Skip to main content

How Cloud Computing Service Management is Evolving

Cloud service management is going to become yet one more segment of the legacy enterprise software sector that's being affected by the ongoing adoption of open-source software subscription models.

The shift in end-user IT consumption preference to cloud services will trigger disruption and pressures old-school Infrastructure Management (IM) software vendors on two fronts, according to the latest market study by Technology Business Research (TBR).

Cloud consumption models rely on subscription revenue. The revenue recognition patterns for subscriptions are in stark contrast to the expensive software vendor license models that include ongoing maintenance support agreements, generally purchased after the first year of deployment.

The shift to subscription models negatively impact margins as traditional IM software vendors shift go-to-market and delivery strategies to align with end-user consumption preferences -- and the growing demand for a lower-cost IT operations model.

Forward-Thinking Cloud Management Platforms

Second, the underlying technology required to manage cloud environments is vastly different from the historical management software products sold on a license basis by legacy vendors -- such as Computer Associates (CA) and BMC.

Traditional vendors such as CA and IBM Software have to rethink how they sell and deliver these products while stitching together the IP assets necessary to manage and monitor cloud infrastructures.

Overall IM revenue grew 3.7 percent year-to-year for the 22 vendors covered in the TBR Infrastructure Management Software Vendor Benchmark, with average IM operating margin of 22.3 percent for those firms.

"How well vendors manage license erosion while ramping-up subscription revenue streams and the requisite product extensions for cloud infrastructure will be a story played out in 2015 and beyond," said Geoff Woollacott, practice manager at TBR.

He believes that this year is a tipping point for accelerated cloud adoption -- and the concomitant business model destruction for traditional legacy suppliers. End-customer consumption model preferences remain difficult to forecast accurately due to their continued evolution.

"TBR decided to subgroup our benchmark analysis given the different rates of change these vendors may experience going forward in this turbulent time in our industry," said Woollacott. "We look forward to extending the benchmark analysis in subsequent quarters as the transformation impacts become clearer through the business model analysis."

Popular posts from this blog

GenAI Can Supercharge Economic Recovery

The Economic Recovery Corps (ERC) is a new, collaborative initiative designed to accelerate recovery from the COVID-19 pandemic in communities and regions throughout the U.S. by connecting organizations with the talent and capacity needed to advance new ways of doing economic development. However, it's unknown if new technology will be a key component. For example, less than 25 percent of government organizations will have Generative Artificial Intelligence (GenAI) enabled citizen-facing services by 2027, according to the latest worldwide market study by Gartner. Furthermore, fear of public failure and a lack of community trust in government use of the technology will slow adoption for external use by a nation's citizens. Government GenAI Market Development Like many organizations over the past 15 months, federal and regional governments have been exploring the opportunities and risks associated with the emergence of GenAI tools. Gartner’s annual global survey of over 2,400 CIO