Economic history is replete with creations that have changed our world. From steam power to the internet, human innovation moves forward in great leaps and bounds, thanks to technology. Here, I present my arguments as to why I believe we are on the ...

 

The Cloud Economy and more...

The Cloud Economy

Slide1Economic history is replete with creations that have changed our world.  

From steam power to the internet, human innovation moves forward in great leaps and bounds, thanks to technology.

Here, I present my arguments as to why I believe we are on the threshold of a new economic era: the cloud economy.  

This is not about how we feel about clouds, it's about the cloud's potential to change the nature of the world we live in, perhaps faster than we thought.

Slide2I think it's always useful to start with a quick historical perspective.  Indulge me?

Steam power was invented in 1762. For the first time, you could deliver substantial mechanical power almost anywhere.

It marked the start of the Industrial Revolution, among other things.

As with any innovation, there were plenty of disruptions at hand.

For example, if you were in the stagecoach business, the idea of steam powered trains didn't exactly thrill you.

Slide3About a hundred years later, we started to use steam power to generate electricity. For the first time, power could be consumed at a distance from where it was generated.

This picture is from the 1920s.

If you look carefully, you can see that the gas streetlights have been updated with electric lamps.

Probably not so good for the guy who was selling natural gas.

In the 1950s, we realized that, not only could electricity do great things in the physical world, it could also do great things in the information world.

Slide4The first computers came into use, kicking off another transformation.

This picture is from 1960 where computers were used for the first time in an attempt to "predict" an election.

It didn't work out well back then either.

In the early 1990s, we started to appreciate the power of connecting computers together in one big fabric -- a network of networks -- the internet. As we all know, this was another big step forward.

Which brings us to our current digital era. Just about everything we do: read, eat, shop, relax, work -- has been transformed by the internet.

And there are no signs of anything slowing down.

What Can We Learn From History?

Slide8I want to step back from these events, and see if there are any common patterns we can learn from them.

I think there are a few lessons worth considering.

First, disruption of the established players is the norm. As a familiar example, retail after the internet will never be the same again.

And we can safely say that these economic evolutions are happening at a faster pace. Steam power took about a hundred years to be universally adopted. Electrification, maybe 60 years. Computing, perhaps 20 or so years. The internet? Less than a decade.

Things are coming at us faster than before.

I like to remind people that the iPhone came out about ten years ago. You get tired trying to list off all the different industries that were impacted by a single device.

Think about it: handsets, telecom companies, cameras, nav systems, music on the go -- even watching Netflix on your phone instead of on a TV. All from one device, and all in a very short period of time.

I think of these eras as building blocks, each new one building on the previous ones. Steam power was used to power electricity. Electricity powered computing, which in turned powered the internet.

The other important thing was that the use cases that people quickly came up with were very different from their initial intent.

The first application for steam power was draining water from coal mines. The point is this: that vast waves of innovation inevitably result when these new models come along.

Slide9You'll also notice that consumption as a service has become the preferred model, vs private ownership and consumption.

I think that's for two reasons: one, of course, convenience -- but also structural economics.

For example, in the early history of electrification, some people thought the best way to capitalize on electricity was to build and operate your own powerplant for your own use.

These days, we realize that a shared utility model wins, most every time.

If you dig a little deeper into the stories of people who lived and worked in these times, an interesting picture emerges.

Slide10First, you'll find stories of people I call mobilizers -- people who understood the threat, or the opportunity, or perhaps a bit of both -- and did something about it in their world.

The factory owner who invested in steam power before it was everywhere.

The CFO who invested in computerization back when they were big, expensive beasts.

The marketeer who realized that there was this new thing called social media, and it changed the game.

These mobilizers had to think in terms of new organizational models in a redesigned world. Yes, you still did finance, or marketing, or manufacturing, but you were going to do it differently than before.

And finally, whatever platform they used to run their business had to change as well. In the age of steam power, owning lots of horses and stables didn't make sense like it used to.

What's Next?

Slide11So with that historical perspective in mind, what's next?

I call it the cloud economy.

It builds on what has come before. And I think it marks the beginning of a new historical economic epoch.

The next big thing, if you will.

And not because I happen to work in tech.

If you cut through all the noise, I think there are three big ideas behind cloud.

First, it's an enabler.

Slide12Applications, tools, data, resources -- all there, all ready to be put to all sorts of innovative new uses -- at least, when you put them in the right hands.

Second, it's an economizer.

Even if you don't use it to innovate, it fundamentally changes the cost structure of familiar IT.

Third, it's an equalizer.

In the cloud economy, little guys have just as much firepower as the big guys.  How you feel about that depends on whether you're a little guy, or a big guy.

Slide13If we go back and look at all the other transitions, part of the disruption was that there was a new way to get things done faster and cheaper than before.

In economics, we call this a "new means of production".

In the cloud economy, cloud is the new means of IT production for one simple reason: a shared services model always wins out -- every time.

But there's something even more powerful at work here.

Cloud bends the innovation curve.

Slide14Cloud-native innovation is exponentially faster and cheaper than trying to innovate using traditional IT methods.

And it's easy to see why this is: in the cloud, you've got the very best applications, the very best tools, the very best data sets, the very best infrastructure -- all ready to go at a moments notice.

And entirely new things are possible as a result.

So, how does this impact those of us who are business leaders, and thinking hard about the next thing?

Impact On Business Leaders

Slide16I think most of us are busily re-imagining what our organization's value proposition should look like in a few short years.

Entirely new things are possible -- how will be capitalize on them? Or protect ourselves from others who are also innovating?

Once we have some clear ideas, we'll have to start thinking about transforming the pieces of our organization to adapt and thrive in the new cloud economy.

We'll have to get really good at out-innovating the other guys.

Slide17I think -- in the cloud economy --  people will need a new platform to do business on. The platform you're probably using today was built for a different time, and a very different set of rules.

The last time the world forced this kind of change, it was the internet. I'd argue it's happening again, only faster this time.

And -- at Oracle -- we have a few perspectives about how you might think about your next business platform.

The Oracle Perspective

Slide18Let's start at the top: your application platform. Your business processes are what defines your business as it runs today.

In the cloud economy, your application platform must become a platform for business process innovation.

Doing things in a new way, much faster than before.

Our recipe is conceptually simple: standardize your business around a modern core, extend and innovate around the edges, and position yourself to take advantage of all the great technologies coming our way: AI, internet of things, advanced analytics, chatbots and whatever else is out there.

Slide19We think that a great application platform should be built on a great information platform.

In the cloud economy, information is the new currency.

We will all have to get very skilled at extracting the value from information: ours and others.

We'll need to be able to gather and organize it in all its forms. We'll need to be able analyze and put new insights into action quickly.

And we'll have to do so in such a way that we don't expose ourselves to digital risk.

Slide20And, finally, we'll need cloud infrastructure. Think of it as the modern factory for the cloud economy.

You'll want it to be cost-effective and open. You'll want it to be secure and resilient.

And you'll want to deploy it in any location of your choosing: someone else's data centers, or maybe in your own.

Perhaps you realize something new is in the air, and you've started to think hard about your next business model, and how you're going to capitalize on this generational opportunity.

Oracle's Role

Slide22People ask me why I work for Oracle.  

The answer is simple: we can help leaders thrive in the cloud economy.

We bring the cloud platforms that our customers require for success.

We bring very broad expertise: technology expertise, functional and organizational experise, and vertical industry expertise

And, perhaps the most important thing of all -- we guide leaders in crafting their individual strategies to move forward in the cloud economy.

I would argue that we are in the early days of the cloud economy.  

I wonder how long it's going to take for everyone to figure out that -- once again -- the rules have changed.

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The Cloud Dialogues

Doctor_is_inSeveral years ago, my wife decided to get an advanced degree in psychology, and became a counselor. Along the way, I was duly impressed by the therapeutic power of simply talking about a problem in a constructive manner.

These days, I joke that I've become a "cloud therapist" for many of the enterprise IT leaders I meet. They know they have a big challenge ahead of them, they just need to talk about it.

I've been told the conversations are usually helpful, which is good.

Over the years, some of my most stimulating discussions have been with Dave Vellante, founder of Wikibon. Dave and I feed off of each other quite well: freely challenging each other's assumptions, and getting to the meat of the matter before too long.

And we always have fun.

A while back, we thought it'd be great if we could have these great dialogues in a more public forum. We agreed on a series of four interviews, each approaching the enterprise IT cloud challenge from different perspectives.

Chuck_hollis_cubeIn the first interview I'll want to explore some of the deeper forces behind the move to cloud-like models for enterprise IT. Understanding why a problem exists in the first place is a big part of conquering any challenge.

Our second session will be looking at why existing approaches aren't working well for most enterprise IT groups. My general thesis is that most enterprise IT leaders want to move in a cloud direction, but are finding it much more difficult than it should be.

No surprise, I want to spend a session on what Oracle is doing to close enterprise IT cloud gaps, and have Dave poke holes as he usually does. Dave can be quite the skeptic.

And I want our final interview to explore different journeys enterprise IT organizations are taking to progressively adopt cloud models -- putting the ideas into practice, moving forward and delivering results.

If the past is any indicator, these should be great conversations -- especially if you enjoy point-counterpoint debates.

If this sounds interesting, I'd invite you to join us: "Conquering Enterprise Cloud

Looking forward to seeing you there!

      
 

The End Of Storage As We Knew It

BuildingThis morning, I came across this grim piece from Chris Mellor at The Register, detailing evidence of the violent restructuring in our familiar storage array market.

Call it confirmation bias, but many of us have seen this coming for a while, and have acted accordingly. The numbers have been mediocre for many quarters, but recently the pace seems to be accelerating.

It wasn't all that long ago that storage companies were almost semi-glamorous in the enterprise IT world: EMC, NetApp, HDS, Pure, Nimble, et. al. Great growth all around, and tons of VC flowing into the sector.

What happened? And should we think of this as a temporary aberration, or a permanent structural shift?

The Lure Of Storage

Symms2I decided to join a small storage startup in 1994, moving from Silicon Valley to suburban Massachussets. At the time, EMC was a ~$400 million company with something like 1,600 employees.

I became sold on the idea that -- in the world of computing, information mattered. Capturing, persisting and re-using data was going to be a big deal, so storage was going to be really important.

And I thought standalone storage vendors would have a better strategic positioning than server vendors in this regard.

So I packed up my young family, and off we went on our adventure. It turned out to be a good decision, but nothing lasts forever.

The Last Twenty Years

Info_explosionGenerally speaking, the last twenty years have been good for dedicated storage vendors.

The need to store and protect corporate data has grown rapidly, and there has been no shortage of new technologies that make things better: performance, capacity or functionality.

We had year after year of rosy industry numbers: healthy growth, good margins and wildly optimistic forecasts for countless zettabytes! of future growth.

The growth in information still holds true, it's the consumption model that's changed.

Once again, nothing lasts forever. The familiar model is gone, and it's not coming back.

I think there are three primary reasons we're seeing a structural shift in the storage sector.

1. Opportunities for differentiation are gone.

Early on, storage was difficult enough technologically that there was plenty of room to invest heavily in unique IP and establish differentiation. In addition to secret sauce, things like integration and availability and customer support really mattered to enterprise IT teams.

And, overall, aggregate demand for capacity, performance and functionality exceeded supply, hence overall growth.

Same_sameBut storage technology has matured. The opportunities for secret sauce are now few and far between, and generally quite niche. And once differentiation slows, commoditization kicks in with a vengeance.

New, disruptive technologies aren't the answer because everyone has access to the exact same tech.

For example, how many flash arrays are in the marketplace today? Hyperconverged systems with integrated storage? Cheap, dense storage boxes that do dedupe? As another example, NVMe flash and fabrics are all the rage today, but it won't be long before it's just another checkbox feature.

Without meaningful differentiation, storage (like compute) becomes a race to the bottom. Unless demand for standalone storage skyrockets, the overall market will shrink.  And that demand isn't there.

FWIW, part of Oracle's differentiation in the storage space is unique feature integration with the Oracle Database. The two of them working together do a long list of things that others simply can't. To the extent that differentiation is meaningful to all those Oracle users, it's an advantage.

2. Storage has become part of something else.

CogThere's been a fundamental shift in storage consumption models: storage has become a feature of something else.

I think the trend started in earnest with converged systems, picked up a notch with hyperconverged, and went into full turbo mode with public cloud.

Decades ago, when cars came with crappy sound systems, there was a huge market for aftermarket stuff. Now that most cars come with a decent sound system that's fully integrated, not so much.

This has not been lost on standalone storage vendors. They are in a desperate race to surround themselves with converged (and now hyperconverged) consumption models.

Public cloud is a different story entirely. Not a one of them have figured out to be a meaningful player in any public cloud. And I don't think it's for lack of trying.

At Oracle, we're in pretty good shape in this regard. Our ZFS storage appliance is an integral part of our popular on-premises engineered systems offering. And there's over 600 PB of ZFS storage running in our public Oracle Cloud.

3. Supply exceeds demand.

Ice_cream2When it comes to the ingredients used to build storage arrays,  unit prices have been melting faster than an ice cream cone on a hot summer day.

4TB drives became 6TB and then quickly 8TB and now we're looking at 10TB and 12TB drives. Flash storage started with megabytes, quickly jumped into the gigabyte range and is now safely in terabyte territory.

Fast processing cores are getting cheaper at the same pace. As are wickedly fast interconnects between components, storage and servers. I would argue that supply has exceeded demand, as there's only so much storage capacity and performance a traditional enterprise can consume.

600HP_carThere are only so many flat panel TVs you can put in your house. Or consider the the automotive world, where 300HP+ cars are now commonplace. How many people can justify a 600HP+ car for their daily driver?

OK, myself excepted, but ... good enough is good enough for most folks.

Not only that, thanks to decent storage software, storage array vendors are starting to get cut out of the middle -- adventurous buyers are starting to roll their own.

Witness the success of VSAN, Scality, and others.

What Lies Ahead?

FarewellOne thing is clear: the standalone storage array industry already has its best days behind it.

We are witnessing the end game of a structural industry shift. It will still continue exist as a category, but -- before too long -- we won't be seeing any more Gartner MQs as no one will care as much as they once did.

Unless storage vendors can offer meaningful differentiation, as well as being part of something architecturally bigger (like a public cloud), it's a grim scenario.

You might have noticed that the VC spigot has turned off for on-prem storage array vendors, and the IPO market has not been kind to the new entrants.

Storage *software* companies that have a decent public cloud angle might still be an opportunity though. Or not.

It was a nice run, but nothing lasts forever.

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The Case For Pessimism -- And Optimism -- In The IT Labor Market

John-Maynard-Keynes-650I have long been an armchair economist.

I did a full economics sequence in school, found it to be utterly fascinating, and have continued to read intently on the topic ever since.

Such is the life of a geek.

However, I've always wondered why none of the typical IT analyst firms spend any serious effort studying the structure and dynamics of the IT labor market.

Sure, there's all sorts of great analysis on various technologies, vendors and consumption models, but what about the people who are responsible for making the magic happen?

How is their world changing?

It's relevant because change is in the air. Cloud, baby.

Cloud_roomPublic cloud is not only arbitrage on technology costs -- which everyone talks about -- but also labor costs.

Cloud is already busily at work disrupting the IT technology market. I would argue that -- before long -- it will do the same for the IT labor market.

I don't know whether to be pessimistic or optimistic about the changes to come, so I'll present my case for both -- and let you decide.

But one thing is certain; change is coming.

The Case For Pessimism

One of the best ways to understand an industry transition is to go looking for reasonable historical parallels. Yes, there's no such thing as a perfect analogy, but it's still a useful exercise.

ManuMy best example is what happened in US manufacturing near the end of the last century ("Why Enterprise IT Will Go The Way of US Manufacturing").

TL; DR: in a short period of time, US manufacturers were forced to transform from laggards to leaders, or perish in the process.

But what happened to the US manufacturing labor market as a result?

In the recent US elections, much emphasis was given to manufacturing jobs going overseas. While that might be true in some degree (and certainly a red meat election topic), the data shows that automation is responsible for the decline of manufacturing jobs in the US.

Robots, folks.

Metro_20161118_mfg_output-vs-employment51As a result, US manufacturing productivity is now at an all-time high. And US manufacturing jobs are at an all-time low.

Such is the way of the world.

If one considers enterprise IT as a "factory" for delivering value-added IT services, the implications might be grim.

Increasing levels of automation -- whether on-premises or in the public cloud -- will likely decimate the IT employment ranks over time in a similar way.

Although productivity per worker will be at an all-time high.

Pessimistic, yes.

The Case For Optimism

The comparison between IT and manufacturing only goes so far.

With manufacturing, we're talking about tangible things -- and there's only so much demand for TVs, cars, widgets, jet aircraft and so on. You fight for your fair share by delivering a better widget at a lower cost than the other guy.  

RemotesBesides, how many flat panel TVs can you own? I think I've hit my limit.

IT services are a completely different beast, I would argue.

There seems to be no finite boundary for our appetite for newer IT services.

Look what's on the plate now: advanced analytics, IoT, machine learning and more.

And when we're done with those, I'm sure there will be even more bright shiny things we'll want to spend money on.

Furthermore, I'd argue that the market for IT services is highly elastic: the cheaper they become to produce, the more aggregate demand appears for those services.

I'd never would have imagined a 10GB data plan would be insufficient for my daily needs, but there you have it.

Personal_techOK, maybe there are some practical limits on how much personal technology we are willing to  wear, or how many apps we can have on our phones, but -- generally speaking -- the appetite for better tech in the business world shows no sign of slowing down.

All that technology magic will always require smart people to make it work.

Yes, they'll have different skills and roles than before, but the jobs will be there -- maybe even more so than today.

For example: how many people who work with IT tools every day are esconced in business units outside of a traditional IT function?

A whole lot, and I would argue their ranks appear to be growing.  We can't get enough of a good thing.

A potential analogy might be healthcare in the US.

Over the last fifty years, there have been incredible breakthroughs in both outcomes and productivity.

Healthcare-Job-ChangesAnd -- at the same time -- remarkable growth in the demand for healthcare workers.

We tend to care about our health, so I guess we spend more on it over time.  

We can't get enough of a good thing.

A Mixed Bag?

Combining equal parts of pessimism and optimism gives you an interesting scenario.

Like manufacturing, many of our traditional IT jobs are going away, and they're not coming back. Once they've been automated -- cloud or otherwise -- that's that. If you believe in finite demand for enterprise IT services, it's a grim scenario for the career IT professional.

But, like healthcare, maybe we just can't get enough of a good thing. The focus shifts to using IT in innovative ways to create better outcomes vs. heavy investments in simply keeping the lights on.

That means plenty of satisfying IT career opportunities abound, they just look very different than the ones from decades past.

Such are the perils and promises of the cloud era.

I guess you could count me as an optimist.

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Untangling Enterprise IT For The Cloud Era

Many business leaders are now applying serious pressure towards their IT counterparts to move to a cloud model sooner than later.

ConflictTheir motivations are unambiguous. Business people see cloud models delivering better IT services at a lower overall cost.

And no one wants to forego a significant competitive advantage.

But it can be harder than it looks -- at least, given many of the familiar public cloud options in the market.

Most larger enterprise IT landscapes are deeply integrated; almost woven together.

Applications aren't usually isolated; they feed, and are fed by, others. Critical business processes that power any enterprise can span dozens of individual application components. And like a central nervous system, the enterprise IT control plane spans all of it, keeping a watchful eye on performance and security.

Cloud_presoUntangling the components incrementally, and attempting to move them to a public cloud model one at a time, is turning out to be far harder than it might look to be on vendor powerpoint.

Unfortunately, the basic nature of popular public clouds isn't genetically compatible with what enterprise IT is doing today. And therein lies a thorny problem.

What to do?

It's All Connected -- Or Should Be

I keep arguing with folks that enterprise IT is distinctly different than other forms of IT.  

What a web-scale company wants from IT and what a manufacturing company wants are usually two different things.

WovenOne of the defining characteristics of most enterprise IT is deep integration: whether intentional or not.

Data flows are integrated: transactional systems feed reporting systems feed analytical systems which often make transactional decisions -- like what offers you'll be presented on a web page.

Control planes are typically integrated around business processes, or should be: any weak link in the chain can disrupt the desired business outcome.

IT skills and expertise transcends neat boundaries; IT pros do what's needed to ensure that data continues to flow.

Now, Try And Separate Out One Component

When considering a move to a public cloud model, the discussion usually drifts to "which applications might put in a public cloud?".

Unwoven2But if applications tend to be woven together, separating one or two components out for a re-implementation can be much harder than it looks.

The underlying technology of many public clouds is fundamentally different than what you'd find in the data center.

It's managed, secured and operated completely differently.

Existing applications can't be run unless they're tested, qualified and -- in many cases -- entirely rewritten.

And, oh yes, there's this network latency thing :)

If, as an IT leader, you've been successful in creating a deeply integrated on-premises environment, congratulations.  You did your job.

Unfortunately, the act of doing so has made your ability to deconstruct individual application components and move them incrementally to a public cloud model just that much harder.

MovingI remember many years ago when my wife and I foolishly attempted to move house over a period of many days instead of all at once.  I don't know what our reason was at the time, all I can recall is that it didn't work out so well.

The moving boxes would arrive a few at a time, but we had little control as to what was in them.

We'd try to cook a meal, but couldn't come up with enough utensils. We'd try to sleep and shower in the new place, but ended up missing pillows. I tried to fix a few things around the house, but my tools hadn't arrived yet.

It's getting dark outside, where are our lamps?

It wasn't until most of our belongings had arrived that we could get back to a normal life.

Charting A Course

So, what to do?

On one hand, there's no denying the acute business interest in moving to a cloud model. On the other hand, there's no denying the stupefying complexity and deep integration of many IT environments.

Jet-engineThe classic rubric of trying to change a jet engine while in flight applies here.

One school of thought is to embark on a massive initiative to re-engineer IT to be more "cloud native" in anticipation of an eventual move to a public cloud model.  

That's a laudable and notable goal -- but, in some sense, we've been continually re-engineering our environments over the last few decades.

Certainly, any investment along those lines (for example, starting to use containers to package applications) is a positive thing. 

My belief? Depending on a complete re-engineering of a significant component of enterprise IT isn't going to save the day. 

The required level of investment -- in time, money and resources -- can only be measured in many years. It's an inherently risky undertaking.  

And the business people don't appear to be willing to wait -- or spend the inordinate amounts required to accelerate to a reasonable timeframe.

An Alternative Approach

If most public clouds don't work the way enterprise IT works, how about a public cloud that's better designed to work with enterprise IT as it is today; and not at some distant future state?

Cloud_nativeThe change-the-world let's-start-over-again visionary IT types will reject most forms of compromise when discussing cloud.  

Unfortunately, most enterprise IT is defined by compromise.

Let's take workloads and application models.  Many IT shops have a wide inventory: older monolithic legacy applications, current multi-tier setups, and maybe a few modern containerized models they're working towards.  

Ideally, your choice of public cloud vendor should support your choice of application and computing model.  Just like you do in the data center. Want to run your own stack?  You should be able to.

DatabasesHow about database?  The majority of valuable enterprise information lives in some form of a database.  

It's not an unreasonable view that any choice of public cloud ought to be able to run databases extremely well -- at least as well as they run in data centers today.

Which explains why Larry Ellison used most of his keynote at Oracle Open World to clearly contrast the ridiculously extreme differences between Oracle Cloud and AWS.

How about being able to have identical environments in the public cloud and on-premises?  Being able to bring the public cloud model behind your firewall?  Have workload portability across both the data center and multiple public clouds?  Being able to manage and secure it all with a consistent control plane?

These are not unreasonable expectations from an enterprise IT point of view.

Why Public Cloud Adoption Has Been Slow For Enterprise IT

Tangled-messWhen you look at the industry statistics for public cloud adoption patterns by enterprise IT, you'll notice they are characteristically low.  

Dig deeper into actual usage, and you'll find what I call "cloud at the edge" and typically not at the core of the enterprise.  

Maybe desktop and collaboration has been moved to a public cloud model.  Maybe there's some SaaS being done by parts of the business.  Maybe there's a familiar private cloud consolidating generic workloads in the back room.

What's left is the hard stuff: enterprise applications, woven together, powering the critical business processes that every organization depends on to get work done.

Maybe the problem with enterprise IT adoption isn't about enterprise IT.  It is what it is.

Maybe it's more about the poor public cloud choices enterprise IT has been offered up to this point.

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