Pitfalls of the “Big Bang” Approach for Infrastructure-as-a-Service Sourcing Initiatives

During the past 18 months, we’ve seen a handful of Fortune 500 (F500) clients attempt to adopt Infrastructure-as-a-Service (IaaS) Platforms at a corporate level from one or more of the large, established global IT service providers. The drivers for these initiatives were as varied as the companies themselves: CIO wants to move in a new direction, pending contract renewal, a desire for a more portable infrastructure — you name a driver, and we’ve probably heard it.

Regardless of the driver, the story remained the same for nearly all of these initiatives: The client eventually landed on a solution that looked very similar to the incumbent managed services agreement, with IaaS comprising a much smaller portion of the overall deal than was originally anticipated.

How can this be? Given that clients are showing a desire to replace their tailored managed services agreements with more standardized and scalable IaaS services, and large IT service providers are pouring huge investments into building out their IaaS platforms to meet this demand, this would appear to be a match made in heaven.

However, appearances can be deceiving. Here’s why we’re seeing a movement to hybrid approaches over full-scale transitions to IaaS:

• Financials: Many of the traditional global IT service providers are working to reclaim their cloud investment too early, which is reflected in the per-unit cost of compute, storage, and network services. Often, when the IaaS proposal is compared to the traditional managed services proposal, the financials are not attractive to clients. This can be a real shock for clients who’ve become accustomed to hearing cloud is always cheaper.
• Multi-tenancy: Large clients have yet to break through the myriad of security, legal and compliance hurdles to fully take advantage — at a corporate level — of multi-tenant platforms for their core infrastructure. Security, compliance and legal teams generally want to move these initiatives forward, but can’t, because of broad concerns around shared infrastructure. These concerns can often be overcome, but security and compliance teams are often in the dark until late in the negotiations, at which point the client and supplier may not be able to recover and must fall back to a more traditional managed solution.
• Standardization: Clients are asking for more standardized, scalable and repeatable solutions — and providers are building high levels of standardization into their IaaS platforms to reap the economies of scale inherent in homogenous platforms. However, just like we saw in the heyday of ERP, clients have not standardized their internal processes and technologies; therefore, it’s  difficult for them to adopt a standard IaaS solution at the very core of their infrastructure. As customizations inevitably creep in, the solution begins to look more and more like a tailored managed service.
• Skills: Many of these clients have been outsourced for many years, so the organization long ago lost the ability to manage the day-to-day operations of its infrastructure; the retained organization is now managing a service, not the infrastructure itself. How, then, can the retained organization be asked to take back over responsibility for an environment where self-service provisioning and management is at the very heart of the solution?

All is not lost, however. All it takes is recognition that in order to take advantage of what the market will offer today, clients need to look at this not as a big bang, but as a journey to IaaS.

The areas that are slowing widespread adoption of IaaS services for F500 clients will be addressed by the traditional global IT providers – there is simply too much demand for those platforms to not allow adoption. As more large clients successfully move to these platforms, costs will come down, and these trailblazing customers will pave the way for more cautious ones. Innovations in cloud orchestration software will also continue to alleviate concerns around standardization and lock-in, because these platforms will enable clients to run workloads in the most appropriate cloud.

However, the concerns also will be addressed indirectly — clientsare beginning to recognize that by moving up the cloud stack and evaluating application workloads, rather than infrastructure, they are in a much better position to evaluate whether IaaS will work for them. Moving the workload to a public Platform- or Software-as-a-Service solution may be more appropriate, negating the need to even include IaaS in the conversation.

Look forward to a deeper dive on this subject early in the second quarter of the year when we’ll release a more detailed white paper on IaaS adoption patterns by large, multinational clients.

As always, feel free to reach out to me at stanton dot jones at isg-one.com for more information, or you can find me on Twitter.

About the author

Stanton helps enterprise IT and sourcing leaders rationalize and capitalize on emerging technology opportunities in the context of the global sourcing industry. He brings extensive knowledge of today’s cloud and automation ecosystems, as well as other disruptive trends that are helping to shape and disrupt the business computing landscape. Stanton has been with ISG for more over a decade. During his tenure he has helped clients develop, negotiate and implement cloud infrastructure sourcing strategies, evaluate and select software-as-a-service platforms, identify and implement best-in-class service brokerage models, and assess how the emerging cloud master architecture can be leveraged for competitive advantage. Stanton has also guided a number of leading service providers in the development of next-generation cloud strategies. Stanton is a recognized industry expert, and has been quoted in CIO, Forbes and The Times of London. You can follow Stanton on Twitter: @stantonmjones.