Bloomberg Summit Speakers Weigh Threat to IT Vendors From Public Cloud

NEWS ANALYSIS: Speakers at the Bloomberg Enterprise Technology Summer predict that the mass migration of corporate IT resources from private data centers to the public cloud will devastate the top IT vendors.

NEW YORK—The public cloud is the only future option for enterprises, and traditional IT vendors are headed to a catastrophic experience. That was one of the predictions from this year's Bloomberg Enterprise Technology Summit, which moved the discussion from whether public cloud computing is a viable alternative to traditional enterprise infrastructures to it being a CIO mandate if a company wants to stay competitive.

At least that was the opinion of some speakers at the summit here on April 24, although a CIO panel was less ready to pronounce the old guard dead.

The traditional concerns around using a public cloud including security and compliance requirements are now being flipped on its head as public cloud advocates claimed that cloud security and compliance are more robust than internal on-premises operations.

"The cost curve will wipe out private data centers," said Scott Weiss, a partner at Andreessen Horowitz, an investment organization. Weiss also predicted that traditional enterprise vendors—he characterized the vendors as the "top five" but declined to name names—are "staring at the abyss," as their core businesses will disappear because public cloud vendors use pricing, speed and flexibility to outdistance the traditional vendors.

Weiss' forecast was backed up, not surprisingly, by Benjamin Fried, CIO for Google. Fried's focus is internally on building the applications and providing services for the Google workforce. Fried said that in his position he is able to see trends several months and years ahead of what many CIOs are able to witness.

One of the big trends he is currently following is a "zero trust" model where all data moving within a corporate environment is treated as if it were moving on the Internet and data protection and the need for encryption become paramount. The second big trend involves developing applications without a big administrative overhead, but that are designed from the start to work well on mobile platforms, including tablets and smartphones.

Not so fast was the refrain delivered by a group of CIOs involved in corporate transitions. Although organizations such as Kaplan are moving many applications to the public cloud, there are some applications that are still best suited to on-premises operations. Mike Capone, the CIO for ADP, noted that customer records are the core value of the organization and as such they will remain in-house.

The mix of maintaining some applications—typically legacy software—while developing new applications on the cloud environment by default was a common theme from the CIOs attending the Bloomberg event.

The other common theme was security. The security discussions soon turned to "The Snowden Effect" and what will be the outcome of the massive leaks of U.S. government intelligence secrets by former National Security Agency contract employee Edward Snowden. Raimund Genes, CTO of Trend Micro, contended that one negative outcome may be that the Internet becomes more regional in nature as companies get concerned about where their data is stored.

Colonel Cedric Leighton, the former deputy director of training for the NSA, said "tribalization" may be the unintended consequence of Snowden's disclosures. This walling off of the Internet by countries is a negative.

One concern was the need for more public discussion and a further understanding of what controls and limitations should be placed on the operations of the nation's intelligence agencies.

"None of us understand what the boundaries will be for the intelligence agencies," said Rick Howard, the chief security officer for Palo Alto Networks.

"The government and the private sector need to have a confluence," said Leighton. This confluence would allow a method for private companies and public agencies to work together.

"Information sharing is the secret sauce," added Howard.

You need to get actionable intelligence rather than using a vacuum approach that scoops up vast amounts of data, according to Leighton. "I never had the desire to go into areas other than the support of military operations," he said.

Are the traditional vendors at risk? Yes, but that has always been the case. The attendees at the Bloomberg event were clearly trying to figure out how to evaluate and implement new technologies without disrupting their own internal operations. Developing new applications in the cloud while maintaining and figuring an end of life for the legacy applications was the theme that resounded most solidly with the CIOs.

Eric Lundquist is a technology analyst at Ziff Brothers Investments, a private investment firm. Lundquist, who was editor-in-chief at eWEEK (previously PC WEEK) from 1996-2008, authored this article for eWEEK to share his thoughts on technology, products and services. No investment advice is offered in this article. All duties are disclaimed. Lundquist works separately for a private investment firm, which may at any time invest in companies whose products are discussed in this article and no disclosure of securities transactions will be made.