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VMworld 2014, the cloud and the future of enterprise IT

Bernard Golden | Sept. 10, 2014
The VMworld 2014 expo hall floor brimmed with vendors hawking network, storage and VMware extensions. But that's legacy tech, and anyone going back to work thinking that the public cloud remains two refresh cycles away is missing the bigger picture.

As far as addressing the "developer" part of DevOps that is, the user of virtualized resources it's safe to say that developers represented a shadowy presence hovering beyond the shadows of the campfire around which VMworld attendees huddled. Unmistakably, the needs of developers and application groups were viewed as a kind of generalized, inchoate demand to be addressed at some point, once the infrastructure was all shipshape.

Understanding the Nuances of AWS Spending
It's here that the comforting inferences many might draw from the survey show their true danger. When I queried another analyst on the conclusion that enterprises aren't using AWS, he restated the survey results in a more nuanced way. He noted that enterprises are using AWS, but only for a subset of applications collaboration, some analytics and Web properties, to name three. The vast majority of enterprise applications still run in corporate data centers. Put differently: While there is enterprise spending with AWS, it's a tiny fraction of overall spend and, therefore, relatively unimportant.

While I respect the analyst, I respectfully disagree. Too many people look at the ratio of total spend to public cloud spend and conclude that public cloud computing is a rounding error. That fails to understand the rate of change (their first derivatives) in the two areas. Even more importantly, it fails to comprehend their second derivatives, which is how fast they're changing. As IDC wrote in its 2014 forecast, the IT vendor space is really two markets. There's a stagnant (0.7 percent growth) second platform a "legacy IT" market and a high-growth (15 percent) third platform market.

That floor full of vendors offering network, storage and VMware extensions? It's a collection of legacy-focused companies locked in a zero-sum game, where one firm's growth comes at the expense of another vendor. One can certainly see this in big tech's financial results:

Every new vendor that crowds into the virtualization ecosystem makes its bones by stealing revenue from an incumbent.

On the public cloud side? As I wrote last month, Pacific Crest Securities estimates that AWS will grow 40 percent per year for the next five years. This significantly outstrips IDC's estimate. I believe Pacific Crest's estimate more nearly represents the third Platform growth rate. In my experience, the growth rate is increasing; that is, its second derivative is growing.

I find the whole message of VMworld puzzling. Attendees could come away from the event confident of a measured pathway to the future, secure in the knowledge that an entire ecosystem of vendors will make it possible for them to incrementally improve their existing environments.There seems to be little awareness that this approach won't nearly satisfy the increased expectations of developers. Now that they've seen what's possible from AWS (or Google or Microsoft, for that matter), the belief that they'll wait two refresh cycles for functionality approximating what's widely available today is risible.


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