DevOps Comes of Age in Business Transformation

Software development has long been a key element in the running of any business, from back-office functions to helping with product development.

Before COVID-19, the idea that a business should integrate this often long-term, iterative process with its short-term, day-to-day IT operations—a process known as DevOps—was not on many companies’ agendas, due to organizational inertia and a tendency for business functions to operate in silos.

But a surge in digital engagement sparked by the pandemic has changed all that.

That surge, brought about in large part by mass remote working and a boom in lockdown-induced e-commerce, has involved more organizations moving to the cloud, allowing them greater flexibility in managing workloads across multiple locations, and enabling faster time-to-market for omnichannel commerce. This has resulted in a more joined-up approach to software development and IT operations so that cloud applications can be more quickly and efficiently implemented, in turn giving DevOps a big boost.

Essentially, DevOps is the process by which the people who build software and those who run it within an organization collaborate to implement the necessary software upgrades. It aims to achieve faster development and rollout of product features, thereby improving return on investment.

An IT user survey in late 2019 from UBS Evidence Lab, an alternative data provider, showed that one-third of organizations did not have a roadmap for moving their data from on-premise storage to a public cloud platform. Organizational inertia played a part, but cost pressures also forced businesses to continue with existing technologies. In some cases, concerns about data security also contributed to the reluctance to move to the public cloud.

Fast-forward to today and the behavioral shift is clear. A 2021 survey by a New York-listed cloud communications platform found that soaring digital interaction between companies and customers led to 82 percent of business leaders reporting an accelerated move to the cloud, equipping their companies with the flexibility to serve customers from anywhere.

“The disruption caused by COVID-19 has been a key enabler of accelerated digitalization, to the extent that many businesses have no choice but to move to a digital ecosystem,” says Diviya Nagarajan, Analyst, Asia Software & Services at UBS Global Research.

“This means nothing less than the start of a multiyear technology transformation—and DevOps comes into its own here. It is the key enabler of accelerated cloud adoption and other solutions for fully digitalized business interactions.”

UBS analysis shows these trends are likely to continue. The bank expects there will be 24 million remote workers in technology by 2024, increasing demand for omnichannel commerce and further encouraging cloud adoption, as the distributed computing framework under which cloud operates makes working across multiple technology interfaces much easier. Global spend on cloud-based services is predicted to more than double in the next few years, with an estimated value of nearly $600 billion by 2024.

This in turn will drive acceleration in DevOps to the point where there could be embedded contracts of more than $70 billion annually until 2024, possibly rising as high as $100 billion.

Pre-pandemic, responsibility for software development and IT operation largely functioned in separate silos, but Ms. Nagarajan says 2020 witnessed a real impetus to unify those functions, propelling DevOps to a new level. UBS estimates that roughly 35 to 40 percent of organizations have some form of “agile” and DevOps methodologies, which could increase to 75 percent by 2024 as technology investments are fast-tracked.

While businesses are largely equipped to handle this from a technological perspective, because the tools have existed for some time, Ms. Nagarajan argues that “from an organizational perspective it’s relatively early in the cycle.”

“DevOps is going to be a slower burn than cloud adoption, as businesses get organizational buy-in,” she says. In a traditional software development model, teams are organized in silos—design, development, testing, application support, and production. But a cultural shift is needed as DevOps encourages coordination between teams.

To be ready, organizations must take stock of their technology operations and assess where silos can be broken down. “While a lot of this is about technology, in the end this is a business transformation,” Ms. Nagarajan says.

From an investor perspective, DevOps is currently a small market. But UBS believes it is shaping up to be one of the fastest growing areas of the technology sector, partly driven by organizations’ need for a global presence and omnichannel reach, combined with pressure for faster time-to-market product and service delivery.

The key beneficiaries will likely be hyperscale cloud providers and software-as-a-service (SaaS) companies. Per-capita revenue in the contracts associated with this business can be relatively high because development is mostly done through agile models, requiring programmers with more expensive skillsets.

UBS analysts believe that customer “stickiness” is also likely to improve as faster rollouts of new features improves the return on investment for customers, while service providers with better DevOps skills are likely to become more strategic to customers.

“From a service provider perspective, there is a major opportunity to upgrade their offerings to take full advantage of the benefits,” says Ms. Nagarajan.

The quotes used in this article were relevant when shared on March 17, 2021. Current views may differ.