(innovative music) >> Hi everyone, this is Dave Vallente and welcome to part one of our four part series Conquering Enterprise Cloud co-sponsored by Oracle. You know, Cloud is on everyone's minds these days and for good reason. I'm here with Chuck Hollis of Oracle, good to see you again Chuck. >> Thanks, Dave, you know it's great to be here. You know, I think we both think this is an increasingly important topic for any IT leader these days. I'm looking forward to a deep discussion. >> You know, that's right, Chuck. Our goal here is really to deconstruct Cloud computing and specifically try and address the challenges faced by most IT groups today. We really want to understand how to best utilize Cloud to create business capabilities and really have a frank conversation about Oracle's role in Cloud. So let's dig in. In our initial segment, we're going to start with the big Why. Why is there so much interest in Cloud models and why now? Let me start by sharing some data from a survey of 1,200 respondents that we just finished last month. 33% of the respondents are thinking tactically as Cloud first. 49% are thinking about deploying Cloud selectively and only 8% say Cloud only. Less than 10% say no Cloud. So this data clearly underscores that Cloud is on virtually everyone's mind. We know public Cloud is still small, but it's rapid growth has everybody trying to figure out their own Cloud strategies. >> You know what this tells me is that over 90 percent of your 1,200 respondents are thinking seriously about Cloud in some form these days. If that's not mandate, I don't know what is. >> Well Chuck, how do you think we got here? I mean in the last few years, it looks like we've gone from 90% being skeptical of Cloud, to 90% really taking it quite seriously. Large companies like Microsoft and Oracle have completely reshaped their strategies around Cloud. >> You know, you're right. Maybe we take a step back and figure out why we're having this discussion in the first place. >> I think a good starting point might be how business itself has changed over the last few years and of course when the business changes, IT really has to adapt. Chuck, you talk to a lot of customers and really a lot of IT people. What is driving the shift from your perspective? >> If you really want to talk big picture, I think we've gone from an economy of things to an economy of information. Everything an organization does, or might ever want to do, is entirely grounded in information these days. So it's no surprise to me that IT is starting to matter a lot more than it ever has. Another way of saying the same thing I think IT has become one of the big three ingredients you need for business success. Great people, great financials, now great IT. >> You know, I remember years ago when we felt like the job of IT was to support the business, you know by automating financials or HR or whatever. Now the opposite is true. In many cases, IT has really become the business. >> Right, let me offer a different view. One way to look at any organization is as a collection of business processes. Building stuff, finding customers, making them happy, learning from the experience and doing it better the next time. To do any of these things, at any scale these days, you're going to need serious IT capabilities. >> You know, it's funny, we've both been in this business for a while and it seems like it takes less and less time for the latest buzz word to become main stream reality. I mean look at Cloud, obviously, Mobile, Big Data, IOT, what used to take a decade, or even longer, it's really now happening in a few short years. Now a lot of people feel like it's the consumer of the consumerization of IT that's driven by the likes of Facebook and Google that are really responsible for this shift and of course they're the epitome of Cloud companies my question to you is are traditional enterprises finally tuning in? >> You know, sure, consumerization of IT it's a factor. But what I really think we're seeing is an entire generation of business leaders that want to use information in new ways to thrive and compete. And they're depending on IT to help them do that. You know I find today's business leaders a whole lot more IT savvy than just five or ten years ago. >> Sure, in our survey of 1,200, we asked what the key drivers were to move to Cloud and here's what people said. Number one, scalability. Number two, agility and number three was cost. So I wanted to explore this a little bit with you. People don't typically associate traditional IT and the vendors that serve that space with these attributes, particularly agility and scalability, but even cost as well. Now cost I know can be complicated and somewhat misleading, it's not just the acquisition cost or the published price of the Cloud service, but my question is, why should anyone take seriously the perspectives of someone like yourself, a long time enterprise IT guy working at a company that was founded in the 1970's. >> Ouch. Well I think that's fair enough. Look, I think longevity in this industry isn't necessarily a disadvantage, but failure to adapt sure is. For example, Intel was founded in 1968, Microsoft was founded in 1975, Cisco in 1984 and I don't think you're saying that these guys are somehow irrelevant just because they've been so successful for a long time. As far as me, I spent close to forty years in this industry and I'm still not bored. For some strange reason, I've always been fascinated with Enterprise IT. I've also had the privilege of meeting with thousands of IT leaders over these decades and learning from each and every one of them. And I've also done pretty well at calling the big shifts over the years. So, you can take it or leave it. More to the point. I can't argue with your findings. I would suggest though that there might be a deeper interpretation to some of these. >> What do you mean by that? >> Well, let's take scalability. I think it's more than just getting really big. You know, for some shops, it's also about getting global. Look, if you're going to deliver IT services close to your users, using a public Cloud provider to get global footprint can look pretty attractive. Look how popular contract workers have become in most work places. That makes it really easy for management to dial labor costs up, or down, without too much drama. I think they'd like to be able to do the same thing with their IT costs. Or maybe we consider agility. Most people would think that the ability for IT to move faster is a good thing and yeah, that's true, but there's more to it. We're now getting to the point where there's all sorts of attractive public Cloud services that just aren't practical to attempt to recreate with a traditional IT model. If you think about it, the very best IT stuff these days runs in the Cloud. That's where all the R&D is going. And you know, I agree with you on your point on costs. I think way too often, people focus on the cost of the ingredients instead of the cost of the meal. You'll hear people say it's often cheaper to buy servers instead of rent capacity. But I always wonder, are you forgetting to include things like data center cost, people cost and that sort of thing. >> Sure. >> Public Cloud providers are very good at assembling the ingredients and offering an attractive service. In house IT groups, maybe not so much. And we can't forget opportunity cost either. When those resources are freed up, what higher value activities could they be working on other than just patching infrastructure. You know I don't think this debate will be definitively answered anytime soon. >> For the customers you talk to, let me ask you a question, is Cloud becoming less of an IT thing and more of a business thing and isn't that being driven by the ascendancy of public Cloud? >> I think you're right. Step back bit and think about how virtualization came into the market. I categorize virtualization as more of an IT win than a business win. IT saw most of the benefit, but the business users got pretty much the exact same capabilities they had before and just got them a little faster and a little cheaper. It didn't really change the game for the business users. Now when we think about public Cloud, the business realizes that they can now do things that just aren't practical to attempt to do in house. >> Right. >> So if we think about this, it's quickly becoming a business thing because no business person wants to give up on a competitive advantage. So they've started to get very vocal about IT moving to a Cloud model as quickly as possible. Remember, decades ago, we were all talking about globalization, everybody had to get global. >> Sure. >> I think business leaders realized that they had to either invest in getting global to get in the game or suffer the consequences. And I think the exact same thing is happening with Cloud. >> Well staying on that trend, it's reflected in our forecast when you look at aggregate IT spending. >> Roughly about a trillion dollars are spent on IT infrastructure and related activities. And long term, our forecast show that about a third of that spend is going to go into the public Cloud, a third is going to be On-prem, Cloud like in that organizations will be attempting to operate their own Clouds on premises, and about a third will be Legacy stuff that people are just going to manage in a slowly declining fashion. >> You know that sounds about right to me. I think another way of saying the same thing is that over the long-term, two-thirds of IT spend will shift to some sort of Cloud model. Whether that's a public Cloud, or something cloud-like that lives in the data center. I also think you're seeing that shift reflected in R&D spend for the major IT players. I can't speak for the other vendors, but at Oracle, the vast majority of our R&D spend is now tied to the Cloud in some meaningful way. If you look at our recent acquisitions, they're all in that category. StackEngine, Ravello, NetSuite, Dime, on and on. Here's the point for Enterprise ITlers. It's going to be increasingly difficult to stay current without embracing some sort of Cloud model. It's where most of the industry investment is going these days. >> Okay, let's talk about the looming talent shift you know again, the data shows, in our forecast, that over the next 10 years we'll see about 200 billion dollars coming out of IT staff expense. Shifting to vendor R&D in the form of Cloud, whether that's public Cloud, or On-prem. What does that mean to you? >> You know I think that's a great factoid. And it's not that surprising to me. When you buy a Cloud service, you're not just buying infrastructure, you're also buying the expertise and the automation to run it effectively. If you think about it, that would represent a huge shift in the Enterprise IT labor market. >> Well let's follow that thread, which is the people side of the equation. The joke is you only need two things in IT, you need money and you need people. We've talked about the cost. Talk about how Cloud impacts skill and expertise requirements. How do you see CIO's thinking about this challenge? >> You know, I think you bring up a great point. IT organizations have to compete for talent just like everyone else does. And anytime I'm with a group of CIO's, the talent and staffing discussion always comes up. Because not having the right people on your team is almost worse than not having the budget you need. >> But the real point there is that the best people want to work in a modern environment. >> That's true. >> One where you can keep developing their talents and their skill sets and these days, that means Cloud. My question is, can traditional IT organizations keep up with this change? >> You know, I don't think there's a yes, no answer to that, but I'd say they've got to try really hard. Look, you can already see signs of progress. The application developer community has embraced Cloud models and Tooling in a huge way. I think their far more productive as a result and I don't think they're going back. I'd like to think the infrastructure and operations folks are starting to see the same light. Now, just to be clear, I don't think the IT infrastructure guys are being stubborn about Cloud. It's just that getting there is a lot harder than it looks. So we, as vendors, have to work to come up with strategies and approaches that works the way they do. That being said, I've got IT leaders telling me that it's a lot easier to find key talent when you can offer them a modern environment to work in. And these days, that means Cloud. Look, it's not unusual to go through an IT org chart these days and find a beginning Cloud team working alongside the traditional IT function. I see clear evidence that IT leaders know that they need to start investing in a new way of doing things. >> Okay so Chuck, I think it's time to wrap up this segment with a quick summary. Why don't you start us off? >> I guess the first key point I'd offer is that Cloud has moved from theoretical to inevitable. >> Yeah and so let's remember the findings that I shared earlier. A third of the respondents are thinking tactically as Cloud first. 49% are thinking about Cloud selectively. Only 8% say Cloud only and less than 10% say no Cloud at all. >> Yeah, congratulations, that means 90% of you are out there thinking hard about Cloud going forward. If we look at why that is, I think we can point to the macro trends, for example, every business is trying to compete in the digital economy, and no one wants to be left behind. >> And you know, the data supports that as well based on our survey. The top three motivators were scalability, agility and of course cost is always a factor. >> And the only thing I'd add to that list is that I see Cloud becoming a business strategy issue and not just an IT only discussion. I think the next big point is that Cloud has already started to transform the vendor side of the equation. What were those forecasts? >> Well long-term, we see about a third of IT spend moving to a public Cloud model, a third moving to a Cloud model that's On-prem and about a third being spent to maintain Legacy environments. >> And I think the implication is pretty clear. IT vendors are going to invest where the money is going. And that's Cloud. And I think we need to reiterate the point about how Cloud is transforming the people's side of the equation. >> Dave: Well, that's big, our forecast is that about 200 billion dollars of labor cost is going to come out of the data center and go directly into the Cloud model. >> And if you're going to want to attract the best people, which we all do, you're going to have to give them a modern environment to work in. And that's quickly becoming Cloud. So why don't we take a moment and give people a preview of what we'll be talking about next. >> Well, sure, in this segment we wanted to look at the forces behind Cloud and more importantly, why Enterprise IT can't escape its gravitational pull. In our next segment, we're going to look at why familiar approaches to the Cloud might not always work for all Enterprise organizations and what can be done about it. >> Thanks everyone. See ya next time. (innovative music)