The Demise of On-Premise Computing

With the development of "Confidential Computing" solutions, the cloud hold-outs are running out of excuses.

The Talent Shortage and the Great Resignation

What the media has begun calling the 'Great Resignation' is a phenomenon in Tech that has been in play for a while. I remember reading a headline over three years ago about over 10,000 baby boomers a day retiring. Articles about the talent shortage in tech mentioned how college enrollment in STEM (Science, Technology, Engineering, Math) related fields was down, and that the influx of new talent was unable to keep up with the exodus of seasoned technologists. I knew then that virtually every aspect of the technology field was going to grow faster and that wages would rise. The success of the public cloud, Kubernetes, Docker, DevOps and the shift to micro-services represented a change in the types of skills needed. When you add to that mix, a pandemic and a rising stock market that makes retirement for workers finally feasible, you have a witches brew for the supply-and-demand balance within IT related fields.

Companies that believed they were stable remaining with their COBOL mainframes, or dated J2EE monolithic applications are now experiencing a rise in the cost of talent that is making their head-in-the-sand approach to modernization more costly than the alternative. We have entered an era where the cost of maintaining legacy infrastructures and applications is now more than the cost to modernize. Investors, customers, and stakeholders from all sectors are beginning to expect that even highly traditional businesses begin to progress in the areas of automation.

The Increase of the Cyber Security Threat

When you consider the technological advancements in the field of corporate and state sponsored espionage it is easy to understand why the 'if it aint broke don't fix it' approach to legacy computing systems is falling by the wayside. Hygiene, and the ongoing patching and renewal of systems is required to simply tread water in the age of Zero Day Threats. Companies that have applications that have been running without a recompile are simply time bombs waiting to blow up.

Perimeter-level security is increasingly challenging as business are forced to become more connected with third-parties. Supply chains, peripheral revenue partners, data from and to customers, and even the basics of payment processing pose new challenges for geriatric computing executives.

Business today are left with two choices. Close your eyes and cross your fingers and just hope the breach doesn't come before your retirement party, or find the financial resources and talent to at least modernize your systems enough to withstand the myriad of cyber security threats. Once modernization becomes inevitable, just to stay alive, you are left with the choice to cloud, or not to cloud... doing nothing is no longer an option.

Shareholder Expectations and the Availability of Capital

If a breach, a DDOS attack, or a ransomeware attack occurs, the executives in denial of the threat are faced with the grim reality of squandered brand equity. It is becoming impossible to keep the outage or data theft a secret. At some point, the C-Suite has to explain the answer to that pinnacle question asked by the board; "How did this happen?"

I once worked for Campbell Taggart. At the time of my employment it was the 2nd most successful bread company in the world. Its systems were undergoing a slow but steady modernization. The company depended heavily on its parent at the time Anheuser Busch for a COBOL system it called the 'Bread Cost' system.

At the time I was there I served under a change in CIO to someone that came into the IT Post from the revenue department. The individual that took the top spot in the IT Department had very little technology background. He was the company's most outspoken critics of their desktop computing technology. He had implemented Novell networking and had PC's on every one of his employees desks. The fairly new CEO at the time wanted to get the desktop modernization underway for the entire company and that is what they did.

Later when the company sold to Sara Lee the CIO that had done a stellar job on desktop modernization shared with me a conversation he had with the CEO. He told me that he had been let go because he focussed too much on cost and not enough on modernization. He was basically too slow in addressing the rest of the company's needs. When he asked the CEO about his budgets and why they didn't give him more money to run the department, the answer that came from the CEO was that he had never asked!

The CIO spot is one of the places in huge corporations that has a revolving door. The average tenure of CIO's is fairly short. Many business studies have demonstrated that the alignment between corporate strategy and the execution of the IT Department often fails because of several reasons. One such reason is when highly successful companies retain boards that lack technology backgrounds. Accenture has been a vocal critic of established companies that do not modernize their leadership with a technically savvy board.

Today we find ourselves with a 30,000 point DOW. Liquidity amongst corporations, at least successful ones, is at an all time high. Interest rates have been at all time lows. In short, there is a glut of cash available for IT modernization. In this era, the executives that aren't asking, had better be the ones that get the new watch at the retirement party soon. Because the ones that aren't asking will face a disruptive event soon and find themselves woefully unprepared.

Ongoing Digital Disruption

Some will argue that virtually every industry is undergoing a disruption caused by digital progress. My wife was a realtor for a time and now works at a title company. Most of her colleagues do not read what I read and they don't have any familiarity with cloud computing or blockchain. If I mention digital disruption to them they are not really sure what I mean.

Some will think Zillow. But Zillow has almost joined the bricks-and-mortar real estate industry by serving conventional realtors and aligning with the MLS (Multiple Listing Service). Zillow hasn't really affected the industry as a whole. If someone is going to really see the tsunami that is coming they have to polish their crystal ball with some pretty serious study. Understanding how the block chain and distributed ledger will eventually relinquish a title policy obsolete is way past their understanding of their own industry.

I find it is easier to illustrate the impact of digital disruption by using the industries already overrun. Example such as AirBNB's impact on the hospitality industry. Uber's impact on the Taxi business. Paypal's and Venmo's impact on the credit card business. And of course Amazon's impact on retail. I find the retail apocalypse as something that most people can visualize when you point out the vacant building where the K-Mart used to be.

Most people in an industry, just like the executives that have been successful in the past, are really too busy to focus on the 'climate change' that is affecting them now. If any of them would just read the writings of science enough to project the end that is coming, they could make a choice to be a part of the immanent change rather than resist it.

The Acceleration of the Pace of Change

I have been somewhat of a fan of Ray Kurzweil. The premise of his book, The Singularity is intriguing. Kurzweil postulates that technology feeds on itself. He explains that the pace of change is accelerating. He explains that the time between the development of the first analytical engine and the first computer was over fifty years. But then the time form the first computer to the PC was only about half that time, a little over twenty-five years. He projects the time that it will take for a computer to have the intelligence of a mouse, then a human, and then eventually surpass human intelligence. Similar to Moore's Law which states that the power of a microprocessor will double with each half life of the former advancement, Kurzweil postulates that we approach a time when technology will fuse with humankind. If you want to hear it from the horse's mouth you can watch this video. https://youtu.be/1uIzS1uCOcE

An older and funner video is the trailer for a documentary called the Transcendent Man, above.

When I was an Agile Coach while with Red Hat, I used to open workshops with the trailer video. I was trying to use an ice-breaker to get people talking about why a change to use agile instead of waterfall was important. I learned then that many felt Ray was a kook. Some of them said so in my seminar.

Over the years I have come to find that there are many influences that cause us to think and feel the way we do. I have learned that I embrace change. I thrive on it. I get excited about it. But I have also found others that resist change. They fear it. They are intimidated by it. Their visceral response is so pronounced that many will simply choose not to believe something that scares them. That has proven to be true of many of the political issues of our day and explains some of the polarity we find in politics.

However, as a technologist, I have a full-time job of developing computing applications and infrastructure that are cost-effective. For the return-on-investment (ROI) in a system to be achieved it often requires assumptions regarding the system's useful life. I have influenced many Fortune 100 companies to invest millions of dollars. Having a sense of where technology is going, and appreciating the mandate to modernize has been a key part of my practice.

Confidential Computing and Running Out of Excuses

Just as colleagues in my Agile workshops would reject my premise that they needed Agile, seasoned executives often reject my opinions regarding their need for Cloud Computing. Stated simply, an executive can easily avoid modernizing their systems and migrating to the cloud if there are deficiencies in the cloud that they require. Security has been one such deficiency.

I have worked with companies such as Capital One that explained to me their journey to the cloud and explained how they had to educate their regulators along the way. They have been bullish on cloud computing. But even the most progressive financial institutions have some systems that remain on-premise in their own data center. The reason? Often security.

Some companies have the valid concern that their data must be protected from breach, theft or tampering. The cloud computing industry has used encryption to protect data at rest and in transit. But prior solutions to protecting data in use have not satisfied the fiduciaries of our global financial services companies. However, the recent developments in Confidential Computing may finally provide the on-ramp to the cloud that these companies have been looking for.

The Confidential Computing Consortium has a growing list of the who's-who of cloud native computing. The acceleration of the advancement of these cyber security solutions is becoming more and more relevant. And while financial services is one sector that will surely be affected, I would argue that every industry will be impacted by confidential computing.

The Development of AI and ML, and the Blockchain

Artificial Intelligence(AI), Machine Learning(ML) and the Blockchain get a lot of press but in many sectors of IT are not yet mainstreamed. I think their impact is nascent due to a lack of understanding and the fact that most companies truly making advancement in these areas realize the competitive value and differentiation that will be realized by them. In a sense, the real leaders in this space are not sharing their secrets yet!

Sure we read of self-driving cars and Bitcoin billionaires but the disruption of an industry wrought by AI or ML or Blockchain is not a prevalent thought in most of our minds. I would say that the impact of robo-investing may be one area that is percipient. Another might be the impact Internet advertising algorithms have on our browsing experience. (and yes after you have read this article expect Singularity related products to appear in your browser window soon! ;-) )

I bring up Confidential Computing because it is truly a valid area of development that is vital to the Web3 ambitions of our industry as well as the continued penetration of Web2 level cloud computing. And it is not just for financial services companies.

The continued advancement of AI and ML as well as Blockchain means that many applications in virtually all of our industry sectors will depend on vital data to perform normally. Tampering with the memory cache of a self-driving car will allow a malicious actor to threaten your life. Upsetting the derived outcome of a complex ML or AI process could result in error for a life sciences company designing a therapeutic pharmaceutical remedy. Facilitating the theft or sabotage of distributing contracts will violate the integrity of a distributed ledger and render it useless.

Confidential Computing and the protection it provides will be a matter of life and death. Industries as well as governance and the economy will depend upon its protection of data in use.

Why On-Premise Computing Will Prove Cost-Prohibitive

So once the cloud is secure and the last perimeter of cyber protection is extended to our data in use, there may still be hold-outs that will argue that a migration to modern cloud and Web3 infrastructures is not a requirement for their business. I understand. It is a big and very expensive change.

However, the reality is that the perception that maintenance of legacy on-premise environments saves money will slowly erode. As the industry shifts to a shared resources and pay-for-what-you-use paradigm, an on-premise datacenter will prove much more costly than its cloud alternative.

Even further, if the business needs for secure AI, ML or Blockchain are paramount, then establishing these capabilities in a private data center for one user will be cost-prohibitive. We must remember that the cloud was invented by necessity. Amazon's growth projections meant it had to develop a means of scale for its own business purpose. Google likewise had a level of ambition that mandated a new computing paradigm. Both companies sought to offset their expense developing their private clouds by sharing it with others.

The availability of talent, computing resources, and even energy and space will escalate over the next few years because the shared use model provides for shared investment. The world of opensource is proving that crowdsourcing and shared resourcing is a model for achieving more impactful results faster than private research and development allows.

All of this means that our futures are quite bright. Those of us that are the change mongers, the free thinkers, and the kooks of IT, will finally be joined by our more conservative brethren. The nay-sayers are running out of excuses.