Commoditisation of IT Services

I’ve been thinking a lot lately about where things are heading with IT services. As an avid follower of Simon Wardley’s blog and his regular tweets, I believe it looks increasingly likely that the industry is headed for a big shake up.

I like analogies, even if they’re not perfect, it helps get my mind around hard concepts. The one I’m going to use here is the automotive industry.

When cars were first invented, they were custom made, very expensive, unreliable, and required constant maintenance. Henry Ford made one of the first large changes, with the industrialisation of the assembly. A standard product could be turned out much more cheaply than before, also more consistently which is also of vast importance.

Over the years, this has been the standard way of car production, mainstream products being stamped out in a consistent and uniform way. The immense costs of design and development generally limiting the number of models available, although recently with the use of car “platforms” such as VAG’s MQB platform that 8 models are currently built on, a greater range of models is now coming to market, to cover smaller and smaller niches. At the opposite end of the spectrum from commoditisation, small manufacturers still exist, but an ever increasing cost of design, and meeting safety and emissions standards, is making the cost per unit climb steeply.

And so it is with IT services. The assembly line is automation, such as cloud automation tools. If you aren’t heavily scripting your provisioning, you are a small manufacturer like Morgan – interesting, but destined to become an irrelevance to the market as a whole. Your cost per unit is going to be prohibitive.

As the cloud platforms mature, they make it possible to cover more use cases, people are standing up SAP systems on AWS, which would have been unthinkable even a couple of years ago.

What then of private clouds? You will still find them, but the massive cost differential with public clouds will make them very much a second choice. Pretty soon, they will be just where security concerns and governance dictate that they can’t go on a public cloud. I think it’s highly likely that these will also succumb eventually, G-Cloud is a prime example of this momentum.

So will AWS, Azure, and Google own all the business? Well, yes and no. Those 3 will probably have the majority of the hosting, however the majority of businesses will require an integrator to build the automation, to manage the service, to provide the value, rather than just a bunch of virtual servers.

There will be a lot of differentiation and a lot of opportunity in providing those cloud management services, and it will need engineers that are skilled in automation, in service management, and not just an OS or a Hypervisor.

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2 thoughts on “Commoditisation of IT Services

  1. Pingback: So cloud is becoming a commodity, where’s the real work and interest going to be? | YAVB - Rich Dowling

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