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ESG RESEARCH INSIGHTS PAPER

Understanding the Benefits of Cloud Operations for Dedicated Infrastructure

Measuring the Desire for, Progress Toward, and Pay-off of aaS for Dedicated Infrastructure

By Adam DeMattia, Research Director; Michael Barry, Market Research Analyst, Custom Research; and Scott Sinclair, Senior Analyst
AUGUST 2021

Executive Summary

As the adoption of cloud computing continues to mature, organizations are realizing with increasing frequency that what their IT environments can do is much more important than where the environments are located. Different applications have different requirements and selecting the infrastructure that best meets those requirements is what really matters. Whether the infrastructure resides in a private cloud, at the edge, or in the public cloud is secondary. Similarly, modern IT is shifting away from delivering systems and technologies to services and outcomes. It should not matter what technologies support applications as long as SLAs are met and the user experience is satisfactory. ESG research validates these perceptions with nearly three-quarters of respondents agreeing or strongly agreeing with each statement (see Figure 1).
Figure 1. Perceptions Related to Cloud Computing and Modern IT

Please rate your level of agreement with the following statements? (Percent of respondents, N=1,000)

Created with Highcharts 6.0.72%2%6%6%9%9%13%13%19%19%18%18%46%46%43%43%42%42%39%39%33%33%31%31%Strongly agreeAgreeNeutralDisagree/Strongly disagreeDelivering dedicated infrastructure “as-a-Service” is critical toour IT operations to keep up with user demandsDelivering dedicated infrastructure “as-a-Service” is critical to our IT operations to keep up with user demandsCloud computing is more about how (operating models) thanwhere (public vs. private)Cloud computing is more about how (operating models) than where (public vs. private)Modern IT is about the user experience, not underlyingtechnologiesModern IT is about the user experience, not underlying technologies

Source: Enterprise Strategy Group

But do private clouds and as-a-Service (aaS) operations in dedicated infrastructure environments offer a compelling alternative to public clouds, and do they deliver meaningful improvements to legacy on-premises infrastructure operations? Answering that question is the crux of this research report, which is based on a survey of 1,000 IT professionals currently responsible for and knowledgeable about their organization’s infrastructure management workflows and cloud requirements. To answer this question, ESG used the survey results to segment respondents, and the organizations they represent, by their adoption of aaS operations for dedicated infrastructure (meaning on-premises or colocation-resident). Based on how each respondent answered the segmentation questions, their organization was categorized as either “Lagging,” “Late Majority,” “Fast Following,” or “Leading” in terms of aaS adoption.
ESG’s hypothesis was that Leading organizations should be more efficient and flexible, better able to quickly respond to business needs, and achieving financial advantages associated with aaS adoption. This hypothesis was borne out by the data that Leading organizations:
• Are able to deliver IT services 47% faster than Lagging organizations, have reduced the IT time and effort to manage infrastructure by 57% more than Lagging organizations, and resolve service-impacting infrastructure issues 40% faster than Lagging organizations.
• Nearly universally (98%) agree that their IT resiliency has helped avoid product release delays and lost productivity over the past 12 months. They are also 2x more likely than Lagging organizations to beat competitors to market, and C-suite constituents view IT as a competitive differentiator 3.5x more often.
• Are achieving business results: they are 2.7x more likely to exceed their revenue targets by more than 7%+ in their most recent fiscal year and are 2x more likely to say they are in a “very strong” position to succeed in their markets over the next few years.

Segmenting Organizations by Their Adoption of aaS for Dedicated Infrastructure

To segment organizations based on their current adoption of aaS operations for dedicated infrastructure, we asked respondents two key questions. First, we asked them about their organization’s preference related to IT operations. Do they prefer cloud operations like defining and purchasing outcomes, scaling infrastructure on demand, automating and outsourcing IT management tasks, and paying for infrastructure over time as an operational cost? Or does the organization prefer legacy IT operations like purchasing IT systems, sizing infrastructure multi-year time horizons, tasking IT staff with infrastructure management, and paying for infrastructure up front as a capital expense?
As shown in Figure 2, the majority of organizations today prefer an aaS model for defining solutions for purchase, scaling infrastructure over time, and IT management. Organizations were nearly split regarding financing preferences, with a slight majority preferring capital expenditures for dedicated infrastructure.
Figure 2. Organizations’ Preferences for IT Operations

Thinking of the IT operations associated with dedicated infrastructure, for each row below, please indicate what your organization would prefer? (Percent of respondents, N=1,000)

Created with Highcharts 6.0.734%34%66%66%43%43%57%57%44%44%56%56%53%53%47%47%IT defines specs and purchases IT productsIT defines requirements and purchases outcomesInfrastructure is sized at purchase for a multi-year time horizonInfrastructure is scaled over time as resources are neededIT manually conducts day-to-day management processesIT automates or outsources day-to-day management processesInfrastructure is purchased upfront and depreciated as it agesInfrastructure is paid for only as it is used

Source: Enterprise Strategy Group

Respondents preferring cloud operations were then asked how far along their organization is in implementing those preferences. To assess organizations’ progress adopting aaS operations for dedicated infrastructure, ESG totaled the number of areas where the organization had either achieved its aaS goals or begun implementing solutions to pivot to aaS operations. Leading organizations are those that have begun implementing aaS in all four areas included in the survey, Fast Followers are those implementing aaS in any three areas, Late Majority organizations are defined as those implementing aaS in two areas, and Lagging organizations are those implementing aaS in one area or who have no interest in aaS infrastructure operations.
Evaluating the distribution of organizations today in this context, it is clear that the adoption of aaS for dedicated infrastructure is nascent; despite many organizations having a preference for cloud operations, just 5% of organizations surveyed are comprehensively implementing aaS today (see Figure 3). However, Leading organizations are achieving significant benefits as a result of their efforts. Organizations in the less-advanced cohorts have a significant opportunity to transform their IT operations with Dell APEX and remove the friction of adopting aaS for dedicated infrastructure.
Figure 3. Organizations’ Progress Toward Adopting Cloud Operations for Dedicated Infrastructure

Source: Enterprise Strategy Group

Research Findings

How aaS Adoption Improves IT Operations
In order for the IT organization to effectively support the business, infrastructure needs to be provisioned rapidly, operated reliably, and proven to meet the needs of the end-user. Based on our research, organizations Leading on aaS adoption are outpacing their peers across each of these IT outcomes. When we asked respondents if they had improved IT operations in their dedicated infrastructure environment in the past 12 months, more than 9 out of 10 respondents at Leading organizations reported that they have accelerated responsiveness to the business (94%), reduced the time required to manage their infrastructure (94%), reduced costs (93%), and accelerated application development (91%). In all cases, Leading organizations were significantly more likely than their peers to report achieving these benefits (see Figure 4). The implication is clear: by running your infrastructure as-a-Service, IT operations can be greatly improved relative to traditional, in-house IT infrastructure management.
Figure 4. Benefits Achieved in Dedicated Infrastructure Environments

Have you seen any of the following benefits in your organization’s dedicated IT infrastructure environment over the last 12 months? (Percent of respondents, "Yes" responses only)

Created with Highcharts 6.0.763%63%64%64%62%62%64%64%60%60%73%73%67%67%70%70%71%71%58%58%85%85%78%78%79%79%78%78%67%67%94%94%94%94%93%93%91%91%79%79%LaggingLate MajorityFast FollowingLeadingEnabled faster response time for IT to respond to lineof-business needs (N=1000)Enabled faster response time for IT to respond to lineof-business needs (N=1000)Reduced time needed to support and manage infrastructure(N=1000)Reduced time needed to support and manage infrastructure (N=1000)Reduced IT infrastructure costs (N=814)Accelerated application development and deployment (N=1000)Reduced vendor lock-in/greater workload portability (N=1000)

Source: Enterprise Strategy Group

Efficiency Breeds Agility for Leading Organizations
Maturity of cloud operations and aaS adoption help IT organizations be more responsive to their business constituents. With automation, outsourcing, and an ability to deliver infrastructure on demand, we see Leading organizations drive significant improvements in a number of areas. First, when asked if they think that the infrastructure support and management time required from IT staff has been reduced in the last 12 months, Leading organizations reported 57% more time savings than Lagging organizations on average (33% reduction in person-hours versus 21%).
The efficiency Leading organizations achieve frees up IT teams and allows them to be more responsive to end-users. Specifically, Leading organizations deliver IT services (compute, storage, provisioning, etc.) in about half the time it takes Lagging organizations (47% faster, on average). It’s also worth noting that Leading organizations have been accelerating their response time significantly over the last 12 months. Leading organizations have reduced their response times for things like provisioning requests and trouble tickets by 36% on average in the last year (a 71% larger reduction than Lagging organizations achieved). By cutting down on time spent managing and supporting infrastructure, IT teams can focus on more proactive planning and collaborating with line-of-business teams to support activities like application or product development.
Leading Organizations Achieve Greater Infrastructure Reliability
Regardless of the organization’s capabilities, outages and errors can still occur. No IT team or environment is perfect, but our research makes a compelling case that aaS infrastructure helps reduce the number of service-impacting events (i.e., an event which causes an IT service or application to be noticeably degraded or unavailable) organizations experience by a sizeable margin. Based on the research, Leading organizations are 5.3x more likely to reduce the occurrence of service-impacting events to an annual frequency, while the majority of Lagging organizations experience service-impacting events weekly or more often (see Figure 5).
Figure 5. Frequency of Service-impacting Events in Dedicated Infrastructure Environments

How often does your organization encounter a service-impacting event in its dedicated infrastructure (i.e., an event which causes an IT service or application to be noticeably degraded or unavailable)? (Percent of respondents)

Created with Highcharts 6.0.754%54%28%28%13%13%4%4%49%49%24%24%18%18%8%8%52%52%17%17%18%18%12%12%34%34%23%23%17%17%21%21%LaggingLate MajorityFast FollowingLeadingWeekly or more oftenMonthlyQuarterlyAnnually

Source: Enterprise Strategy Group

According to the research, when issues do occur, Leading organizations are able to respond to and remediate these issues faster than less-advanced organizations (see Figure 6). Leading organizations are 3x more likely than Lagging organizations to locate the root cause of a service-impacting event in less than an hour, and they remediate the issue in 40% less time, on average. Eliminating service-impacting events at the source in such a short time not only limits the amount of time IT spends mending the outage, but it also improves uptime and reduces the disruption of these events on business processes. In short, managing complexity and maintaining business operations are among the most important mandates for IT, and Leading organizations are the best equipped to handle these tasks.
Figure 6. Time to Remediate Service-impacting Events in Dedicated Infrastructure Environments

Generally speaking, how much time goes by from the time a root cause of a serviceimpacting event affecting dedicated infrastructure and workloads is found, and a fix can be deployed? (Percent of respondents)

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Source: Enterprise Strategy Group

Agile and Reliable IT Delights End-users
In the research, we observed a strong correlation between aaS adoption and end-user satisfaction. We asked respondents how satisfied they believe end-users are with IT operations and the service delivery experience at their organization on a scale from 0-10. Using a Net Promoter Scale methodology (see Figure 7), we found that end-users at Leading organizations were 2x more likely than those at Lagging organizations to be promoters (i.e., rate their IT organization as a 9 or 10), and those at Lagging organizations were 10x more likely to be detractors (i.e., rate their IT organization as a 6 or lower). The result? As a group, Leading organizations achieve a customer satisfaction score 6.6x higher than Lagging organizations.
Figure 7. End-user Satisfaction by Level of aaS Adoption

Source: Enterprise Strategy Group

Level of aaS adoption Percentage with end-users that are promoters Percentage with end-users that are detractors NPS
Leading 55% 2% +53
Fast Following 31% 13% +18
Late Majority 39% 22% +27
Lagging 28% 20% +8
The research also gives us a strong indication that the correlation between aaS adoption and end-user satisfaction is in fact causal: 85% of all respondents agreed that delivering dedicated infrastructure as-a-Service is critical to enabling IT operations to keep up with user demands.

How aaS Adoption Supports Business Outcomes

The research clearly shows how aaS adoption benefits IT operations, but it also makes it clear that those IT improvements have an impact on improving business outcomes.
aaS Agility Helps Organizations Outpace Competitors and Transform
As discussed, Leading organizations have accelerated response times to line-of-business needs by 71% more than Lagging organizations. When technology teams help the business move faster, the impact can be huge. The research touched on two key measures of agility: time-to-market performance and progress made toward digital transformation initiatives. By either benchmark, Leading organizations are moving significantly faster than their peers.
We asked respondents to describe their last few product launches and releases in the context of their competitive set. Are they beating competitors to market? In line with the competition? Or struggling to keep pace? According to the research, Leading organizations are 2x more likely than Lagging organizations to beat their competition to market (see Figure 8).
The research helps us quantify the problem with legacy approaches to managing the lifecycle of IT infrastructure and how that can slow an organization down. We asked respondents if they had a brand-new workload to support and how much calendar time they would need to define requirements, plan capacity, evaluate vendors, attain approvals, and deploy and integrate the infrastructure. In total, following traditional infrastructure procurement steps serially, respondents estimated the time to deploy the infrastructure for a net-new workload would be 37 weeks. For organizations seeking to accelerate innovation and bring compelling new digital services to market ahead of competitors, this is unacceptable. On-demand aaS infrastructure management offers a compelling advantage.
Figure 8. Time-to-market Performance of Organizations

Considering your last few major product launches/releases, how has your organization compared to competitors (e.g., have you been ahead or behind the competition)? (Percent of respondents)

Created with Highcharts 6.0.732%32%54%54%12%12%42%42%47%47%10%10%53%53%39%39%6%6%63%63%26%26%11%11%LaggingLate MajorityFast FollowingLeadingAhead of competitorsIn line with competitorsBehind competitors

Source: Enterprise Strategy Group

Speaking specifically about digital transformation—the use of new digital technologies to transform business processes—a similar trend is observed. Leading organizations were 2.9x more likely to report that they have mature digital transformation practices and have optimized several digital transformation initiatives.
The Resiliency Associated with aaS Adoption Helps Organizations Perform, Even in Trying Times
IT resiliency has a direct effect on commercial success; customer-facing applications need to be online and performant, and employees need access to the tools and technologies to do their jobs. Outages in either area can lead to lost productivity, frustrated users, and—potentially—lost customers. We have already discussed how Leading organizations see fewer service-impacting events in their dedicated infrastructure environment and resolve those issues faster. The data gives us an indication of how this performance impacts the business. Nearly all (98%) Leading organizations say their IT resiliency helped avoid product release delays and lost productivity over the last 12 months. Significantly fewer (65%) Lagging organizations report the same sentiment. It is clear in our data that an aaS consumption model helps maintain stability, even as IT resources and endpoints become more diverse and unfurled.

98% of Leading organizations say their IT resiliency helped avoid product release delays and lost productivity over the last 12 months.

At a time when organizations have face unprecedented uncertainty and macroeconomic headwinds due to the COVID-19 pandemic, IT teams at Leading organizations have risen to the challenge. While the world is emerging from the pandemic, preparing to meet the next macroeconomic shock head-on is top of mind for many organizations, and aaS adoption is a compelling solution.
Businesses Recognize the Value of IT at aaS Adopters
The level of IT agility and resiliency delivered by Leading organizations is not lost on executive leadership. Leaders’ ability to support go-to-market excellence, business transformation, and reliable operations all combine to elevate IT’s standing within the organization. C-suite executives at Leading organizations are 3.5x more likely than those at Lagging organizations to view IT teams as a competitive differentiator (see Figure 9). In the past, organizations just saw IT as a service provider or cost center. The adoption of aaS is one way for CIOs to help redefine their teams as profit drivers.
Figure 9. View of the IT Organization by the C-suite

How does your organization’s C-suite business executives view the IT organization? (Percent of respondents)

Created with Highcharts 6.0.713%13%55%55%26%26%5%5%19%19%59%59%18%18%4%4%25%25%53%53%19%19%1%1%45%45%43%43%11%11%2%2%LaggingLate MajorityFast FollowingLeadingCompetitive differentiatorHigh-value service providerAdequate, but room to improveCost center/business inhibitor

Source: Enterprise Strategy Group

The Financial Implications of aaS Adoption

One of the core value propositions of any cloud solution is the idea that the organization pays only for what’s used and wastage due to overprovisioning is eliminated. The research shows that aaS adoption is delivering on this promise: 69% of all organizations have reduced their IT infrastructure costs, but among Leading organizations, this percentage increased to 93%. When respondents were then asked to quantify the size of their cost reduction, Leading organizations reported an 85% larger reduction than Lagging organizations (see Figure 10).
Figure 10. IT Infrastructure Cost Savings by aaS Adoption

By how much do you believe your organization has reduced IT infrastructure costs over the last 12 months? (Percent of respondents, N=1,000)

Created with Highcharts 6.0.713 %13 %15 %15 %17 %17 %24 %24 %LaggingLate MajorityFast FollowingLeading

Source: Enterprise Strategy Group

What is it about legacy approaches toward IT infrastructure management that allow aaS adoption to reduce costs? We asked respondents what percentage of legacy infrastructure deployments ultimately result in infrastructure overprovisioning, and the results were noteworthy: on average, respondents reported 53% of legacy infrastructure deployments result in overprovisioning or overbuying. Even with all the progress the market has made with respect to workload consolidation and virtualization, overprovisioning infrastructure is still a major issue.
Moreover, it is an issue respondents say aaS is directly helping them solve: 60% of all respondents report that as-a-Service consumption models have helped their organization eliminate overprovisioned or underutilized infrastructure, and that jumps to 74% of Leading organizations represented.

The Bigger Truth

The adoption of aaS for dedicated infrastructure is in its early days; just 5% of organizations have made a comprehensive pivot to cloud operations. However, organizations on the leading edge report tremendous results across their IT operations, business outcomes, and in terms of cost efficiencies. Taken together, we would expect these impacts to manifest in improved revenue performance for Leading organizations, and this is borne out by the data: Leading organizations are 2.7x more likely to exceed their revenue targets by 7%+ this fiscal year (see Figure 11), and they are 2x more likely to say they are in a “very strong” position to succeed in their markets over the next few years.
CIOs tasked with finding ways to improve IT operations with the ultimate goal of achieving tangible business impact would be well served by accelerating cloud transformation and aaS adoption within their dedicated infrastructure environments.
Figure 11. Organizations’ Financial Performance by aaS Adoption

Thinking about your company’s current fiscal year (FY), which of the following represents your company’s performance (or expected performance) relative to its revenue goal? (Percent of respondents)

Created with Highcharts 6.0.718%18%57%57%13%13%9%9%27%27%43%43%15%15%12%12%27%27%43%43%13%13%11%11%49%49%32%32%6%6%12%12%LaggingLate MajorityFast FollowingLeadingWe exceeded/expect to exceed our FY revenuegoal by more than 7%+We exceeded/expect to exceed our FY revenue goal by more than 7%+We exceeded/expect to exceed our FY revenuegoal by 2%-6%We exceeded/expect to exceed our FY revenue goal by 2%-6%We met/expect to meet our FY revenue goal(this includes a range from greater than -1% toless than 1%)We met/expect to meet our FY revenue goal (this includes a range from greater than -1% to less than 1%)We missed our FY revenue goal

Source: Enterprise Strategy Group

RESPONDENT METHODOLOGY AND DEMOGRAPHICS

This ESG Research Insights Paper was commissioned by Dell Technologies and is distributed under license from ESG.

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