Disruptive Changes

Lead Analyst: Cal Braunstein

Amazon Inc. and Microsoft Corp. lowered their pricing for certain cloud offerings in attempts to maintain leadership and/or preserve customers. Similarly, Hewlett-Packard Co. (HP) launched its next-generation Moonshot hyperscale servers. Meanwhile, IDG Connect, the demand generation division of International Data Group (IDG), released its survey findings that show there may be a skills shortage when it comes to the soft skills required when communicating beyond the IT walls.

Focal Points:

• Earlier this month Amazon price reduced the prices it charged for its Windows on-demand servers by up to 26 percent. This brought its pricings within pennies of Microsoft's Windows Azure cloud fees. The price reductions apply across Amazon's standard (m1), second-generation standard (m3), high-memory (m2), and high-CPU (c1) instance families. CEO Jeff Bezos stated in the Amazon annual report the strategy of cutting prices before the company needs to, and developing technologies before there is a financially motivating factor, is what protects the company from unexpected markets shifts. Microsoft has responded by aggressively cutting its prices by 21 to 33 percent for hosting and processing customer online data. In order for customers to qualify for the cuts they must make monthly commitments to Azure for either six or 12 months. Microsoft also is making its Windows Azure Virtual Network technology (codenamed "Brooklyn") generally available effective April 16. Windows Azure Virtual Network is designed to allow companies to extend their networks by enabling secure site-to-site VPN connectivity between the enterprise and the Windows Azure cloud.
• HP launched its initial Moonshot servers, which use Intel Corp. Atom low-cost, low-energy microprocessors, This next-generation of servers is the first wave of hyperscale software defined server computing models to be offered by HP. These particular servers are designed to be used in dedicated hosting and Web front end environments. The company stated that two more "leaps" will be out this year that will be targeted to handle other specific workloads. HP claims its architecture can scale 10:1 over existing offerings while providing eight times the efficiency. The Moonshot 1500 uses Intel Atom S1200 microprocessors, utilizes a 4.3U (7.5 inch tall) chassis that hosts 45 "Gemini" server cartridges, and up to 1800 quad-core servers will fit into a 42U rack. Other x86 chips from Advanced Micro Devices Inc. (AMD), plus ARM processors from Calxeda Inc., Texas Instruments Inc., and Applied Micro Circuits Corp. (AMCC) are also expected to be available in the "Gemini" cartridge form factor. The first Moonshot servers support Linux, but are compatible with Windows, VMware and traditional enterprise applications. Pricing starts at $61,875 for the enclosure, 45 HP ProLiant Moonshot servers and an integrated switch, according to HP officials. (For more on this topic see this week's Research Note "HP's Moonshot – the Launch.")
• According to a new study by IDG Connect, 83 percent of European respondents believe there is no IT skills shortage while 93 percent of U.S. respondents definitely feel there is a gap between the technical skills IT staff possess and the skills needed by the respondents' companies. IDG attributes this glaring differentiation to what are loosely defined as "hard" (true technical skills and competencies) and "soft" (business, behavioral, communications, and interpersonal) skills. The European respondents focused on hard skills while their American counterparts were more concerned about the soft skills, which will become more prevalent within IT as it goes through a transformation to support the next-generation data center environments and greater integration with the business. As IT becomes more integrated with the business and operational skill requirements shift, IDG concludes "companies can only be as good as the individuals that work within them. People … are capable of creative leaps of thinking and greatness that surpass all machines. This means that any discussion on IT skills, and any decision on the qualities required for future progression are fundamental to innovation. This is especially true in IT, where the role of the CIO is rapidly expanding within the enterprise and the department as a whole is becoming increasingly important to the entire business. It seems IT is forever teetering on the brink of bigger and better things - and it is up to the people within it to maximize this potential."

RFG POV: IT always exists in a state of disruptive innovation and the next decade will be no different. Whether it is a shift to the cloud, hyperscale computing, software-defined data center or other technological shifts, IT must be prepared to deal with the business and pricing models that arise. Jeff Bezos is correct by not sitting on his laurels and constantly pushing the envelope in pricing and services. IT executives need to do the same and deliver comparable services at prices that appeal to the business while covering costs. This requires keeping current on technology and having the staff on board that can solve the business problems and deliver innovative solutions that enable the organization to remain competitive. RFG expects the staffing dilemma to emerge over the next few years as data centers transform to meet the next generation of business and IT needs. At that time most IT staff will not need the current skills they use but skills that allow them to work with the business, providers and others to deliver solutions built on logical platforms (rather than physical infrastructure). Only a few staff will need to know the nuts and bolts of the hardware and physical layouts. This paradigm shift in staff capabilities and skills must be anticipated if IT executives do not want to be caught behind the curve and left to struggle with catching up with demand. IT executives should be developing their next-generation IT development and operations strategies, determining skills needed and the gap, and then begin a career planning and weaning-out process so that IT will be able to provide the leadership and skills needed to support the business over the next decade of disruptive innovation. Additionally, IT executives should determine if Moonshot servers are applicable in their current or target environments, and if so, conduct a pilot when the time is right.