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The Cloud Is Tempting CIOs To Change Their Tech Vendors

Something big is happening, and Cloudera’s recent raise of $160 million is just one indication of many that the technology industry is undergoing a tectonic shift.

In a recent global survey of CIOs, Gartner found 70% of CIOs expect to change their technology and services vendors over the next two to three years. Seventy percent. Enterprises, driven by an increasing hunger to put data to use and cloud infrastructure for the purpose of scale, are said to be rethinking the ways they do business.

A Sign Of The Times

Oracle missed its earnings estimates on Tuesday—again. For those keeping track, this is Oracle’s sixth top line and third earnings miss in the last twelve quarters. A year ago, Oracle’s miss pushed me to declare an end to the era of traditional enterprise software business. Today, this almost feels like a truism.

Cowen & Co. analyst Peter Goldmacher echoed this sentiment towards enterprise software in a research note:

Enterprise Software is witnessing a structural and deflationary trend as challengers are disrupting legacy vendors such as Oracle by offering more contemporary products at much lower prices. Focus on growth over profits is enabling challengers to get to market and disrupt the status quo faster than ever before. Oracle is going up against a long list of these emerging vendors that offer portions of its enterprise applications and platform functionality. While technology parity is part of the problem, we believe technology cost is the real issue as Oracle cannot compete on price without a major model reset.

That the industry is shifting, but cost is not the primary driver. According to Gartner, it’s all about agility and the innovation it affords: “Cloud-based infrastructure as a service (IaaS) and business process as a service (BPaaS) are the two fastest-growing segments [of enterprise technology spend], expanding 44.9 and 12.4 percent, respectively, in 2014. Agility, not cost, will be the primary reason that many organizations adopt cloud computing.”

This is true of cloud computing, but it’s also true of Big Data, mobile and other sweeping changes to how we interact with machines. Old-world licensing and deployment models simply don’t fit the way business needs to be done today.

Big Data = Big Change

As Gartner writes, “Digital business is an unstoppable and irresistible catalyst for change—change that will affect the fundamental foundations and baseline assumptions of every business.” Or, as Hortonworks vice president Shaun Connolly terms it, “The explosion of new types of data in recent years has put tremendous pressure on the datacenter,” forcing CIOs to reconsider their legacy technology relationships.

Just look at how much money enterprise-focused technology companies have raised from VCs in the last 12 months:

  • Cloudera – $160 million ($300 million total)
  • Box – $100 million ($399 million total)
  • MongoDB – $150 million ($231 million total) (Disclosure: I work for MongoDB)
  • Dropbox – $350 million ($607 million total)
  • Pure Storage – $150 million ($242 million total)

If we included companies that are changing the way we get paid (Stripe, Square), drive (Uber), or communicate (SnapChat), the list would grow and it would become even clearer that we’re at a crossroads where investors are piling on to ensure they both pick and make winners in the process. And with 70% of CIOs expecting to change their vendors, there’s now a race to ensure their new choice in enterprise technology is fully ready to compete. 

We live in an exciting time, one in which cloud and mobile have fundamentally restructured how data is collected and processed. It’s the first time in decades that the old guard is actually looking vulnerable.

Image courtesy of Shutterstock

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