Cloud-Born Or Legacy Constrained?

Which organisations are best placed to adapt and benefit most by fully embracing the trend towards cloud-based business models? Whether or not you have legacy has got a lot to do with it:

  • [legacy] something left or handed down by a predecessor

  • [legacy] denoting or relating to software or hardware that has been superseded but is difficult to replace because of its wide use

Cloud-based business models leverage a shared infrastructure that provides elastic compute resources. These resources are packaged and bundled and sold as-a-service, usually for a monthly per seat or resource instance based price. The market for public cloud services is still small today but growing quickly. For the next couple of years we predict that public cloud spending in the Netherlands will increase from €439 million in 2012 to €1,173 million in 2016, a CAGR of 29%.

Companies that have leveraged cloud-based business models from the start, such as Salesforce and Amazon (AWS, Amazon Web Services), are the ones that have no legacy today and are best positioned to profit from the growing public cloud market. But there is a host of other companies that have legacies. The figure below provides a snapshot.

Looking At Legacy

Software vendors like SAP and Oracle still sell the bulk of their software on-premise rather than in the cloud. Systems vendors like IBM, HP, Dell and Cisco sell hardware rather than flexible compute capacity. Device vendors like Dell, Microsoft and Intel sell PCs rather than mobile devices. Integrators like Capgemini and Atos sell consultants rather than cloud integration SaaS. Telcos sell connectivity rather than communications. Infrastructure service providers sell managed systems rather than managed capacity. Distributors and resellers sell single solutions rather than monthly subscriptions.

The examples mentioned above all exhibit traits of disruptive innovation as described by Clayton Christensen. What are companies doing to defend themselves against the disruptive innovation of the public cloud? Acquiring cloud-born disruptors is a popular strategy, copying disruptors is another one, adapting public cloud models for private or hybrid cloud business models is a third one. Whatever you do, ignore the disruptive capacity of the public cloud at your peril!

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About Pim Bilderbeek