NexGen Cloud: Get Ready For Enterprise Apps' Rush To The Cloud

Solution providers will increasingly see the applications their enterprise customers use being run off-premise in the cloud, and should be ready to move fast to capitalize on new opportunities because of it.

That's the word from Clifford Grossner, research director at analyst firm IHS, who told attendees of this week's NexGen Cloud conference in San Diego that the migration of applications to the cloud stems from two simple truths:

"If you ask why enterprise applications are moving off-premises, one, it's because they can, and two, because it makes sense," Grossner said during his NexGen Cloud keynote.

[Related: IDC: Storage Sales Shift From On-Prem External Arrays Toward Cloud, Server-Based Storage]

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The migration of enterprise applications is at a stage where customers are focusing on agile computing, or the ability to get the required compute and other resources on demand and release them when not needed, Grossner said at the event, sponsored by The Channel Company, CRN's parent.

However, the focus over the next four years will gradually shift to what Grossner termed the "meta cloud" or a "cloud of clouds." Each enterprise will set up its own cloud of clouds depending upon needs, which will require solution providers to integrate offerings from several providers. "There will always be reasons to use more than one cloud services provider," he said.

That focus will lead to increasing demand for off-premise cloud services -- revenue of which is expected to grow year-over-year by 42 percent in 2015 and 40 percent in 2016, Grossner said. "This is a fast-growing, and a long-growing, market," he said.

To make this happen, enterprises will look to their cloud services providers to provide increasing performance and agility from their cloud infrastructures, and to pass on the savings realized from increasing the scale of their operations, Grossner said.

In addition, a lot of enterprises will expect better performance from applications living in the cloud than from on-premise applications, as well as no-compromises security. "If you think about it, that's a tall order. ... If you are a services provider providing applications, [service level agreements] are going to be important," he said.

Over time, IT budgets will continue to shrink, Grossner said. But at the same time, a higher percentage of those budgets will be spent on off-premise cloud services. "So those of you selling [on-premise] products and services, you're potentially giving away a lot of money," he said.

According to IHS surveys of enterprises and the cloud, the primary criteria for enterprises looking to choose cloud providers are the level of service and support, financial stability, and pricing, Grossner said.

"It turns out the top three have nothing to do with the technology," Grossner said. "It's more focused on the services side."

Enterprises surveyed by IHS use an average of 10 cloud services providers, with that number expected to reach as high as 15 providers per enterprise by 2017, Grossner said. That is because some cloud providers have particular specializations or locations required by enterprises; offer branded applications such as SAP, or Office 365; or offer specific types of Infrastructure-as-a-Service, he said.

Grossner is correct, said Ron Brown, vice president of operations at San Luis Obispo, Calif.-based cloud services provider Digital West -- it is important for cloud services providers to get ahead of the migration of enterprise applications to the cloud.

"Customers are already talking to us about these changes," Brown told CRN. "The industry as a whole has been falling behind what customers need. Customers tell us they don't want to figure this out on their own. That's why we want to own it."