with a gag order so the business customer does not even know they are being searched. Big government is completely out of control (at least in the US).
      Rann Xeroxx
  • Your mileage may very...

    I wish there were more articles about HOW the cloud is being leveraged for companies. As I work for a larger company that has some restrictions. I have a different perspective of what we should or shouldn't push the cloud. I can see opportunities for things such as mail, but then you have make sure your legal discovery and hold processes can handle that. SharePoint is a place that can move to the cloud, but it kind of has the same problem.

    I can see how SMB's would love cloud, as they really don't have the budgets or tolerance to buy everything that's needed..

    I guess, I'm just saying I wish these articles proclaiming that the cloud is coming would have some more substance.
    • Here is what I see...

      In the very near future, all desktops will be virtualized and all you will need is a computer and a web browser to access your work desktop. Amazon is setting up a service to do this at a very attractive price per user (about $10-$25 per user per month, depending on your needs, with some levels including full copies of MS Office), so I definitely think that this will be the future.

      The servers will be virtualized on the same service, in this example, Amazon, which is offering such services at very attractive prices as well. 2 TB is about $400/month. And then Amazon is taking care of all backups, so your data is safely stored.

      Bottom line is it won't matter if you have a Mac, PC, Linux machine, Chromebook, Tablet, even a Rasberry Pi, you will be able to run ALL of your desktop apps quickly, even massively graphics intensive apps with no real difficulty and without the need to buy high end computers anymore.

      This of course is going to cause a massive drop in the business side of the PC Market, much like we have seen the personal PC side take the past couple of year, in fact this could be far, far worse.

      Now, Amazon's services will not work for everyone, but there are services that are similar that have government security clearances, etc.

      As for security, I used to think that my data would be more secure if I have it physically here, but the more I look into it, the reality hits that the data is far more secure in Amazon's servers. Why? They have more money to spend on security than I ever will.

      So, yes, I do think the cloud is coming and fast, because they have worked through a lot of the objections people have had in the past. The real problem comes where there is limited internet connections or no internet connections at all. In these areas, the cloud will NEVER happen, unless something drastic changes and they can get better internet access to these areas.

      I don't necessarily think 2014 is going to see everyone doing something like this, but we are definitely looking seriously into it.
      • That all sounds good and others have been there already, yet for me

        to use Google Docs or Office 365 of something similar it would cost me around $25.00 per page with all the data charges as most of the world does not have unlimited free data - and that's a big killer.
        Deadly Ernest
      • cmwade1977, you are correct

      • Yep..

        I agree to a point. But the big issue is disclosure rules, etc. If you have any PII or other sensitive information the regulations state that you need to investigate how far did they get. What did they have access to, etc. I'm still struggling with how I would do that in the cloud, when local tools presently can do that easier. I'm not saying it won't happen, just saying there are more hurdles that need to be addressed.
      • Cloud may be useful when it's offered how it is supposed to be.

        2 TB is about $400/month
        Are you sure? If they have this nerve to ask 400 $!, per month!(oh god relieve them of their idiocy) for just 2 lame terabytes, cloud will sink before it is born. Yes, we need the comfort of accessing information everywhere, anytime, but if I have to pay 4800 dollars a year for just 2 pitiful tb, I might as well buy 100 tb of local storage and distribute it in spacetime according to my needs.
        Forget privacy and security, just because some morons invested heavily in what is necessarily becoming obsolete technology, doesn't mean we will help their investment to pay off.
        2 tb is soon going to be the capacity of a f****** flash usb.They must be stoned if they think people will pay them a fortune for nothing.
      • @cmwade1977

        I agree with you that a lot of business will move to the cloud, but I don't see all companies doing so. The company I work for has already stated, and more than once that we will not be moving any of our data to any cloud, or off site services.

        I work for a very large defense company, and well I'm sure you get the picture.