Enterprise IT vs Cloud: Adapt or Be Disrupted. Surviving Cloud Disruption: Lessons from Lyft, Uber and Airbnb

January 23, 2015 Thomas Orozco

IT has a very ambivalent relationship to cloud. It’s viewed both as an enabler of growth, because it provides greater business agility, and as a risk, because it enables business users to circumvent IT altogether to get the resources they need.

Business users circumventing IT is called “shadow IT,” and has been a driver for the adoption of just about every cloud service out there: business users like Dropbox (SaaS) because it’s much easier to use than the organization’s file-sharing system, and email doesn’t cut it for large attachments; similarly, DevOps users flock to Amazon Web Services (IaaS) as it lets them get servers much faster than the organization’s ticket-based IT resource provisioning process.

 

Cloud is Disruptive Competition for IT

Within the enterprise, cloud service providers and IT compete for market share among the organization’s business users. But what’s interesting is that they aren’t playing by the same rules, a pattern common in industries with disruption.

Just as Airbnb is able to disrupt the hotel industry because zoning rules don’t apply to it, cloud can disrupt IT because risk-management policies (and their associated costs) don’t apply to it. In both Airbnb and cloud’s case, the disruptor makes its product comparatively better for the end-user by choosing to ignore the negative externalities that it creates (e.g. risk of noise for neighbors in Airbnb’s case, risk of data compromise or runaway costs in cloud’s case).

Of course, IT departments must account for risk-management, as it’s one of their main functions, which precludes simply accepting and ignoring the disruption that’s going on in their market. So, what are their options?

 

Two Forms of IT

Among enterprise IT, two camps are forming. The first wants to return to the old ways, and the second wants to compete with cloud on its own turf by offering their business users an experience similar to the one they’d get through a cloud service provider, only internally.

In the case of IaaS, this split looks like:

- “Conservative IT” clinging to ticket-and-approval-based resource provisioning processes, through new internal regulations that forbid or limit the usage of cloud resources.

- “Progressive IT” deploying private clouds and/or adopting cloud management platforms that allow for IT control and the self-service experience business users seek.

Of course, Progressive IT departments still account for the negative externalities mentioned earlier (they, fortunately, can’t just “stop caring about security!”). To make up for this disadvantage, they rely on economies of scale and differentiation such as providing integration with other systems in the organization, which cloud service providers can’t offer.

This approach works. IT departments that have decided to become value-added internal service providers and have accepted that IaaS is where the organization’s workloads will be deployed in the future are measuring substantial adoption from DevOps users, and observing a decline in shadow IT.

 

 

Adapt or be Disrupted

Of course, the question remains: can Conservative IT departments survive?  To answer that question it’s helpful to look at a relevant pattern from industries that have been disrupted.

The transportation industry is a great example. Rideshare services like Uber and Lyft are taking over the world, and taxi companies are either adapting by offering apps to hail a cab, and improving their level of service, or losing their customers (and trying to get regulators to protect their livelihood).

It’s clear that IT departments must decide whether they want to wait and learn if they’ll lose their (internal) customers too, or if they’d rather proactively adapt and offer what customers are asking for. Hint: it’s what cloud service providers are delivering today.

 

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