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The Cloud Dilemma: How Enterprise Companies Should Navigate The Transition To The Cloud

The discussion around enterprise companies moving to the cloud isn’t new. In fact, we watch this play out daily in the coverage of the ‘cloud wars’ as Google Cloud Platform (GCP), Microsoft Azure, and Oracle Cloud battle with AWS to win the business of global companies like GE, Cisco and Walmart. In my conversations with leading IT executives, the question that they are grappling with is not if they’ll move to the cloud, but rather how much (of their business) and how quickly they’ll move to the cloud.

We heard this first-hand from companies like, Micron, Aegon and PepsiCo — whose executives attended our annual CIO summit in October. While it’s easy for startups to build entirely on top of the cloud, there’s an immeasurable gap between what startups can do and the practical realities large enterprises face when moving to the cloud. Large enterprise companies must move more nimbly in today’s digital world, but do so while keeping their current applications up and running across complex global ecosystems and infrastructure platforms.

Private, Public, Multi- or Hybrid-cloud

When it comes to the decision of whether to go all-in on the public cloud — one vendor or multiple vendors — or to implement a hybrid approach, there tend to be three driving forces on the minds of IT executives.

  1. Speed of innovation: Companies need to innovate and move more quickly than ever before. They risk new entrants making them extinct if they’re not agile, constantly innovating and thinking about what’s next. Large enterprises trying to compete with these new entrants must develop their applications on a public cloud to be able to move nimbly enough to meet their customers’ needs.
  2.  Coexistence of legacy and modern applications: Many enterprises have old servers and data centers dating back to the 1980s and ’90s running their legacy applications. While applications today are written for the public cloud, most enterprise applications were originally architected in a way that it’s not possible to move them to the public cloud. Enterprises are therefore building private clouds that mimic public clouds for running mission-critical legacy applications with the same efficiency and scalability.The rise of hybrid environments has produced a need for a new class of IT operation tools that can monitor and manage infrastructure and application regardless of where it resides. OpsRamp, for example has built a central hub for IT organizations that dynamically discovers and manages all assets across a hybrid IT environment prioritizing them according to business demands. Organizations can now respond faster and be more proactive in managing their IT environments.
  3.  Vendor lock-in: Large enterprises are worried that the public cloud vendors will lock them in to their platforms just like the database vendors did in the past. Moreover, large enterprises are global and have businesses in locations where one public cloud vendor might not have a presence. Therefore, large enterprises are building applications on all the major public clouds. While the multi-vendor strategy is effective to avoid vendor lock-in, it creates challenges for IT executives to manage multiple cloud infrastructures within their organization. Companies like CloudHealth solve these problems by helping organizations aggregate, correlate and analyze data from disparate cloud data sets so that enterprises can efficiently monitor and deploy a multi-cloud strategy. Companies like Mesosphere and Nutanix are also providing cloud operating systems so that enterprises can run and manage their own cloud in their own datacenters or run it on a public cloud.

Looking to the Future

In the short-term, the question for enterprise companies to answer will be what to move to the cloud and how to do it. New technologies like cloud operating systems, containerization and serverless functions will only make it easier to provision and deploy these applications from one public cloud to another or to a private cloud. Over the long-term however, new technologies built on the public cloud will facilitate greater levels of innovation and enable enterprise to tackle new generation of problems since new ecosystems around machine-learning and AI-defined infrastructures are developing mostly around public clouds.

Trevor Schulze, CIO at Micron, made the point at our Summit that in the future, “Your car is going to be a mini-cloud. Is that the cloud? Is that the edge? Are you doing machine-learning there? Absolutely.”

The real question isn’t whether the data is “sitting in someone else’s data center, my car or my factory,” but the speed at which you can access and process that data. Enterprise companies that build applications to process data at speed through leveraging the innovations built by public cloud vendors will stave off competition from more nimble startups and keep being the winners in their market segment.

While it may seem like the innovations on the public cloud are moving at the speed of light, cloud solutions that solve business problems and drive revenue while speeding up business processes are the ones being adopted by today’s CIOs. It’s been inspiring to see these leaders increasingly empowered to drive change at their organizations, and the ones who digitally transform their businesses will no doubt play an increasingly strategic and important role within their companies. They’ll become the catalyst for change as the speed of innovation picks up and companies move deeper into the cloud.


Disclosures:  The information set forth herein is not intended to constitute investment advice and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Sapphire Ventures. Sapphire Ventures does not solicit or make its services available to the public and none of the funds are currently open to new investors. Past performance is not indicative of future performance.

The portfolio companies referred to above do not necessarily represent all of the investments made or recommended by Sapphire Ventures, and were not selected based on the return on Sapphire Ventures’ investment in them. It should not be assumed that the specific investments identified and discussed herein were or will be profitable. Not all investments made by Sapphire Ventures will be profitable or will equal the performance of the companies identified above. View all of Sapphire Ventures’ investments here.