It is clear that the cloud disruption war is over.
Vendors such as AWS, Microsoft, Google and Salesforce have won it. Microsoft is trading at a 17-year high and probably had the largest challenge in developing the cloud model while supporting it's traditional business – kudos to Satya Nadella for having the courage to prioritize cloud and make the needed investments. Even smaller software vendors such as Adobe are benefiting having transformed their business to a pure cloud-based subscription model and is now trading at an all-time high. This model is not only more efficient from a software delivery perspective, but it is also much lower risk from a financial investor viewpoint. Most importantly, customers love it!
Legacy vendors such as Cisco, IBM, Oracle and HP have lost this war. After initially denying that cloud will have any impact on their business, they moved to a “hybrid” strategy claiming that cloud is fine but a private data center and/or enterprise software licensing also has legs – such a straddling strategy never really works if one option is vastly superior to the other. And unfortunately, unlike Microsoft, these vendors only played lip service to their cloud investments while continuing to push the legacy model. The president of Cisco Europe acknowledged this week that AWS has won and can’t be beaten any more as reported by InfoWorld. Even VMware is moving customers into the AWS cloud now and these customers will not be coming back once they experience the compelling economic and technological benefits of a public cloud.
A recent Gartner report states that 40% of all IT spend is now being allocated to cloud and that this is expected to continue growing. And there are new vendors, like Nutanix, who are bringing the benefits of a public cloud into a private cloud environment. This is very different than what the legacy vendors were trying to protect with their traditional data center and software licensing models.
I am not suggesting that the legacy vendors will go out of business, just that they have lost the war in trying to defend their traditional business models and will only be niche players in the new cloud model.