Cloud computing is becoming a core IT and business competency that is impacting both the ways in which companies build products and how the IT industry functions, writes Wikibon Cloud Analyst Brian Gracely. Data from the recently published “2015 Future of Cloud Computing” survey, a joint effort by Wikibon and North Bridge Venture Partners involving more than 30 technology leaders, shows that companies are shifting from private cloud strategies to hybrid and pure public cloud consumption models (see figure above).

The survey of nearly 1,000 cloud computing practitioners also showed that corporate motivation is shifting. While scalability was the most-cited reason for moving to cloud in the 2015 survey, agility has moved from fourth place to second, above cost and innovation, since the initial survey in 2011. Enterprises are also starting to adopt emerging cloud technologies, such as software-defined networking (SDN), platform-as-a-service (PaaS), and database-as-a-service (DBaaS).

Security remains a major concern for corporations consuming public cloud services, along with compliance, privacy, provider lock-in and complexity. Reliability has dropped off the list of user concerns since 2011.

Cloud computing is moving beyond providing traditional compute and storage services to being embedded in the majority of physical products companies produce as a major source of market differentiation. Automotive manufacturers, for instance, are now using new applications and cloud services to deliver better in-vehicle experiences rather than focusing on external design and gas mileage for differentiation.

Impact on vendors

The cloud computing trend is having major impacts on traditional vendors. Companies that once depended on a complex supply chain of vendors, distributors, independent software vendors (ISVs), system integrators, value-added resellers (VARs) and in-house purchasing departments see their lines-of-business executives going directly to major cloud service providers. When they do buy from traditional vendors, they expect a greatly simplified supply chain and want to limit the number of vendors they work with. This is driving the vendor consolidation trend that made news in 2015.

Cloud services provide multiple on-demand pricing models. And their pricing is more transparent and publicly available to customers. This reduces vendors’ ability to manipulate markets through a lack of information. Cloud providers have much greater insight into customer usage than on-premise vendors. This insight guides their service development roadmaps and pricing. Distributors, systems integrators and VARs are finding themselves disintermediated when customers do not see sufficient value in what they offer. This is forcing these intermediaries to add value and find new ways to engage with customers.

Cloud computing has become a core competency every business will need to embrace and excel at in 2016, Gracely writes. IT organizations need to build stronger relationships with internal business group to understand how technology impacts their business, products and services.

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Graphic © 2016 North Bridge Venture Partners