How virtualized data centers are inhibiting cloud adoption

Cloud providers don't pay much heed to enterprise data centers, but shops are deploying virtual data centers four times faster than they are cloud.

Most cloud providers don't pay much attention to what goes on in the enterprise data center. Their goal is to get enterprises to migrate workloads out of it. To that end, they point out how the cloud effectively addresses IT challenges such as high capital costs, inflexible infrastructure and cumbersome processes.

Only 13% of current virtualization users plan to adopt IaaS in the next two years.

But providers need to realize that enterprises have a different view. To resolve those same IT challenges, enterprises are increasingly looking inward by virtualizing their own data centers. In fact, businesses are implementing virtualized data centers at four times the rate that they are adopting cloud services. According to a recent Frost & Sullivan survey, about 65% of all U.S. businesses have implemented server virtualization in their data centers, compared with just 15% that have adopted cloud Infrastructure as a Service (IaaS).

Why should cloud providers care about data center virtualization? After all, the cloud is more than just virtualized servers. But it turns out that virtualization has become a significant competitor to cloud adoption.

Are you losing customers to data center virtualization?

Enterprises that have recently invested in a major virtualization initiative are less likely to make a commitment to cloud than enterprises as a whole. According to Frost & Sullivan's research, current virtualization users are 35% less likely to adopt IaaS compared with the overall business population. Furthermore, only 13% of current virtualization users plan to adopt IaaS in the next two years, compared with 31% of nonvirtualization users.

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The reasons are logical. Enterprises operate in a heterogeneous IT environment, comprising private data centers, hosting facilities and, in some cases, cloud services. Initiatives are funded from a single budget using a single decision process. In truth -- and to the dismay of cloud service providers -- most businesses don't think in terms of a "cloud decision." Rather, they are looking for a solution to their IT challenges.

And in the eyes of enterprise IT decision makers, virtualized data centers answer the same challenges that cloud does. Both enable the enterprise to reduce data center costs, increase IT flexibility and business agility, and enhance application availability. Of course, cloud services may provide a more complete or longer-lasting solution to a challenge. Yet, for an enterprise, virtualization is the easier and less risky decision for several reasons:

  • Virtualization allows IT personnel to retain control over their applications and data, overcoming a key obstruction to cloud services.
  • Virtualization mitigates concerns about security and compliance that are associated with shared cloud services.
  • Virtualization allows businesses to get more mileage out of their existing hardware investment.

Not surprisingly, enterprises that have begun a data center virtualization project are less willing to consider a cloud service. When a company decides to move forward on a major data center initiative -- building a business case, obtaining budget, assigning resources to shepherd the project, disrupting operations, retooling business processes and retraining staff -- it is unlikely to go through the same process again for a cloud service in a short time period. In fact, proposing yet another initiative to solve the same problems is tantamount to admitting that a mistake was made. This is not an environment ripe for cloud providers' messages.

Continue reading part two: Find out three ways cloud providers can compete with enterprises' virtualized data centers.

About the author Lynda Stadtmueller is program director for Cloud Computing Services Research at Stratecast, a division of Frost & Sullivan.

This was first published in December 2012

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