Disruption is the word on everyone’s lips in the tech sector these days. Yet over the past few years the enterprise IT market has, for the most part, been characterized by incremental rather than wholesale technology advancements. However, three recent developments – IT industry consolidation and reorganization, rising demand for private clouds and increasing pressure on IT departments – will foster the development of technology platforms that promise to fundamentally transform enterprise IT.
The first trend is the move by many major IT companies to consolidate and reorganize their businesses. From Dell’s acquisition of EMC, to Western Digital’s acquisition of SanDisk, HP’s split into two separate companies, and IBM’s massive reorganization, major enterprise IT players are completely restructuring and repositioning their companies. While they do this, these companies will be less interested in and able to acquire startups offering piecemeal IT technology enhancements. In addition, these companies have less of a need for incremental IT technology enhancements now that, with consolidation, many of them possess a complete set of enterprise IT offerings. With major enterprise IT players less interested in acquiring startups offering point solutions or incremental technology enhancements, the major route of exit for these startups has been cut-off. This, along with the fact that high late-stage valuations have made tech IPOs more difficult, means that VCs are less interested in investing in “incremental” startups. Instead, VCs are increasingly investing in enterprise IT startups that offer transformative technology platforms with viable long-term business models – in other words, companies that are highly motivated and ready to disrupt the enterprise IT market.
The second trend is enterprises’ increasing demand for private clouds. In many ways, this trend has been prompted by one of the few developments over the past few years that has caused some level of disruption in the enterprise IT market – the rise of the public cloud. Just as the iPhone changed people’s perspective on how phones should work, the public cloud has changed enterprises’ perspective on how IT should work. With the iPhone, if someone wants a song, a video, or an app, they just download it and, assuming they have enough room on their phone, it is there and just works. With the public cloud if an enterprise wants more capacity, computing power, etc., they just request it and (assuming they can pay for it) they have it. Yet, enterprises are finding that the simplicity, scale and agility of the public cloud comes at a price. Putting their applications and data on the public cloud results in a loss of security and control. Not to mention the fact that public clouds aren’t actually that much cheaper than existing storage solutions. Responding to this, leading enterprises are trying to bring the public cloud “in-house” by deploying private clouds that deliver the benefits of the public cloud, along with the security and control they expect from enterprise IT. However, this is proving difficult, since existing enterprise IT technology platforms – especially storage – were not built to support private clouds. This is creating a massive opportunity for platforms that can support the deployment of private clouds.
Increasing pressure on IT is the final trend that is fostering an environment for disruption in the enterprise IT market. As more and more economic activity takes place digitally, IT departments are being tasked with a multitude of ambitious tasks. As mentioned above, they are being asked to find a way to use their existing legacy IT infrastructure to create private clouds. They are also being told that they need to support the development and rollout of new web, mobile and other digital services, as well as frequent updates to these services after they are launched. In addition, they are being assigned other, long-term strategic IT initiatives, including datacenter modernization, big data, and IoT projects. They have to do all this while continuing to maintain and support their existing IT infrastructure using their existing budgets. All of this is leading them to consider the deployment of disruptive new enterprise IT technologies in an attempt to find some way to relieve the pressure all these forces are placing on their departments. This creates a fertile environment for platforms that “change the game” and allow IT departments to cost-effectively deploy private clouds, enable faster and more agile digital service development, increase IT automation, and implement datacenter modernization, big data, IoT and other strategic IT initiatives.
The enterprise IT market has been dozing while the emerging digital economy has fundamentally transformed numerous other markets. However, these three trends – IT industry consolidation and reorganization, rising demand for private clouds and increasing pressure on IT departments – has created fertile ground for companies with disruptive technology platforms. It is about time for the enterprise IT market to wake up.