This is a point of view by the authors to give an overview of the cloud market and emerging opportunities in this first article of a multi-part series on cloud computing and application modernization. We will explore what has changed in the past 18 months and what the post-pandemic era has in store for cloud vendors and customers.
The pace of digitization accelerated nearly 7X globally during the pandemic, as huge portions of the economy moved to digital channels; these trends are here to last. Cloud infrastructure is a critical enabler for this digital transformation and in the post-pandemic world, this trend of cloud adoption is only going to accelerate. As per a study by Gartner, worldwide end-user spending on public cloud services is forecasted to grow 18.4% in 2021 to total $304.9 billion, up from $257.5 billion in 2020. Cloud is projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020.
However, a more granular view gives a better assessment of what happened, and where the trend lines are headed. In a report from CloudHealth, here are a few takeaways:
- Total cloud spending increased in the aftermath of the COVID-19 pandemic. However, the leap in 2020 was not huge. This was partly owing to the free services offered by cloud providers during the pandemic and the cost optimization measures enforced by organizations in a bid to control operational expenses. However, in 2021 a significant jump of 18% is forecasted by Gartner in end-user spending on cloud services.
- Spending on compute services, which is by far the biggest spend, actually decreased in the same period.
- Container usage saw a big increase in 2020, even in verticals that saw decreased total cloud spending. Increasingly enterprises are looking into moving applications from physical hardware and virtual machines (VM) into containers and deriving benefits such as increased portability, faster application development & deployment, etc.
- Cloud vendors and their System Integrator partners are focused on helping customers derive the maximum value from their cloud investments, with strategic consulting and operational offerings.
Why Cloud and Why now?
The pandemic has brought to the forefront a number of fundamental shifts which are driving growth in cloud adoption, few examples:
- Increased focus on business continuity planning & agility in the business
- Increased demand for e-commerce, e-learning, telehealth, video-on-demand, etc
- Explosion in demand for remote work, hybrid work will continue to be the preferred model in the Post-COVID world
- Dramatic swings in demand cycles increasing the importance for pay per use models
Conversations with enterprises on the rationale for moving to the cloud is now much broader than simply saving costs & having a better infrastructure. It is now about cloud making the business more adaptable & agile, about enabling innovation, reinvention, and growth. Public cloud providers continue to make huge investments to enhance their platforms and move up the stack providing key capabilities that enterprises had to earlier build themselves. This is allowing enterprises to focus on capabilities that truly drive innovation & differentiation in their business. There are still some enterprises in the early stages of cloud adoption that are migrating workloads to the cloud solely for cheaper compute & storage. They are doing a simple lift & shift of their on-premises workloads to the cloud and are often disappointed with the ROI unless they include other critical aspects of the cloud migration such as automation of IT processes, leveraging cloud-native technologies, cloud ecosystems, and marketplaces, etc.
The trend of companies adopting multi-cloud and hybrid cloud strategy continues to accelerate, almost all large enterprises are deploying workloads on more than one public cloud while also keeping some data on private clouds if necessary owing to data residency/sensitivity, regulations, latency, and other reasons. As per an IDG Cloud Computing Survey, over half (55%) of organizations who have embraced the cloud, currently use multiple public clouds, with 21% saying they use three or more. This is further corroborated by analysts at IDC who project that more than 90% of enterprises will use a mix of public, private, and on-premises environments by 2022.
That said, the disruption of traditional IT caused by cloud computing is here to stay and we should be moving from fear-uncertainty and disinformation (FUD) and chaos during the pandemic to rapid and orderly adoption and refactoring of traditional applications in the post-pandemic era.
Regulatory hurdles and concerns dissolve when you adopt Privacy and Security by design
In our experience, the biggest roadblocks for enterprises to accelerate cloud consumption are runaway costs and compliance/security concerns. A survey by IDG Cloud Computing (referred to in the prior section) validates this as well.
- Compliance and security concerns: One of the key concerns raised is the inability to protect sensitive data in the cloud. To overcome this concern, in addition to encryption of data in transit or at rest cloud providers have also started providing the ability to encrypt data even while it is in use i.e. while it’s being processed. There is no one-size-fits-all solution but cloud providers are working hard to provide “engineered-in, invisible security” that protects even the most sensitive data in the cloud. Public cloud providers are also providing offerings based on a zero-trust framework that will help governments be in compliance with President Joe Biden’s recent executive order on improving cybersecurity.
- Cost: While the pay per use cost model and ease of provisioning is a great advantage of the public cloud model, it also means that organizations that do not have a robust cost management practice are unable to build accurate cost estimates and are often faced with runaway charges in their monthly invoice. The complexity of pricing, billing & cost attribution for public cloud services adds to this challenge. However, public cloud providers have cost management tools that provide a holistic overview of costs with the cloud provider, cost savings/right-sizing recommendations, the ability to set budget alerts, and much more. By building a FinOps practice around them, enterprises can derive cost savings that directly contribute to their bottom line.
Industry matters – Industry segments that are bullish on the cloud
Cloud computing is now intrinsic to businesses across almost all sectors. We will highlight some industry segments which have shown a lot of momentum and continue to hold promise for the future:
- Digital Native companies that exist primarily online and are “born in the cloud”, naturally lead in the adoption of ever-evolving cloud technologies. Their infrastructures are already cloud-based, they are usually the first to adopt emerging cloud technologies and are able to derive maximum benefits from the cloud. This is much harder for traditional enterprises owing to their legacy technology, slower processes, staff skill mix, and longer technology learning curves, etc. Below is an example of how Box is leveraging Google Cloud’s advanced capabilities to enhance the scale, performance, and intelligence of its cloud content management platform globally.
- Retailers across the board are playing catch up to meet the evolving consumer needs for next-generation personalized experiences that blend the physical & virtual worlds and the cloud is a critical enabler to make this happen. Retailers also need to be agile to adapt to sudden changes in demand especially during “surge demand periods” such as traditional holiday driven or seasonal fashion swings. To be able to do this, moving IT systems for retailers to the cloud is critical. Here’s an example of how retailer Kroger adopted Cloud to gain deeper insights into their business rapidly in a scalable fashion.
- Public sector adoption has been relatively sporadic and low but is slowly picking up with government agencies in the US and across the world. Cloud providers continue to add to their certifications and compliance standards to meet the needs of governments. Public health agencies at the state and local government level have awakened and the need for quick and nimble apps such as covid contact detection, notification, and vaccine distribution, and post covid campus reopening led them to believe in the transformational nature of the cloud. Here’s an example of such solutions the SpringML team has implemented with Google Cloud technologies across the US Public sector and has even been recognized for a vast variety of impactful implementations.
- In the case of the manufacturing industry, driven by early adopters of Industry 4.0 frameworks and now data-driven organizations embracing predictive technologies, the cloud is enabling new use cases across the value chain. Following are a few examples –
- Operational insights to invent more efficient ways of working on the shop floor
- Resilient supply chain that can adapt to whatever uncertainty and disruption is thrown at it, experts collaborating across factories
- Engineers solving complex problems using large scale simulations
- Solutions predicting machine failure and much more.
- This is being made possible by the access to innovation that hyperscalers are providing in their platforms in areas such as AI/ML, IoT, Analytics, Speech recognition, optimized computing resources on-demand, etc.
- Organizations in the Healthcare and Life Science industry are also adopting cloud technologies rapidly across the value chain. For example, they are leveraging cloud technology for real-time collaboration to accelerate research efforts, sharing health data seamlessly across authorized providers & unlocking value from the data in real-time to enhance patient care, deriving operational efficiency through pay per use models enabling them to reduce the cost of care. As an example, pharmaceutical and health care company McKesson migrated siloed legacy infrastructure to use high-performing Google Cloud databases to get the most out of their data and ultimately deliver a better healthcare experience to patients.
Humans are continually innovating. The need for automation has been increasing historically since the Renaissance and days of the industrial revolution when the printing press replaced handwritten manuscripts. We are said to be in the fourth wave of industrial revolution since 2010 but the Post-COVID-era could be labeled Industry 5.0! The remarkable pace of adoption of innovation and automation across industries especially with a customer service component can certainly be attributed to COVID-induced lockdowns and fresh thinking and introspection when almost within weeks companies digitally transformed and devised strategies to enable remote work for most of their employees without missing a beat. That would not have been possible without the progress in the Internet, cloud computing, and automation technologies in the past two decades. Since 2020 we have increasingly come across exciting real-life success stories of Customer Service Innovation (e.g. Call Center AI ), Voice-based user experience interfaces (e.g. Chatbots) and a plethora of AI/ML use case adoption (predictive maintenance, autonomous driving, advanced robotics, etc to name a few). The common denominator is advancement in cloud technologies and their rapid adoption. The cloud market is growing fast as various analyst reports have stated and is already huge but we are just getting started and may only have touched less than 10% of its potential. We will deep dive further in subsequent articles in this series.
About the Authors
Himanshu Kapoor is a Customer Success & Professional Services Executive with an extensive background in leading technology-led transformation for clients and client-facing teams at leading organizations like IBM, Cisco Infosys, and currently Google. In addition to his expertise in Go To Market Strategy, he brings a deep understanding of public cloud platforms like Google Cloud & AWS.
Piyush Malik is a veteran of data-driven business transformations across multiple industry domains having served customers worldwide & leading multicultural teams spread over 40 countries and helped with digital transformation, cloud adoption, and applied data science/AI/ML journeys. Having served in strategy, management consulting, and application software leadership roles at PWC, IBM, Cadence Design in the US as well as product management with Tata group in India, he is currently a Senior Vice President at SpringML, a Google Partner, besides being active with several industry bodies and non-profits.