Enterprise Decision Maker
By Roy Illsley 21 Nov 2019
The data center has been the epicenter of the IT delivery environment for organizations for the past 30 years, but with the rise of cloud computing this is now changing.
Recent enterprise deals tracked in Ovum's IT Service Contracts Analytics (ITSCA) have given us more visibility on cloud service offers to enterprise, and the prospective value of large-scale cloud services. While final values for on-demand services cannot be known until the end of each billing period, cloud service providers and customers in both the enterprise and public sectors have disclosed some of the spending patterns on cloud services, showing that for the moment anyway, hyperscale workloads are not matched in hyperscale values.
Tracking IT service deals in 2H18, we have been given more visibility on cloud deal terms and expected overall contract values. We got some good insights on AWS contract terms from the AWS re:Invent customer and analyst event of November 2018. Total contract values (TCVs) were mostly in the $5m–15m range, with some exceeding $30m. Importantly, AWS says deals with major corporate accounts such as Amgen (ITSCA deal ID 51897) are getting longer and look more like traditional IT deal terms, with a separate source disclosing that a contract for Korean Air (ID 51896) is for 10 years.
However, as even the market-leading AWS deals show, hyperscale workloads are not matched in hyperscale values. The big deals still involve a lot of legacy IT:
In 2H18, Microsoft signed a series of deals in competition with AWS to become a primary cloud provider to US retailers such as Gap and Walmart, as well as signing smaller agreements in India for its Azure range from IaaS to IoT via managed backup and virtual desktop as a service. But these are dwarfed by Microsoft's $1.8bn contract signed in January 2019 with the Space and Naval Systems Center (ID 52135) to provide software and computing engineering for the Department of Defense over five years.
Harley-Davidson Inc. will build its new all-electric motorcycle on IBM's cloud platform (ID 52229), but again this has modest value for the vendor set against its deal to help Banco Santander with its business transformation. Santander (ID 52133) will use IBM technologies in AI, blockchain, and big data. This is another example of a banking institution striving hard to digitize and modernize a whole range of IT operations. This deal is valued at $700m for five years, during which time the bank will be shifting to a hybrid and multicloud environment while using IBM DevOps to launch new digital services.
Finally, cloud IT and hyperscaling are not monolithic. They include multiple constituent services such as connectivity infrastructure, managed hybrid cloud, and hyperscale compute. Nutanix is a good example of the latter type of "hyperconverged infrastructure" provider which runs as many customer-premises appliances as virtual machines. But "managed cloud" seems to fit well as a service category here too because the Nutanix platform converges multivendor services, from operating systems to storage and compute. Nutanix does deals between $1m and $20m, with most at the lower end of that range. It is more evidence that cloud deals are, for now, smaller than ITO, and still at single-digit millions.
Cloud services provided a record 126 major deals in the ITSCA database in 2018, up from 69 major deals in 2017. These numbers are still far short of the volume of IT outsourcing deals, even though these were down from 1,702 in 2017 to 1,043 in 2018. But cloud services added an estimated $10bn in TCVs cumulatively in the three years between 2016 and 2018 (inclusive), and have become a significant part of the overall IT services contracts pipeline, even if overall TCV volume for cloud services is still dwarfed by sales of more traditional IT services. It is clear that cloud will play a growing part of the IT contracts picture in 2019.
Enterprise Decision Maker, Enterprise Technology IT
By Richard Palmer 21 Nov 2019
It is essential to be digitally fit in the current marketplace. DigitalFit provides a straightforward means of assessing the main dimensions of digital fitness across strategy, customer engagement, processes, organization, and technology platforms.
Enterprise Verticals, Enterprise Technology IT, Enterprise D...
By Daniel Mayo 21 Nov 2019
While hindsight can always make mistakes seem obvious, there are a number of important lessons from the TSB review for enterprises considering large-scale legacy modernization projects.
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