2019 Trends in Cloud Transformation

It's a teenage rampage (and soon cloud could be completely in command). As cloud turns 13, problems usually associated with adolescence, such as growth and development, have been taken off the table. There is currently a massive land grab for applications and workloads as the conversion to cloud accelerates. The existential question is who will benefit – and who is staring at oblivion?

Optimization as a Service Will Emerge

Implication: Enterprises face increasing complexity, which results in spiraling costs and operational challenges Software tools used to resolve issues can't keep pace with this complexity Service providers will create new products to address this challenge with consultancy based on emerging software tools

Cloud procurement complexity is increasing at an exponential rate, as cloud providers introduce not just new products, but also variations of the same product based on tiers and sizes. 451 Research's Cloud Price Index now tracks half a million SKUs from Google, Amazon Web Services (AWS) and Microsoft Azure – in a single week in December 2017, the total SKUs available from these hyperscalers increased by 50,000. It would not be surprising if the total SKUs breach the 1,000,000 mark in 2019.

Enterprises will naturally want to choose the optimal configuration of these services to get the best performance at the lowest price from a range of a providers. With so many SKUs to consider, this is impossible to do manually, which explains why optimizing for performance and cost are major challenges for 42% and 37% of enterprises respectively, according to our Voice of the Enterprise (VotE): Cloud, Hosting & Managed Services, Budgets and Outlook 2017 survey. Software tools to resolve this complexity will be needed but will struggle to keep pace, as cloud providers add more services and variations over time. Specialist skills will be needed to make 'informed estimates' of best procurement practice, based on data from these tools.

Service providers will look to resolve complexity through optimization as a service, which will provide recommendations of cost saving on an ongoing basis, based on consumption data. Despite enterprises finding such optimization a challenge, only 20% of service providers offer a performance SLA and only 33% include cost-optimization as standard according to our Private Cloud Index: Managed Services, Q3 2018. It is an opportunity waiting to be addressed.

Resolving the complexity challenge is key to the concept of invisible infrastructure – at the moment, the servers and technology might be invisible, but the billing certainly is not.


  • Cloud providers with large portfolios should take steps to resolve complexity for customers by providing training, recommendation algorithms, certifications, APIs and data on usage and consumption.
  • Managed service providers, especially those offering third-party or hybrid management, should consider bundling optimization as a service into current offerings as a value-adding feature, or creating a chargeable optimization service. Tooling will be important for these services, but specialist skills and regular planning sessions with customers will add the most value to enterprises.
  • Optimization software vendors must attempt to keep pace with the influx of new services and capabilities into the market. Such software really adds the most value when used by appropriate specialists, and as a result, channel sales or use by service providers might be more of an opportunity than direct-to-enterprises today.


  • Managed service providers of third-party or hybrid clouds. Service providers that run managed services on top of the hyperscalers are in a good position to provide independent advice to enterprises on which cloud is best suited to requirements, and to provide ongoing face-to-face support with scaling to meet business objectives.
  • Emerging startups in the optimization software space. A spate of new software companies has come to market promising to clean up complexity. These are ripe for acquisition by managed service providers looking to add value through optimization


  • Enterprises that don't act now. Complexity will only get worse over time, so enterprises should take action now to document, control and optimize the procurement, operation and turn-down of resources.
  • Service providers and software vendors that just report. Giving users data and reporting and consumption is table stakes today, and enterprises will demand this data is acted upon to improve the environment.

Focus Will Shift to Cloud-Native Outcomes Delivered As-a-Service by Intelligent Platforms

Implication: The systems integrator and consulting community is reimagining the way it supports customers within application service lines by developing platforms that encapsulate end-to-end capabilities from business consulting at the front end of the project, through pilots and production deployment to ongoing maintenance and monitoring This approach focuses on solving a particular business objective via a layer of abstraction enabled by cloud delivery, advanced analytics, AI and DevOps that increasingly makes the underlying ERP application estate a less visible component as enterprises migrate from ERP to a digital platform

The move to cloud delivery of production applications is gathering pace as enterprises consider how to address their existing investment in monolithic ERP systems (see Figure 1).

While most companies making the move to cloud infrastructure are initially happy to lift and shift applications to the cloud, it soon becomes clear that while such an approach reduces infrastructure costs, it is not in itself helping the organization to become more agile and flexible. That requires adopting a more radical migration to software designed for cloud delivery, which, of course, the major application vendors can all now provide, by delivering SaaS software capable of taking advantage of advanced analytics.

This is prompting the global consultancies and SIs to develop intelligent platforms that bring together consulting knowledgebases around industry domains and business expertise that are continuously enhanced by AI and machine learning. These are combined with technology templates for new offerings from key technology application partners, such as SAP, Oracle, Microsoft and Salesforce. This platform-based type of offering provides end-to-end service capabilities that can rapidly take the enterprise from the incumbent ERP estate to a modern platform approach that makes use of SaaS. Such SI platforms begin to make applications invisible, as the platform powers the realization of business outcomes such as 'journey to cloud,' 'becoming a data-driven enterprise' or 'improving employee productivity,' from initial consultancy through to technology deployment, based on the client's preferred technology partner and its ecosystem.

Figure 1: Major Enterprise Software Suites Begin the Shift to Cloud Platforms

Source: 451 Research's Voice of the Enterprise: Cloud, Hosting & Managed Services, Workloads and Key Projects 2018 Q: What is your organization's primary implementation model for (software) today?

Q: What will your organization's primary implementation model for (software) be in two years?

The combination of trusted global SIs working with the dominant enterprise software vendors to create intelligent platform-based services will speed up mainstream production adoption of cloudnative software that has so far faltered when faced with geeky, cloud-native technology vendors. The clincher for the mainstream business buyer is that this intelligent platform approach can be honed to address a client's specific business challenge while taking advantage of standard cloud software components provided by enterprise-savvy technology vendors that the organization is familiar with.


  • Consultancies and SIs that do not already have their own intelligent platform in use with clients should consider buying a platform to jump-start their capabilities to take customers to cloud-native deployment.
  • Enterprises embarking on application migration projects should take a look at the ERP-to-platform approach to assess how it could transform the speed of moving to a cloud-native deployment cycle.
  • Specialist ISVs need to become embedded in the app marketplaces of the big enterprise app vendors to ensure ongoing enterprise growth within the platform services landscape.


  • Consultancies and SIs that are developing this intelligent platform-based approach to pivot themselves and their customers to digital service capability will grow more quickly into new revenue streams.
  • The big enterprise application vendors, as this approach offers a highly effective way for enterprises to take the plunge to go cloud-native using incumbent brands.


  • Those consultancies and SIs that are moving too slowly toward new intelligent platformbased revenue streams, as they will increasingly be left behind to manage and maintain aging application estates, which will ultimately constrain growth.
  • Enterprises that stick with a lift-and-shift to cloud application strategy as they will not realize the business benefits of cloud services and will fail to compete effectively with cloud-native offerings from others in their market.

Cloud Will Work 'As Advertised' in the Era of Consumption

Implication: Cloud management has become very complicated because of the jumble of clouds, containers and venues Making cloud work 'as advertised' to deliver key benefits such as speed and scale is getting harder 2019 will see a focus on approaches that can resolve this complexity and deliver these benefits

Cloud and Containers

Every company is becoming a service provider, creating digital services to better engage with customers, partners and suppliers, and to compete in the digital economy. The currency of this economy is software, and every company will need to raise its software IQ to transform successfully. Cloud is the operating model and deployment approach for IT resources supporting these digital transformations, delivering what 451 Research 4Sight refers to as Invisible Infrastructure – consumption-based and service-driven, with a retail model discipline.

At the same time, cloud-native approaches to service development (containers, microservices, Kubernetes, etc.) promise to dramatically simplify the deployment of applications and services. This benefits technology consumers who expect to access, assemble and pay for digital services in a simple, seamless and automated manner without requiring any specific knowledge of the underlying physical infrastructure. Invisible Infrastructure is instantly available, operates, scales regardless of specific requirements, and is billed and metered in a manner the customer prescribes. It just works.

As outsourcing, managed hosting and cloud continue to converge, buyers are increasingly seeking options that allow them to select from these models as part of best-execution-venue strategies to optimize agility, performance, cost and security. Cloud services consumption will overtake cloud building as the primary driver of IT by the end of 2020.

Multi-cloud and hybrid environments are the new reality of this era and there is a massive land grab underway as all industries and public agencies convert to cloud.

The data tells us that while around a third of enterprises will use a single cloud, a quarter will use multiple clouds with no interoperability (see Figure 5). More than 40% will have cloud environments featuring some level of data/workload migration or interoperability in the next two years.

Source: 451 Research's Voice of the Enterprise: Cloud Transformation, Vendor Evaluations 2017

Q Which of the following best describes how your organization will use different on-premises and off-premises cloud environments over the next 2 years? (n=503)

This suggests every organization is going to need cloud management. The problem is cloud service providers each have their own unique dashboards and APIs. What users need is a unified view of their IT estates, with management and orchestration approaches that can optimize the use of venues and deliver developer services. Whether this can be delivered in a single tool is yet to be seen. There are broadly two activities associated with cloud management: cloud readiness (pre-flight and boarding) and cloud governance post-conversion management and optimization.

Currently, a single control pane for cloud management is like a universal remote control. Having just one control for all your devices is a lot more convenient than multiple controls. But each device has its intricacies that can't be captured by a single control. As a result, one might keep old remote controls for things such as channel tuning or configuration. The same issue lives with cloud's single pane of glass: They can do the common things that all providers offer, but they're not so good at the differentiated features between providers.


  • Focus on cloud governance and the ongoing optimization of deployments as the real prize in this journey, rather than cloud readiness. However, we believe the more effective a company is in supporting the transformation journey from the beginning, the more right it will have earned to be there after the fact. Most of the opportunity is in ongoing management and optimization.
  • Cloud management (readiness and governance) continues to be a strong investment thesis for investors seeking a stake in the cloud conversion land grab. However, there is a lower barrier to entry in cloud readiness across all dimensions (geography, vertical), and there are many MSPs in the market with less differentiated offerings chasing lower margins and lower returns – at lower risk. Cloud governance capabilities have higher risk, but offer a higher return. The question is, what represents the better investment?
  • Remember that cloud storage costs start to rack up over time. There must be an increased focus on resource wastage, and managing data and storage in hybrid deployments (vs. compute instances).


  • Companies developing support for cloud mobility. Moving applications, workloads or data between environments will not be a one-time event; it will become a standard IT practice.
  • Approaches that can deliver self-driving clouds. The growing demand for business intelligence and analytics is reflected in the use of AI, machine learning and sophisticated automation techniques to better predict and plan the right mix of cloud services and capacity to meet needs.


  • Approaches that do not also upskill customers' operations teams to support the organizational and operating model aspects of the deployment, and not only the technology piece, risk not being considered for use. Cloud is an operating model, not a place.
  • Suppliers that are unable to remove the burden of IT operations. Buyers are seeking to get out of infrastructure operations by moving to cloud and leaving the operational costs behind.

451 Research is a leading information technology research and advisory company focusing on technology innovation and market disruption. More than 100 analysts and consultants provide essential insight to more than 1,000 client organizations globally through a combination of syndicated research and data, advisory and go-to-market services, and live events. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group.