Techaisle Blog

This is a two part blog article. The first part, published earlier, reviewed the predictions we made for 2015 and the second part, below, focuses on outlook for 2016 and for the longer term (2017 - 2020).

Top 10 Predictions for Year 2016

1. 2016 will see even more intense emphasis on “CIA-Plus”
IT Suppliers will begin to align their offerings with Cloud, IoT, and/or Analytics; products that do not address end-user needs in these areas will be positioned as infrastructure and integration services needed to capitalize on these technologies. This trend, like hybrid IT, will continue into 2017. In 2016, Cloud and Analytics will remain among the top five IT priorities of SMBs and midmarket businesses. IoT will inch its way up into the priority list, though adoption will remain limited.

2. Rise of IoT will be constrained by a lack of real-world examples
From a buy-side perspective, the rise of IoT will need to be fueled by real-world examples showing the benefits of automating tasks and processes within IT and in other sectors. Within the SMB community, we expect sporadic implementation and a lack of concerted effort towards creation of IoT strategy, even though IT suppliers will continue to push forward their solutions hoping to remain top-of-mind in order to claim leadership in this emerging space. Each IT supplier will create its own solution set causing decision and adoption inertia, despite the wave of innovation that we expect to see emerge from the smaller & more agile IoT providers that are able to more easily align IT expertise with real life solutions. Experienced consultants and system integrators in particular will hold sway in matching SMB adopters with suppliers.

3. IoT supplier success will be determined by ecosystem management
On the sell side, the rise of IoT will be accompanied by an intense wave of interest in ecosystem management. It is difficult to buy or sell a “box of IoT”, though providers will claim to provide complete solutions. Parenthetically, this constraint is not limited to IoT. While it is possible to sell a “box of cloud” under the right circumstances, only AWS really manages to do so. And while one can sell a “box of analytics”, the boxes themselves come in a lot of different shapes and sizes. To meet SMB and enterprise buy-side demand for IoT, sellers will assemble coalitions that provide the many products and services that comprise an IoT solution. This will make alliance management a key success factor in the marketplace. The last time alliances determined market leadership; SAP became the global standard in ERP. Niche value added reseller may find a new source of success in IoT.

4. Business transformation will continue to elude analytics users
Analytics users will find that they are not achieving the expected benefits, prompting divergent responses. Some SMBs will find that analytics has not been transformative, and will blame the technology; others will look to move past descriptive and diagnostic views, piloting predictive or prescriptive initiatives. One of these responses is clearly more sensible than the other, but that does not mean it will be universal, at least in 2016. Focus on visualization will increase (mine is better than yours), on how the technology can solve business issues and challenges for SMBs and midmarket customers. Simplified implementation of customer and social analytics will be key drivers of adoption.

5. “Hybrid” will be used more often in conjunction with “IT” than “cloud”
User organizations will accept the notion that their focus on cloud needs to evolve into a focus on hybrid IT, as firms realize that their platforms and management scope must encompass on and off-premise systems. Truthfully, there is still a lot of work to do in cloud adoption. But the nature of the discussion has changed from “what and how do we move to the cloud?” to “what do we do to build an integrated, manageable infrastructure?” In 2016, there will likely no longer be an infrastructure debate about use of cloud, but there will be an important emerging discussion around managing hybrid IT.

6. Collaboration will drive “silo” to the realm of four-letter words
Anywhere, anytime also means any type of collaboration. SMB & midmarket businesses will look for unified shared workspaces that allow employees to enter into the workspace from any entry point to work together, collaborate and interact. Collaboration solutions cannot be deployed on stand-alone platforms – they need to be viewed as a framework for integrating multiple capabilities, native to multiple applications.

December has traditionally served as the occasion for the publication of New Year forecasts. It’s understandable that we want to look ahead to the sources of opportunity that lie ahead. But in the business world, December also marks the beginning of the review season. And while detailed forecasts focus on the next twelve months, the planning horizon needs to look a little further, so that tactics provide support for business strategies, rather than simply delivering a series of course adjustments.

This is a two part blog article. The first part, below, reviews the predictions we made for 2015. Second part will focus on outlook for 2016 and for the longer term.

A look back – what was it we said was right around the corner, again?

Here are the issues we highlighted, “Ten predictions for 2015 – and five issues to keep an eye on for 2016 and beyond” and how we think we did in our prognostication.

The Top 10 for 2015

1. Hybrid arrives – not as a strategy but as the result of many discrete decisions

With the benefit of today’s perspective, we might fairly say that in 2015 and for several more years to come, a more apt description of hybrid is journey rather than destination. Digging into the detail, though, we believe our prediction that “an ability to manage hybrid infrastructure will become a key corporate IT requirement in 2015” has been borne out by the focus on tools and strategies (ranging from Docker to Agile) that we saw throughout the year. In Techaisle’ SMB Cloud adoption studies, there was a sense of growing ubiquity in the usage and plans for private, hybrid and public cloud. Use of hybrid cloud continued to increase as both a conscious strategy and as a reaction to use of both public and private resources within a single infrastructure; by the end of 2015, two-thirds of companies with 100-999 employees were using hybrid models.

2. Collaboration becomes a much bigger concept

In 2015, collaboration began to expand beyond file-sharing to become a necessary tool for driving decision-based agility, fostering innovation and extending customer intimacy. Collaboration is a process rather than a discrete outcome. Our key notion that collaboration “extends beyond the corporate staff (and as a result, beyond large enterprises) to include customers” clearly did reflect strategies and investments in 2015. Within the SMB segment collaboration is increasingly becoming a central component to virtually all business activities rather than a means to enable connections between discrete tasks. Other changes in this area will further reshape collaboration, but you’ll need to refer to the “forecast” part of the blog for that discussion.

3. Collabmobilicloud becomes a management reality

The core concept explained that despite vendor tendency towards defining collaboration, mobility and cloud as separate domains, both enterprise and SMB users have started viewing them as integrated components of business solutions. The user belief that collaboration, mobility and cloud should all be attributes of modern applications has become clearer, and even suppliers are starting to recognize the importance of an integrated collabmobilcloud approach.

This is a two-part blog article. The first part dealt with “SMB IT channel reaching an inflection point”. Second part, below is on “New wave of SMB channel conflict in building a cloud practice”.

Turning a supertanker

Building an effective cloud practice within a channel business is a complex undertaking. Using an old metaphor, it has been compared to “turning a supertanker.” This is an inapt comparison, and not just because the vast majority of channel businesses are far smaller than a large ocean vessel. The real problem with the comparison is that turning a supertanker refers to an exercise whose success rests on an anticipation of future change. Certainly, this is part of the problem for the channel – what is the best time to invest in ramping up cloud practice resources? – but the issue has a much greater scope.

A successful cloud business practice requires new management metrics, new financial models, new sales processes (and generally, compensation models), new vendor relationships, new marketing activities, new consulting capabilities and new technical support capabilities. To use a nautical analogy, creating a cloud practice within an existing channel business is like building a second boat within your ship, sailing it off in a different direction, and maintaining alignment between the two courses in order to maximize synergies and benefits and reduce expensive discontinuities.

Abundantly Complex

If this sounds difficult and complex, well…it is. However, there is abundant reason to believe that the exercise is necessary for future viability and success. Roughly 80% of channel firms either offer some type of cloud solution today or are planning to offer cloud solutions; of these, more than 60% expect cloud revenue increases in in next one year (Techaisle’s SMB Channel Partner Trends study). This is not a single-year issue, though: the business impact of cloud within the channel is expected to continue to increase over time. Techaisle expects that over the next several years, the position of the generalist channel firm – the “one stop shop for solutions” – will become untenable, squeezed by market forces requiring higher degrees of specialization. Some channel firms will specialize in cloud, while others will link cloud with one or two other specialties, such as mobility, virtualization and converged infrastructure, and/or managed services. But very few channel businesses will remain viable without having a credible cloud business practice.

VMware has been in the news recently – a valuable asset for Dell, caught between the Dell-EMC deal (see analysis of the deal here). Just a couple of months ago VMware had its VMworld, a forum for VMware to articulate its strategy to customers, partners, media and analysts. VMware’s 2015 theme “Ready for Any” was centered on the challenges that IT professionals are facing today - security, mobility, application delivery and hybrid cloud – and the company’s strategy of supporting “One Cloud, Any Application, Any Device” as a means of empowering IT management to respond to these challenges. VMware’s vision is to “enable an architecture that lets IT deploy or consume capacity from a cloud without having to worry about the physical location or who the vendor is. To do this VMware wants make sure that different form factors of the cloud (private, public, managed, etc.) connect or are transferable”.

Hybrid IT, including hybrid cloud, is no longer an appealing future proposition; it is a current reality as workloads increasingly run internally on a highly-optimized virtual environment connected to a public cloud, and public cloud resources are being widely used for developing and testing applications to be deployed on private or hybrid clouds. Many workloads process data in the public domain and simultaneously store sensitive data in the traditional data center to meet regulatory and compliance guidelines. Techaisle’s SMB & midmarket cloud adoption survey shows that within SMBs, use of hybrid cloud will continue to increase as both a conscious strategy and as a reaction to use of both public and private resources within a single infrastructure; hybrid use is expected to top 40% within the small business market, and will be used by two-thirds of companies with 100-999 employees.

Over the last two years, as virtualization penetration within enterprises has been slowing, VMware has been broadening its solution portfolio to deliver solutions for management and delivery of on/off-premise IT infrastructure. As a result, VMware’s product line has grown beyond compute: it rolled out vSAN for storage, NSX for network, and vRealize for management. Last year, VMware announced its vision of software-defined data center (SDDC) and introduced EVO:RAIL, which ties VMware software to partner hardware for a hyper-converged appliance. In the most recent VMworld this vision was extended to EVO:RACK: while EVO:RAIL was positioned as "SDDC in a box" suitable for midmarket businesses, EVO:RACK (now marketed as VMware EVO SDDC) is aimed at large enterprise customers. In Techaisle’s view, vSAN and EVO:RAIL are also relevant solutions for SMB customers looking to adopt hyper-converged infrastructure.

In 2014, VMware had announced integration between on-premise vSphere and VMware's own public cloud (vCloud Air) enabling businesses to migrate workloads to a VMware-based public cloud. In 2015, VMware extended the narrative to announce Unified Hybrid Cloud - built on SDDC and vSphere - to enable IT professionals run, build, deliver and secure any application, anytime and anywhere. Despite new offerings it is common knowledge that VMware still lags Amazon Web Services and Microsoft Azure in the public cloud market.

VMware is continuing its investment in network virtualization and in the future of NSX. It announced NSX 6.2 with added features such as inter vCenter NSX support, universal firewall rules and security groups, and Trace flow. Techaisle assumes a bigger game changer to be the integration between virtual and physical networks when VMware and partners such as HP complete the support of OVSDB in NSX to manage hardware virtual tunnel end-points (VTEPs).

Key market context

While enterprise market may be saturated, virtualization adoption within SMBs is far from over. Techaisle’s SMB & midmarket Server Virtualization adoption market trends study shows that US SMB server virtualization penetration has reached 54 percent (un-weighted), up from 41 percent two years ago. Within midmarket businesses the penetration has reached 88 percent and another 7 percent are planning adoption in the next year. Across the entire SMB community, there has been a 45% increase in off-premise virtualized servers in the past two years, an enormous shift that highlights the broader shift towards remote management of infrastructure resource. VMware has positioned itself to capitalize on the immense SMB opportunity, however, it needs to have a sales motion that is specifically targeting net new customers within SMBs rather than “mining” the installed base as in enterprises.

The real VMware SMB story is in EUC – enabling untethered mobility

The real story and opportunity for VMware, though, is in end-user computing.