The panel brought together four growth companies that have been out there selling digital solutions, largely to enterprises. In the words of the song they “have looked at clouds from both sides” (Joni Mitchell, 1967) Their discussion gave some interesting points of view on a number of issues, including:
- Current Status of the Cloud Market
- Enterprise Exec Attitudes Towards Cloud
- Public Versus Private (and Hybrid) Clouds
- Drivers of Future Cloud Growth
The participant companies were: Interoute; Kintone; Accelerite; Commvault.
To put the discussion into context, we reviewed some recent published and reported studies of the Cloud market, which are described later in this article. Our major takeaway, however, is that the panel and studies while thought-provoking, unfortunately, in our opinion, don’t address the major factor driving cloud growth, which is Mobile.
Current Status of The Cloud Market
While there seemed to be underlying agreement that the cloud was “mainstream,” there were some differing depictions of the current market. For example:
Accelerite’s CEO, Nara Rajagopalan, stated that “most IT spending today is on virtualization, not on cloud.” Will Moorish, General Manager Product Sales emphasized that cloud is just one alternative solution for companies and stated that for large enterprises, “There’s a lot of stuff that’s not ever going to go to the cloud.”
Kintone’s Dave Landa said that the issue wasn’t any longer whether cloud is mainstream, he said, “It’s here.” Commvault’s Randy DeMeno agreed, pointing out that “Amazon and Microsoft are out there pounding it.” He also pointed to growth of iCloud. He labeled the cloud as “the new mainframe.”
Enterprise Exec Attitudes Towards Cloud
This was a key element of the discussion. All of the speakers sounded a positive note about the growing acceptance of cloud among C level executives, but it was hard to escape the feeling that the selling process is still complex and that cloud is still at an early stage in the marketplace.
Commvault’s DeMeno pointed out that a key consideration for buyers of cloud was, “Which cloud companies will be around in five years?” Answering his own question he pointed to Amazon and Microsoft Azure, adding that Google was a possibility and that with respect to IBM/SoftLayer the issue was whether they were just acquiring solutions to build up the IBM brand or whether they would also accept software solutions from partners.
Kintone’s Landa stated that they felt they were getting buy-in from enterprises for their approach which is to offer a platform that allows Low Code, No Code app development. He also pointed to the desire of LOBs (line of business) to build apps quickly as reinforcing corporate acceptance of cloud.
Moorish stated that Interoute does not approach the client trying to sell them on cloud. He stated that the solutions needed to be driven from the application at the top, down to the infrastructure and then a decision could be made on where cloud fit in. He stated that cloud was “just a tool.”
Public Versus Private (and Hybrid) Clouds
The moderator posed the question of whether “private clouds” exist. Rajagopalan of Accelerite replied emphatically that while it is very early in the development of clouds, he believes that hybrid (public plus private) clouds have enormous potential. He said, “It may be small compared to Big Iron today, but it is growing. If you can provide a public cloud experience in a private cloud, private clouds will take off.” He asserted that over time public cloud will probably account for only about 10% of the cloud market.
While not as assertive, Interoute’s Moorish stated that enterprises were unlikely to be comfortable with the key operational elements of their business being resident on a cloud “300 miles away,” but would want it nearby, either on a private cloud or other in-house facilities.
Drivers of Future Cloud Growth
Rajagopalan stated that he believes the true power of cloud will be demonstrated with the growing ability of users to employ tools like IfTTT (If This Then That; See: IfTTT.com) that allow non-programmers to develop apps very simply.
This tack is consistent with the mission of Kintone, which offers Low Code/No Code capabilities and uses Zapier to allow non-coders to connect services to each other. (See: Citizen App Developers – Low Code, No Code & IoT: Kintone Corp., mobilecloudera.com 8/1/16).
One of the more interesting notes on the question of key drivers of cloud growth was sounded by Moorish of Interoute. He stated that the issue is the boldness, or lack of it, by key executives of established companies. He gave two examples: 1) Asking, regarding Uber – “Would Yellow Cab have sacked all the drivers?” and 2) Pointing out that Craig’s List took classified ads and that established media companies didn’t go after that market. He said that to exploit the technology, “You have to make big bets and take big risk.”
DeMeno of Commvault pointed to a key driver as LOB executives looking for solutions who needed to move fast, “at the speed of business.” He also emphasized that the growth of devices was creating more data and that it had to be protected and indexed and that most of it faced compliance requirements, e.g., checks or birth records being archived.
Landa of Kintone stated that a driver was that expectations of business users were being heightened by their experiences in the consumer world. Especially with millenials, he pointed out, it was necessary to empower people, including all of the users in an enterprise to do things they way they wanted. “Empower people who know the problems best,” he stated.
Cloud Market Size
With cloud at an early stage of development, market estimates and forecasts are all over the lot. Numbers from multiple sources, (e.g., IDC, 451 Research, Statista, TBR, Synergy Research) show estimates of the public cloud market for 2016 ranging from as low as about $20 billion to over $100 billion. Note that Amazon AWS revenues are currently running at about a $10 billion a year annualized rate.
The entire global IT marketplace, broadly defined, is about $3.8 trillion per year (per IDC). Communications and services constitute about $2.5 trillion per year of this marketplace (per Gartner.) So, regardless of the exact estimate, public cloud is currently a very small portion. Growth rates for the next five years or so for public cloud are projected at about 15-19% CAGR, implying doubling or greater over the period.
Surveys and Studies – Verizon
Verizon has been publishing studies of the Enterprise Cloud Market for a number of years and issued a highly bullish report on the state of enterprise cloud (“State of the Market: Enterprise Cloud 2016.”) The theme of the report was that during 2015 Cloud had progressed from being used for “mission critical workloads” to “driving transformation” of business processes. Accordingly, Verizon found:
“Around half of companies say that they will be using cloud for at least 75% of their workloads by 2018. In just a couple of years, we believe that significantly over half of all workloads — across companies of all kinds — will be running in the cloud.”
The study also detected a strong movement towards private clouds, stating:
“We see companies’ reliance on public cloud declining, and believe that in the future it will only be used for a narrow set of workloads.”
It found that, as part of this growth of private clouds, that hybrid clouds were already mainstream, especially for larger organizations. It stated that “cloud is now seen as just as reliable and secure as traditional delivery models – if not more so.” (Their survey showed that 40% of cloud users thought the cloud was more secure than on-premise infrastructure, while another 40% thought it was equally as secure.) The report stated that there was an increased acceptance of “cloud first” thinking for business solutions, but survey numbers were not cited.
Regardless of this highly positive view of the state of cloud acceptance in enterprises, issued in late 2015, Verizon in early 2016 announced a pullback, eliminating two of their public cloud services. This retreat in the public cloud space may be seen as consistent with the earlier study, since the study concluded that the outlook for public cloud was limited, as discussed above.
RightScale which offers a Universal Cloud Management Platform issued a study based on a survey of over 1000 technical professionals (enterprise and SMB) in early 2016. Interestingly, the study found in ranking companies as to their degree of cloud focus, a higher percentage of SMBs (under 1000 employees) were “heavily using” cloud than were larger enterprises.
It stated that 77% “are now adopting private cloud up from 63 percent last year. As a result, use of hybrid cloud environments has grown to 71%. In total, 95% of respondents are now using cloud up from 93% in 2015.” The use of private clouds, it found, is concentrated in enterprises: stating that 53% of SMBs run most cloud workloads in public clouds, compared to 32% of enterprises. It also found that “lack of resources/expertise” had displaced security concerns as the top cloud challenge.
It found that there was widespread use of multiple clouds: “Companies using cloud are leveraging 3 public clouds and 3 private clouds.”
Confusion about Private Clouds
As set out above, there was strong optimism about the progress and future of private clouds from some of the panelists and very much so by Verizon and in the RightScale study. However, there may be some confusion about the issue of private clouds.
A study by Wikibon (a technology consulting community) found that “true” spending on private clouds was $7 billion, (which Wikibon pointed out was lower than AWS revenue of $7.9billion) versus the overall IaaS public cloud market of $25bn in 2015. It appears that the major point of confusion may be that some companies and analysts may be conflating facilities virtualization with cloud implementation.
The study concluded that over a long period – by 2026 – true spending on private cloud might catch up to spending on traditional hardware and software. But it concluded that private cloud spending would still be considerably less than spending on public cloud hardware and software.
Our Take – The Gaping Omission
The inexorable growth of cloud computing has been a principal tenet of our work at MobileCloudEra for the past six years. So the status and outlook for clouds is of extreme interest to us.
It is noticeable that in the panel and the studies we’ve cited the elephant that is missing from the room is MOBILE. While we are sure that the panelists recognize that mobile is out there, we really have doubts, when we hear or read discussions that are IT-focused, that the role of mobile in driving cloud growth is appreciated.
While phrases such as “cloud first” and “at the speed of business” are used, we find these to be misleading. Cloud development is happening because of “mobile first” and the pressure is on to develop solutions “at the speed of mobile.”
It’s the proliferation of mobile into enterprises that is driving the need for transformative solutions and new apps that are cloud-based. Further, the reference to experience gained by consumers that is driving expectations is actually consumer experience with mobile and mobile apps.
We’ve now been writing about this for over five years. Our conclusion is that there can’t really be an analysis of cloud that doesn’t start with Mobile. Without mobile, cloud would be a shadow of itself, probably not much more than a modern day version of Time Sharing.
The growth of Mobile demands the Cloud. As we wrote over four years ago:
“As we view the progression of mobile data and the mobile Internet, had there been no widespread Cloud development in the computing world to date (as occurred over the past three years or so), it would have been necessary to invent the ‘Cloud,’ if just for the mobile industry.”
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