In October, with great fanfare, the Open Data Center Alliance unfurled its banners. The ODCA is a consortium of approximately 50 large IT consumers, including large manufacturing, hosting and telecomm providers, with the avowed intent of developing standards for interoperable cloud computing. In addition to the roster of users, the announcement highlighted Intel with an ambiguous role as a technology advisor to the group. The ODCA believes that it will achieve some weight in the industry due to its estimated $50 billion per year of cumulative IT purchasing power, and the trade press was full of praises for influential users driving technology as opposed to allowing rapacious vendors such as HP and IBM to drive users down proprietary paths that lead to vendor lock-in.
Now that we’ve had a month or more to allow the purple prose to settle a bit, let’s look at the underlying claims, potential impact of the ODCA and the shifting roles of vendors and consumers of technology. And let’s not forget about the role of Intel.
First, let me state unambiguously that one of the core intentions of the ODCA, the desire to develop common use case models that will in turn drive vendors to develop products that comply with the models based on the economic clout of the ODCA members (and hopefully there will be a correlation between ODCA member requirements and those of a wider set of consumers), is a good idea. Vendors spend a lot of time talking to users and trying to understand their requirements, and having the ODCA as a proxy for the requirements of a lot of very influential customers will be a benefit to all concerned.
Cloud computing has arrived on the market in a big way, with virtually every tech vendor, regardless of size, geography, or solution, vying for a cloud position. But in the race to the cloud, many tech vendors have forgotten that ever-critical customer relationship vehicle: the channel. Or, if they haven’t forgotten it, they’ve coaxed channel partners with the pat mantra, “Do more consulting” (“… while we take care of delivery”). To get channel partners’ perspectives on how the technology value chain is changing in an as-a-service delivery model world, Forrester recently teamed with Outsource Channel Executives (OCE) to survey executives of channel companies across 39 countries, from the local level to the global.
The results of the survey are in, and they tell quite a story: that there is a good deal of angst and confusion among channel partners over their role/value in the cloud services technology value chain; that they aren’t sitting on their hands, waiting for tech vendors to tell them what to do; and that they need a lot of help in transforming their marketing and business models in this new era of cloud computing.
Now, not all channel companies are going to be able to make that transformation (nor should they – after all, cloud computing will never represent 100% of the technology market). But there are going to be many that will try and fail, ultimately resulting in a 12%-15% channel company washout. So think about it – supply (the number of channel companies) goes down; demand (for channel partner assets) remains high. It’s those tech vendors that amp their channel game to enable their partners’ cloud aspirations that are going to come away as the new “channel chiefs.”
This past weekend, my wife wanted desperately to attend Jon Stewart’s “Rally to Restore Sanity and/or Fear,” to support the message of civility and moderation. An injured foot and problems with travel logistics kept her from attending, but we watched it on the Comedy Central network. It was, of course, a counterpoint to the “Restoring Honor” rally that Fox News’ Glen Beck held in August. However, there were two striking commonalities about the two rallies:
First, the ability of cable program show hosts to gather hundreds of thousands of people (estimates seem to be around 100,000 for the Beck rally and 200,000 for the Stewart rally) to travel to Washington for a rally. We’re not talking about rallies organized by a major political leader like President Obama or a media giant like Walter Cronkite with a TV audience of tens of millions of people. Instead, the TV personalities who hosted these events have cable audiences that on a good night may reach 3 to 5 million people.
Second, the absence of attention to substantive economic issues facing this country, such as persistent high unemployment, economic recovery strategies, education and competitiveness, global warming, or budget deficits and priorities. Instead, the rallies focused on culture, tone, and attitudes, with the Beck rally resembling a college homecoming event where the returning alumni complain about how the place has gone downhill since they left, while current seniors crack jokes and make fun of the old geezers wandering around the campus.
Sourcing executives are winding down 2010 and gearing up for 2011. Most of the sourcing executives we have spoken with recently are bullish about the year ahead, despite some looming uncertainty about the economy, particularly in Europe. Spend is opening up again, and buyers are investing in more strategic initiatives. But sourcing groups still struggle to balance low cost and high value.
Many of the sourcing groups currently working with Forrester are asking about cloud as a viable alternative to traditional deployment models. Cloud promises rapid deployment, potentially significant cost savings, and variable pricing in line with how buyers want to pay in the current economy. And cloud offerings continue to mature in areas where buyers previously had concerns (vendor viability, security, architecture, location of data). Cloud adoption is already over 25% in North America, and continues to grow in Europe (led by UK, but also growing in areas like Germany, France, the Nordics).
Most sourcing strategies around cloud consist of five key phases:
1. Understanding the evolving supplier landscape and market maturity across cloud offerings.
2. Educating business (and potentially IT) about the advantages and disadvantages of cloud.
3. Building decision frameworks to support cloud purchases.
4. Creating a contract negotiation and pricing strategy for cloud; building contract templates.
5. Working with business, vendor management, and IT to routinely evaluate ROI and decide whether to renew relationships or find alternatives (potentially cloud, hosted, on-premise, or hybrid).