UPDATED 00:43 EDT / AUGUST 05 2011

NEWS

Ten Realities for IT Service Organizations

There are several infrastructure-related trends we’re watching here at Wikibon that will have direct impacts on IT organizations and service delivery over the next five years. Specifically:

 

#1 The consumerization of IT. CEOs have come to realize that for many organizations, IT in the home is “better” than IT at work. This mindset is driving organizations to re-think infrastructure strategies and develop more cloud-like internal IT. Services Angle – organizations will pay a premium for operational simplicity and services business models that rely on extracting value through complexity will become increasingly less desirable.

 

#2 Cloud computing visions. Whether the cloud is public, private or hybrid, organizations are moving to IT-as-a-Service. IT organizations (ITOs) are under pressure to deliver cloud-like agility, simplicity and cost. Combined with the economic meltdown, this trend is a permanent and disruptive force in the industry. Services Angle – everything is becoming a service. For ITOs this means increasingly moving toward a pay-as-you go model that emphasizes lower up-front capital expense and more predictable ongoing operational costs. Models that inject massive changes in ongoing operational costs will be met with friction from lines of business.

 

#3 Commodity thinking predominates. For years, enterprise buyers have justified premium pricing for products such as storage. For example, the uplift for enterprise-class storage as compared to off-the-shelf raw drive capacity has remained at 10X or even higher for a decade or more. Increasingly, driven by best practices at companies like Google, Facebook, Zynga and Twitter, IT practitioners are deploying storage at a 3X uplift (for archiving applications), dramatically reducing storage CAPEX for on-premise storage arrays. Services Angle:  Typically, maintenance fees are calculated as a percent of list prices (e.g. 18%). As up-front prices come down, services organizations will take an initial hit on maintenance pricing. With new methods of data protection however, for the same level of availability less expense will be needed to address failures. Over time this will put pressure on the standard 18% pricing model.

 

#4 Simplicity and the “Google Effect” – While infrastructure at large Web companies is significantly different than traditional enterprise IT, the fact remains that the consumerization of IT is driving ITOs to simplify and cut out the complexities. While enterprise storage requirements still can command premium pricing, ITOs must deliver storage that is simpler to manage and more cost effective. Since the mid 2000’s, organizations have actively pursued a “Tier 1 Avoidance” strategy and rapidly begun to migrate data to more modular products that are highly virtualized and simpler to manage. Services Angle: See #1 above.

 

#5 Cloud service providers (CSPs) as a channel.  Increased storage consumption by service providers will require new marketing and channel strategies. Pressures to the on-premise storage model will come in the form of lower cost commodity targets in the cloud (e.g. S3) and new pricing models – i.e. elastic pricing/rental. As well, there will be a steadily increasing move to object-based, disbursed storage and erasure coding by CSPs, pressuring IT organizations to be more cost competitive. Services Angle – Block-based storage will continue to command premiums at ISPs as they will be able to pass the costs on to certain users demanding block capability. CSPs will become increasingly strategic partners for ITOs as well as services organizations through partnerships. However many of these partner relationships will become strained over time as CSPs become increasingly competitive with large service providers.

 

#6 The Rise of Tier 1.5 and the “Good Enough” effect – The storage industry successfully created a niche that is positioned as a long-term disruptive force. Specifically, so-called Tier 1.5 arrays that offer “good enough” performance relative to high end Tier 1 systems and much more function than Tier 2 modular arrays. Importantly, Tier 1.5 arrays are purpose built for simplicity and mixed workloads, shunning many of the principles of manual tuning that have dominated enterprise storage practices for decades. Services Angle: Increasingly, ITOs and service providers will use products such as Tier 1.5 arrays that are good enough to service more of the application portfolio – changing services delivery by knocking down more silos.

 

#7 Flash changes the game. – Flash only systems are potentially a highly disruptive force to traditional array companies that serve the very high end of the marketplace. Specifically, emerging flash specialists such as SolidFire are targeting cloud service providers and hybrid/private clouds with block-based offerings that provide substantially more flexibility to service providers (e.g. capping performance). Services Angle: The types of high-end solutions going into service providers and private cloud customers will evolve and become more focused. CSPs will charge an ultra-premium for high-end block-based specialized storage and pass that on to customers.

 

#8 New methods of data protection will emerge. Leveraging very cheap commodity disk drives and applied techniques such as erasure coding– new ways of protecting data beyond RAID are coming to market. Lower costs of multi-core machines will support compute-intensive techniques such as erasure coding, which is math-heavy and takes considerable system resources. As an example of the potential of this force, our initial estimates indicate that relative to 3-node data center approaches, erasure code or disbursed storage will offer similar availability attributes at 1/30th the cost. Services Angle: This trend will change the economics of service delivery by both pressuring revenue and lowering the cost of service. As well, the urgency to replace failed components will lessen putting less pressure on ITOs to respond to failure. A “throw it away” mentality will predominate and change the delivery of services from one of immediate response to less pressure.

 

#9 Convergence. The combining of storage, networking and compute has implications in terms of packaging, integration and suppliers’ ability to offer a richer set of options – i.e. different packages for different verticals. Service providers will be large consumers of converged infrastructure from companies such as EMC/VCE, HP and Cisco/NetApp. Services Angle – Service providers will be a big consumer of converged infrastructure. Services organizations living of integration margins at the storage, compute and networking layer will see increased pressure.

 

#10 Big Data. The trend toward massive data farms that are distributed across the Internet and mined for insight are the hot trend in the tech business today. Services Angle. This trend presents business opportunities for new services for ITOs and service providers.  Specifically, services to connect emerging Hadoop infrastructure with traditional data warehouses as well as services in the are of training and certification for data scientists.

We are at an inflection point in our industry and ITOs and services organizations must respond to accommodate new business models, technology shifts and economic realities. 


A message from John Furrier, co-founder of SiliconANGLE:

Your vote of support is important to us and it helps us keep the content FREE.

One click below supports our mission to provide free, deep, and relevant content.  

Join our community on YouTube

Join the community that includes more than 15,000 #CubeAlumni experts, including Amazon.com CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger, and many more luminaries and experts.

“TheCUBE is an important partner to the industry. You guys really are a part of our events and we really appreciate you coming and I know people appreciate the content you create as well” – Andy Jassy

THANK YOU