by Nick Lippis
One of the big picture views I’ve gained from working with the ONUG Community and ONUG Board over the past several years is the transformation of big business, due to an evolution taking place within the digital economy. The industry is in the third stage of the computing age that started in the 1950s, expanded exponentially with the internet economy of the late 1990s, and is now enabling new digital businesses due in large part to mobile and cloud computing. As in previous transitions, some executives embrace the change, like Netflix, while others ignore it, remember Blockbuster Video? Those that get it are using digital transformation to create new markets and compete with long established businesses, but the journey is through confused and choppy waters.
Large enterprises today are managing multiple new forces acting upon their organizations. For example, cloud enabled, software-defined infrastructure and open source software are the tools of the digital transformation age, but there are significant obstacles for established companies to fully embrace this open IT framework approach. Additionally, large IT suppliers have partnered with big enterprise for the better part of twenty-five years but many are now focusing on medium sized enterprises to feed their revenue machines. Lastly, commoditized hardware, open source solutions, cloud providers, and new, nimble competitors are straining the margins of large IT suppliers. This, in essence, leaves large enterprise IT business leaders with partial solutions to enable their digital transformation plans.
Re-Tooling IT Organizational Design
As IT transitions to a software-defined world, nearly all large IT organizations find that they aren’t organized, nor do they have the skillsets or culture to take advantage of the new technology cycle. For the past several decades, IT staff have been organized around the IT industry’s structure of old, placing operational teams in silos of networking, computing, storage, security and application development, to name a few. The new software-defined world requires full-stack engineers, teams with multiple skillsets that represent a cross-section of the silos. In addition, there is a high demand for software engineers and DevOps teams to re-factor existing applications, write new applications that exploit the cloud and program their software-defined infrastructure for automation. All of this is done in an effort to compete with and become a true digitally transformed company.
The shortage of skilled IT is not the only challenge faced by executives. Many large traditional enterprises struggle to hire and manage a distributed or remote telecommuting workforce, something their digitally transformed competitor startups have succeeded in doing. But even if large enterprises can retool their IT operations with these skills, the process of reengineering existing business models and processes will be extremely disruptive. New creative strategies will be imperative as they continue the journey to the digital transformation promise land.
The old approach to IT can slow down IT teams, as it prohibits them from moving fast enough. Legacy applications also demand tender loving care, sapping resources even further. Increasing regulation and compliance requirements in regulated verticals introduce an opposing, counteracting trend by adding process, back office compliance, and approvals. It doesn’t help that many compliance officials are rooted in the previous generation’s technology.
Cloud Provider’s Influence
IT business leaders, too, are feeling increased pressure from business unit managers that bypass their old infrastructure or can’t wait for a private cloud to be built and go right to cloud services to address their needs. Within this common scenario, IT executives submit proposals to build their own software-defined infrastructure to deliver on-demand services. Many find, however, that management questions the spend as they assume that all workload will eventually move to the public cloud anyway, thanks to well-placed articles from the cloud providers.
While there has been much industry talk about hyperscale, cloud provider’s efficiency and the low cost of automated software-defined infrastructure at scale, IT executives now realize that gaining efficiency requires large teams of software engineers, a resource not available to most large enterprises. Some hyperscale and cloud provider firms view this infrastructure as a competitive and strategic differentiator and thus not all of them are motivated to open up or share their secrets with the large enterprise market.
How to Get Choice and Options?
The IT community, especially in the networking space, has relied upon open standards during the Internet age to deliver options and choices. Standards, however, take years to develop, thanks to the slow bureaucratic process of standards organizations and mixed agenda of their members. With virtually no open networking standard projects being addressed, there is little hope that a set of open standards will emerge in the near future for the digital transformation. Traditional standardization is a thing of the past. Open standards are not being created, but rather, they emerge, based on adoption. There are open source projects and some do deliver great value and choice, but the new ‘vendor sponsored open source initiatives’ for networking are not yet proven at scale.
The typical go to suppliers for large scale IT solutions are struggling with the current technology cycle too and thus are not offering full stack cloud solutions. Yet some enterprises, clinging to the old model, choose existing IT suppliers to provide private cloud deployment, in the hope that over time these suppliers will round out their cloud product portfolio. It’s a risky bet, as they potentially hamstring their company’s ability to navigate the more nimble competitors that are well equipped with software-defined infrastructures that deliver speed and lower overall business costs.
New Metrics Needed
I’m surprised at how many large established companies are pursuing this strategy. It’s easy to understand, however, as traditional suppliers are highly motivated to retain customer wallet share, realized by offering attractive, steep discounts. All of this results in vendor lock-in and stifles innovation. When metrics that can measure criteria such as benefits vs. cost of innovation or the number of operational headcount per infrastructure are finally defined, the strategy followed by large established organizations, will change. Executive management can relate to metrics; and these are metrics that ONUG will facilitate, discuss, and track over time.
So what should IT business leaders do? Too often businesses are competing with digitally transformed entities. Digital transformation is driving the need for agility, speed to market, and business innovation while their organizational model, skill sets, and culture is stuck in the past. Some IT leaders don’t even have resources or support from their executive management team. In this environment it is almost impossible to survive the digital transformation.
A Closed Hardware-Defined Industry to a Closed Software-Defined Industry?
Executive management and business unit managers are pushing for public cloud deployment and questioning private software-defined infrastructure investment. At the same time, cloud providers are intent on locking in large enterprises with arduous, multi-year contracts plus property application development tools that make it nearly impossible to move workloads after they are created in their cloud. If there’s a catch 22 with a cloud strategy, going private is no panacea either. As large IT suppliers are still focused on proprietary hardware and software stacks, while playing catch up to new and growing business requirements, they can’t provide complete solutions today as they once did in the past. In short, IT is in danger of transitioning from a closed hardware-defined industry to a closed software-defined industry.
So IT business leaders are on their own. Companies that get the imperative of digital transformation are integrating their own solutions engineered with a range of open source software, cloud providers, start-ups and established vendors while also rebuilding their organization’s skills and pushing the culture reset button. They seek options along the design and build path to mitigate vendor/cloud provider lock-in. For example, hybrid cloud infrastructure is being built to support multi-cloud initiatives, enabling IT executives the leverage and choice in public cloud. The ONUG Community is focused on creating greater options and choices for IT business leaders by advocating open interoperable hardware and software-defined infrastructure solutions that span across the entire IT stack, all in the effort to create greater business value in the digital age.
The ONUG Community understands that to ensure an open software-defined infrastructure industry, there is power and influence in numbers. A community’s influence is directly proportionate to its buying power and engineering talent, and for ONUG this is measured by a buying block in the hundreds of billions and thousands of engineers. The ONUG Working Groups provide an organizing principle to harness engineering talent manifested in cross-industry use case requirements that suppliers can satisfy and earn for their organizations.
So the large enterprise is on its own to chart its approach to competing in the digital transformation age. Being on your own does bring independence and flexibility to plot your own course, but it sure is comforting to have a community along with you that’s navigating the same waters.
Chart your course at ONUG Fall on Oct 24th and 25th, hosted by FedEx in NYC.
Nick Lippis is an authority on corporate computer networking. He has designed some for the largest computer networks in the world. He has advised many Global 2000 firms on network strategy, architecture, equipment, services and implementation including Hughes Aerospace, Barclays Bank, Kaiser Permanente, Eastman Kodak Company, Federal Deposit Insurance Corporation (FDIC), Liberty Mutual, Schering-Plough, Sprint, WorldCom, Cisco Systems, Nortel Networks and a wide range of other equipment suppliers and service providers.
Mr. Lippis is uniquely positioned to comment, analyze and observe computer networking industry trends and developments. At Lippis Enterprises, Inc., Nick works with entrepreneurs evaluating new business opportunities in enterprise networking and serves as an independent investor and advisor.