Where next for public cloud?
While the pandemic functioned as a catalyst for digital transformation in enterprise, the trend for moving computing services and infrastructure to third party cloud providers continues unabated.
Tech consulting giant Gartner forecasts that global spending on public cloud services will grow by 20% this year reaching $500bn – up from $410bn in 2021. By end of next year this is expected to near $600bn.
Multiple lockdowns and enforced WFH policies over the last few years have meant that even slower adopters of new technology- such as government and education – needed to accelerate their cloud usage so they could maintain their operations.
Consequently, the chief hyper scalers – Amazon Web Services (AWS), Google Cloud Platform, and Microsoft Azure saw their profits swell over this period.
Microsoft Cloud generated $20.7 billion in revenue for Q3 2021 – a year on year increase of 36%, driven by a 50% growth in Azure and other cloud services revenue.
Similarly, Google Cloud revenues neared $5 billion over the same period, thanks to a 45% revenue hike generated from Google Cloud Platform (GCP) services and Google Workspace collaboration tools.
So, now that many enterprises across various verticals have between two- and five-years’ experience of using cloud services – what are they looking for now and over the next couple of years?
Rather than using cloud because they must, many technology heads have started looking beyond the core services and are looking at capabilities that can affect and improve business operations and opportunities, according to Sid Nag, research vice president at Gartner.
“CIOs are beyond the era of irrational exuberance of procuring cloud services and are being thoughtful in their choice of public cloud providers to drive specific, desired business and technology outcomes in their digital transformation journey,” he says.
According to Gartner, the greatest growth in spending is forecast in infrastructure-as-a-service (IaaS), which is projected to grow 30% this year and another 30% next year.
This is followed by desktop-as-a-service (DaaS) which will grow by 27% – largely the result of more people working from home during lockdown.
Despite more people returning to the office, for at least some of the time, this offering is still predicted to grow by another 23% next year although, it’s a comparatively small spend ($2bn this year) next to SaaS ($177bn) and IaaS ($92bn).
The third largest category in 2022 is projected to be application infrastructure services, or platform-as-a-service (PaaS) at $110bn.
SaaS, IaaS and PaaS will account for 82% of total cloud. According to Gartner’s Nag however, cloud native capabilities such as containerization, database platform-as-a-service (dbPaaS) and machine learning and artificial intelligence have richer features than commoditised compute and are therefore more expensive – which is what’s fuelling the level of spend in this area.
While increased use of cloud-based productivity tools such as Zoom, Cisco WebEx or GoToMe has been well documented, the surge in demand for cloud infrastructure tools may be indicative of a notable change in how organisations operate, Gartner believes.
As a result of the maturing core cloud services, business leaders are looking for a deeper differentiation in their cloud packages that can disrupt digital businesses and operations in enterprises directly.
“Infrastructure is becoming programmable, and its operation is subsequently becoming automated,” says Henrique Cecci, a senior research director at Gartner.
“Modern IT infrastructure, whether deployed in the data centre or consumed in the public cloud, requires less manual intervention and routine administration than its legacy equivalents,” he adds.
As the market matures, Deloitte reports that another trend has been vertical growth as cloud giants, software vendors, and system integrators develop an array of cloud-based solutions and APIs tailored for specific industries.
A global automobile manufacturer for instance, may partner with cloud vendors to develop cloud-based connected car application development services for the transport industry.
In it’s top Tech Trends for 2022 Deloitte Insights team predicted that over the next two years it expected to see ‘A growing number of organisations across market sectors explore ways that industry clouds can help them meet unique vertical needs.’
It added ‘Organisations increasingly expect cloud vendors to create “common core” solutions that address shared needs across industries and ecosystems.
‘For example, using APIs, engineers and system architects can connect targeted smart factory systems together in a shared cloud network.’
It’s interesting to note that among the recent public cloud usage surveys conducted, tracking cost is coming up almost as much as security now as one of the chief concerns.
According to global research company 451, 55% of enterprise respondents found securing cloud environments as their biggest challenge associated with public cloud usage closely followed by cost optimisation, cited by 52%.
This shows that as market matures, more CTOs are acknowledging the complexities of seeking agility and scale in the public cloud: cloud expenses can pile up quickly – and balancing cost vs. convenience is crucial.
We can also expect an increase focus on sustainability, according to Gartner, as the world moves towards achieving net zero carbon emissions by mid-century to have a reasonable chance of limiting global warming.
Gartner notes that cloud providers are responding to this growing focus on sustainability by instituting more aggressive carbon-neutral corporate goals, which may create new challenges for infrastructure and operations (I&O) leaders.
“New sustainability requirements will be mandated over the next few years and the choice of cloud services providers may hinge on the provider’s ‘green’ initiatives,” says Cecci.
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