Enterprises are pushing through a set of complex political and project dynamics in 2011 according to our surveys. The changes and their motivations offer us an interesting view on the cross-currents that really define what enterprises buy and how they buy it. Thus, they offer a vision of what we could expect in terms of competitive dynamics for the balance of this decade, at least.
Over the past couple of decades, spending on IT and networking has oscillated between modernization-driven and benefit-driven. In rough terms, the former is reflected in the “budgets” for IT spending that are assigned to the IT organizations themselves. The latter represents special off-budget activity that carries an IT cost component but generally is justified by an operations benefit case. Over the years, there’s been increased pressure on the budget side, pressure to deliver more applications at a lower overall cost. It’s this pressure that has created things like server consolidation and its successor concepts. Over the years, this pressure has been relieved to a degree by the growth in the mission of IT, its expansion to new operations areas. That pushes up spending and increases the role of IT within the company.
The relationship between IT and budget spending has proved to be a fairly reliable indicator of whether IT is in an expanding mode or in a consolidating mode in the market overall. Expanding IT means that feature differentiation is easier because their new missions not yet committed to current vendors and not necessarily supported by current features. Consolidating IT tends to empower incumbents and makes TCO the only strategy to argue. In the last 50 years, the thing that drove the expanding/consolidating cycle was the advent of new productivity-augmenting IT paradigms. We’ve had cyclical budget behavior based on that for nearly all of IT history, until 2002.
Enterprises have been following a path toward a different paradigm of computing, but their route has been complicated by the fact that like most consolidation measures it has a short focus. You can get from NY to LA by making a decision at every intersection based on local conditions, but it’s not likely to be a happy (or short) journey. Server explosions created in the heyday of falling server costs were stemmed by server and data center consolidation. That’s because support costs were now higher than capital equipment costs. Now, we’re seeing consolidation in the form of static VM assignment to applications giving way to virtualized resource pools, and enlightened enterprises see these as giving way to private and hybrid clouds.
I think that most of us realize that if you follow a path long enough you get a sense of its destination even if you didn’t have that from the first. I think most would agree that when that sense of destination is achieved, progress along the path is faster because it’s backed by greater confidence. So it is here. But the question for the “market” is how this greater confidence and speed of progress might impact the sales of IT components, and the progress of IT evolution.
The number of IT executives who realize that something more profound than “modernization” is occurring (and is required) has grown significantly in the last year. We’re creating a new architecture from IT by trying to make IT less expensive and more easily supported. While those aims are tactical, the same changes in IT paradigm could empower new mechanisms to improve the IT/operations link, and business produtivity, in the future.
Any time a new paradigm is on the rise, differentiation opportunity can also be expected to be higher. The consolidation-project differentiation apples may not be as easy to pick as apples on the productivity-differentiation side, but they’re just as sweet. For all vendors, they represent the space that has to be attacked to gain market share in 2011 and for all the space that must be defended to sustain it. There probably has never been a year in recent IT history when the balancing of strategic and tactical demands focused on the same issue set. Next year will be one.