Private managed cloud providers are accelerating and disrupting customer journeys to the public cloud. This includes Kyndryl, an IBM spin-off company that focuses on infrastructure services. After separating from IBM and struggling to manage its profit and loss statements, Kyndryl is now forcing customers to migrate to a public cloud environment. This managed cloud migration must happen within a timeframe defined by Kyndryl – sometimes in as little as six months.
If you were already in Kyndryl’s public cloud, you may be in a relatively secure position. But if you are on legacy assets, this means you’re in a compromised position. Your IT department may need to pull its data center cloud migration plans forward, making the need for a cloud migration strategy urgent and unexpected.
Some customers may have already been planning to move to a public cloud provider, but this new model accelerates that move to the cloud and moves their attention away from more critical programs like enterprise software upgrades. Here, I will cover how this change will affect private cloud customers, why private managed cloud providers are forcing migrations to the public cloud, and what steps customers can take to try to maintain control of their cloud migration.
Why Are Private Managed Cloud Providers Forcing Migrations to the Public Cloud?
There are many theories around why Kyndryl’s cloud services are forcing moves to the public cloud. One possibility is that when Kyndryl was separated from IBM, IBM moved all of its assets, including the physical infrastructure that it was leasing, back to Kyndryl and their customers. When Kyndryl gained autonomy, they inherited aging infrastructure that inevitably had to be replaced or upgraded, and they were likely contractually obligated to perform technical refreshes.
To lessen that hardship and improve its P&L balance, Kyndryl placed this burden on its customers through forced migrations to the public cloud. It stopped Kyndryl from having to provision infrastructure for the customer and allowed Kyndryl to financially benefit through managing the migration and subsequent related
Lastly, Kyndryl is likely trying to get back to its “bread and butter” – its core competency of being an IT managed services provider – by moving away from what it believes to be its IBM legacy offering of infrastructure.
How Does Kyndryl’s New Model Affect Customers?
Traditional private managed cloud providers typically provide dedicated or shared physical and virtual infrastructure for one customer. Customers chose this operating model versus a public cloud utility for a reason. But now, those same customers that opted for a private cloud environment are being forced to the public cloud.
Kyndryl’s approach is one of the more rigid processes we are seeing in the market. Other managed cloud providers have used a more gradual and nuanced approach to migrating their clients to a utility cloud. But Kyndryl customers are being pigeon-holed into a “forced march” to the public cloud.
Customers are being caught in a vulnerable position with limited options and time to migrate to the public cloud. On top of that, customers are not engaged in the co-creation and product development processes for these new operating models. This is giving customers very little visibility into what comes next for their data center operations.
Instead, these new operating models are being forced onto them by private managed cloud providers. Most companies are not in a strong enough position to fight back because they are lacking in two ways:
- They lack the right degree of sophistication to negotiate such deals
- They lack the right amount of buying power or overall leverage.
Even if they have a solid understanding of their contract, larger companies with a larger Kyndryl footprint and overall spend profile will have an easier time negotiating because Kyndryl is fighting for business. With smaller companies that may not have that level of spend, Kyndryl would be in a better position to dictate the terms of migration.
Customers who are under contract with Kyndryl, Virtustream, or other firms providing similar services should be aware of this potentially problematic situation so they can take the necessary steps to alleviate the situation.
How Customers can Maintain Control of Their Public Cloud Migration
There are a few steps customers can take now to maintain control of their cloud environment:
- Conduct a Comprehensive Contractual Review: The first step would be to determine whether you are under contract with these firms or another private managed cloud service provider. If such a relationship exists, the second step would be to conduct a detailed contractual review of the governing terms and conditions like:
- Termination and Transition Services
- Notice Period
- General Financial Constructs
Understanding your contractual terms with Kyndryl will give you more leverage and prevent you from feeling bound to their terms at the negotiation
- Create a Competitive Environment: Customers should also start to form a deeper bench of competitors to Kyndryl. Start with existing supplier relationships and explore the range of possible terms for figuring out whether an existing supplier can replace the function of what Kyndryl is proposing to do for you in the future. Then, work your way to net-new suppliers and compile a list of potential RFP participants to create a competitive environment for Kyndryl to operate in.
Regardless of the reasons behind Kyndryl’s policies, these organizations’ risks are clear and present. Organizations would do well to enlist support from a third-party advisory practice with experience in this particular area.
UpperEdge has advised clients in these situations and on downstream negotiations with their end-state hyperscaler. This puts UpperEdge in a unique position to deliver value for its clients and advise clients through a successful move to the public cloud with a comprehensive cloud strategy. Reach out today to learn how we can help.