A consolidated overview of cloud computing, its customer market place and key adoption drivers which come with a prediction for it to trigger the biggest revolution for technology and society since the Internet, impacting all sectors including the auto ID industry
by Jocelyn DeGance Graham, Grail Research
Cloud computing is transitioning from industry buzzword to business-critical solution; recent technology forecasts name the migration to cloud as the biggest trend of 2011, with Gartner anticipating that the spending on cloud computing applications will reach $150 billion by 2013. To date, the perceived business opportunity associated with cloud has driven startup and established technology and services providers to make bets and stake out territory throughout the emerging cloud landscape based on conjectures about how the space might evolve. As customers begin to make substantial investments in cloud, it becomes critical for providers and investors to have an informed view of customer needs and buying criteria.
Cloud customers
Four broad customer segments have come to the forefront in adoption of the technology: SMBs, Large enterprises (selective), the U.S. government and emerging markets. In addition, experts see other organizations migrating to cloud that have one or more of the following traits: complex supply chains, undergoing a significant reorganization, substantial rich digital content, and lack of legacy systems. Organizations within these segments or sharing these traits seem to be at the center of the most active adoption patterns for cloud.
SMBs
Debate over the most basic profiling of customer size seems to finally be subsiding, with the consensus emerging that for the SMB and microbusiness, the value proposition of cloud is compelling. Cloud is a competitive edge for these organizations due not only to cost savings but also to the pay-as-you- go model that delivers an enterprise- class IT infrastructure to businesses that couldn’t otherwise afford it.
Large enterprise
While start-ups and SMBs will continue to be the primary adopters of cloud services, most experts believe that large enterprises are opening up to the idea of transitioning to cloud and are starting to migrate compartmentalized and discrete components of their business operations and data.
U.S. Government
The U.S. government, under the direction of the Obama administration, is leading the way for government entities to adopt cloud. The potential cost savings in IT infrastructure seems to be emerging as the strongest incentive for governments in their battle against budget deficits.
Emerging markets
Gartner anticipates that the U.S. share of the world-wide cloud services market will be diluted from 60% in 2009 to 50% by 2014. Developing nations, especially those in sub-Saharan Africa, are at the forefront of cloud adoption. With increased focus on technology investments and lack of legacy systems in place, the economic benefits of a cloudbased model for these nations are clear. Experts believe sub- Saharan Africa is especially poised to take advantage of cloud due to their increasing investments in the IT landscape and a ‘strong push from government to get its services into the cloud space’. Privatesector firms in the region are also displaying confidence and beginning to accept cloud services as a solution for their business requirements. The need for increased mass awareness also remains a major challenge, which can adversely impact the adoption of cloud in the short term.
Drivers
Among companies that have been the most receptive to cloud, there are various common traits that can be observed: complex supply chains, significant reorganizations, rich digital content, and lack of legacy systems. First, demand for migration to cloud has substantial impetus from organizations with complexities in their supply-chain management, particularly retail and logistics. Cloud can offer significant benefits to improve efficiencies of supply- chain solutions, while simultaneously reducing costs. Second, cloud is gaining traction among companies that are under pressure to reorganize and optimize their business operations, including IT systems, to achieve cost efficiencies.. Third, firms that deal in data-heavy, extremely rich digital imagery are also adopting cloud.
While the picture of the cloud customer seems to finally be coming into focus with experts agreeing on who should be interested in adoption, the market is still early. There is still a lot of uncertainty around who customers are and what segments/traits will be the primary adopters over the longer term, so expect disruptions and emerging customer segments that have yet to be considered.
Experts all have opinions about specific factors driving organizations to adopt cloud now. The drivers around which there seemed to be some consensus were: the need for 24/7 access to data and applications; changes in perspective about cloud risk; improving alignment between customer needs and vendor solutions; and decline in concerns about vendor lock-in.
Accessibility
Accessibility is the number one driver our experts cited for cloud adoption. Most believe that organizations and consumers will ‘trade-off’ other concerns about cloud to gain 24/7 access. The proliferation of compact and powerful mobile devices, cheap and ubiquitous bandwidth, and the increasingly dynamic business environment are driving the demand for this ‘anytime, anywhere, and anything availability’ of data and
applications. Experts believe that the desire for on-the-go access will continue to grow, which will further drive cloud adoption ‘from the small business all the way up to the big enterprise’.
Security
Experts are divided in their opinion about whether cloud offers increased security or introduces greater security risk. However, a significant number of experts cited changes in perspective taking place around security risk that are driving an increase in the number of organizations adopting cloud.
Security is still being debated as one of the significant risks for cloud customers. However, due to increased attention by cloud vendors, it is no longer seen as an insurmountable challenge. According to experts, a number of cloud customers agree that cloud vendors provide better security than their existing inhouse security infrastructure. As cloud vendors continue to provide evidence to support their claims, more and more organizations will migrate to cloud. A senior leader at a Fortune 100 technology firm echoes this sentiment using the analogy of the early days of banking: just as people shifted from keeping their savings at home to trusting a bank to manage assets for them, organizations will move their most sensitive data to cloud – for the very purpose of keeping it safe.
Furthermore, more regulatory requirements are imposed by governing bodies around the management of sensitive customer and employee data, cloud solutions allow organizations to outsource the complexity of complying with these regulations.
And for those who want to take advantage of cloud but still see the risk as too high, there is now cloud insurance. Although cyber risk policies have been available for a number of years, the first cloud insurance is now available. Cloud customers who want to insure their data beyond the very limited liability that most SLAs offer will now be able to purchase policies offering organizations that move to cloud protection against the true costs and losses associated with adverse incidents such as downtime and security breaches.
Customer needs
For organizations that desire some of the key benefits of cloud but believe the risk is still too high, providers have moved to make the concept of the hybrid model a reality. The hybrid model allows organizations to immediately move at least a portion of their data to cloud and reap the benefits of public cloud while retaining some of their IT resources on-premise or in a private cloud. For organizations who are the most risk-averse and reticent about making a move to cloud, there are simple, low risk, ’entry level’ solutions. Rackspace launched its hybrid offering – Cloud Connect – which allows customers to combine dedicated hosting, private cloud, and public cloud in multiple ways to achieve customized solutions. Amazon’s Virtual Private Cloud (VPC), currently in the beta phase, is a hybrid offering that enables organizations to securely connect their existing IT infrastructure to the Amazon Web Services (AWS) cloud through a virtual private network (VPN) gateway.
Consolidation
Over the past decade, cloud computing has evolved into three distinct delivery models: IaaS, PaaS, and SaaS. However, as a result of shifting customer interest towards a combined offering under one umbrella, cloud service providers are beginning to look to have multiple entry points across the different models. Recent new offerings from vendors further substantiate this trend, as they try to extend their reach into the realm of different delivery models.
For example, Elastic Beanstalk from Amazon, currently in beta, incorporates many PaaS features, while retaining the flexibility of AWS’s IaaS. Microsoft, too, has extended the PaaS functionality of Azure into the IaaS domain. Before the various cloud models can fully consolidate, experts see providers focusing on filling critical gaps in cloud offerings. Databases are one area where there is still work to be done. Presently there are limitations to moving complex database operations to cloud and experts expect DbaaS offerings will emerge to address this. As gaps are filled, experts ultimately expect to see consolidation of delivery models into a unified ‘stack-as- a-service’ offering and subsequent consolidation of cloud providers to realize economies of scale. Vendor lock-in, which binds an organization to a vendor for the products and services, has always been an area of concern for organizations. However, some experts believe that the issue is ‘overhyped’ in the case of cloud. They believe that it has been blown out of proportion by ‘governments, policy makers, or standards bodies’.
Next phase
Experts are also seeing viable and sustainable customer segments emerge – including SMBs, enterprise, governments, and Web 2.0 startups – that further bolster the push to migration. They expect developing geographies to lead the next wave of cloud adoption where the sensitivity towards policies, standards, and privacy concerns are all but eliminated by the promise that cloud holds for their economic growth. Experts agree that the evolution of cloud marks a fundamental shift in our relationship with electronic assets and our access to that data and information. Accessibility allowing for the ‘anywhere, anytime, anything access’ of information takes center stage.
Apprehensions around vendor lock-in, and security and privacy are fast subsiding, or in some cases, are acknowledged as ‘trade-offs’ for the efficiencies needed to remain competitive in this dynamic business environment. Also, the arrival of cloud insurance and strategies for disaggregating risk will be used as competitive advantage. Interesting models will emerge where companies move their most sensitive data to cloud, outsourcing the managing of regulatory compliance. if challenges to business adoption can be effectively addressed, cloud’s impact has the potential to be of the same magnitude as the Internet – creating a revolution for technology and society.