The Cloud World We Live In

I thought about starting 2020 with something that we use everyday, often without even noticing it.

Grandpa had books on shelves, mom and dad had CDs and DVDs, and my generation has been the bridge and transitioned from hard drive to cloud. Today we have all our music, photos, files, apps and many daily utilities on the cloud, whilst our children never knew another reality - they keep digital textbooks, essays, all school work and classes history, films, playlists, photos, contacts and pretty much everything and more on the cloud.

That's just one of the most obvious ways in which cloud computing has changed the world we live in.

A timeline of cloud computing

Since the early 1990s, the internet has brought changes to our lives, but it was the launch of Salesforce in 1999 which marked the beginning of disruptive change for businesses. Software as a Service (SaaS) took applications off corporate servers and ran them remotely, letting businesses concentrate on running their operations, not their IT.

In 2002 the launch of Amazon Web Services got the ball rolling for corporations to outsource their entire IT infrastructure to the cloud. Microsoft Azure launched in 2010, with Google and IBM also starting up cloud services - and now, cloud computing is a $141bn market.

The cloud has been transformative. It puts huge power and memory - once the preserve of the mainframe or the big server farm - at the service of cities, corporates, SMEs, and individuals.

Data has kept moving away from the device for the last forty years. In the 1980s, everything was on the device - a mainframe or PC. The move to client/server networks, then to external data centres, and eventually to the cloud, has delivered freedom and accessibility to both businesses and consumers.

Global Cloud Market Share

Source: Canalys, Q4 2018

Moving to the multi-cloud universe

The market continues to evolve, as it moves from the idea of a single cloud to a multi-cloud universe. 90% of enterprises now use a multiple cloud approach, according to research house IDC. They mix public and private cloud ('hybrid cloud'), and mix in-house with outsourced solutions - a third have their own data centres running their private cloud, while a fifth have private cloud running on third party or colocation data centres.

That's one reason IBM Cloud acquired Red Hat recently. Accelerating hybrid cloud adoption makes Red Hat's OpenStack platform and expertise in virtualization, cloud orchestration and cloud management critical for winning new business. The increasing importance of hybrid cloud could also help Microsoft - for which hybrid cloud is a core strength - catch up on market leader AWS.

Enterprise Cloud Strategies

Source: Rightscale, 2019 State of the Cloud

Private cloud offers the cost benefits of the cloud, through virtualization technology, while delivering the security of a discrete implementation and the opportunity to configure the systems to requirement. (Private cloud may be required by compliance in some regulated areas, for instance healthcare.) But the biggest players haven't always competed hard in private cloud, where companies like VMWare (now partnered with AWS), Red Hat, and CloudStack have made most impact. AWS Outposts is only starting to make headway; on the other hand Microsoft is a key player with its Azure Stack product.

While the private/public cloud distinction is an important one for the market, there are also different flavours of cloud depending on what aspects of a company's IT are moved on to the cloud. For instance, SaaS involves running applications such as Customer Relationship Management software or databases in the cloud. At the other extreme, IaaS (Infrastructure as a Service) virtualizes the entire IT infrastructure for a corporate, managing servers, operating systems, network, and storage. IaaS enables customers to purchase resources as needed, making it easy to scale up, and aligning the cost of IT with the consumption of resources.

The leading players at each level of cloud are different. For instance, Oracle is huge in SaaS, providing database services and ERP in the cloud, but less so in IaaS. Salesforce, SAP, and Workday are other large players in SaaS that don't compete in the other layers of the cloud. So a corporate wanting to move its enterprise software to the cloud as well as run its basic infrastructure in the cloud might need to consider two or more providers.

Another specialised sub-sector is the CDN (Content Delivery Network) market, enabling web content companies to provide their services via the cloud. AWS is strong here with its CloudFront product scoring nearly a third of the market, but Akamai is still out in front. There are continuing rumours that one of the majors could bid for Akamai - but so far, it remains independent.

The major players - AWS, Azure, Google

Cloud computing got started in the US, so it's not surprising that the global leaders are American: AWS (part of Amazon) way out in front, Microsoft Azure in second, but beginning to gain some ground, and Google Cloud Platform a more distant third. Google is now looking for acquisitions to boost its market share. Behind come IBM Cloud and Oracle Cloud, which have up till now largely thrived on moving existing customers on to the cloud. Now, they're looking to expand their reach. IBM's acquisition of Red Hat could move it up a gear.

In the Asia Pacific area (APAC) the major US providers share top honours with major Chinese cloud firms, the latter representing about 40% of the market. However, while the Chinese firms dominate their domestic market, only Alibaba makes much of a showing in markets outside China, coming fourth to Amazon, Microsoft and Google. Japanese providers Fujitsu and NTT come fifth and sixth in the ex-China rankings.

Within China, Tencent, Sinnet, Baidu and China Telecom take major shares; Tencent is aiming to move outside China, and could be worth watching.

APAC is a high growth market - IDC expects 47% growth in 2019, and 34% compound annual growth to 2023, when the market will be worth USD 76bn.

Latin America is also growing fast, with Brazil growing at 38% a year - but it's starting from a much lower base. Only 20% of companies in Brazil so far use the cloud, according to Google Cloud's Brazilian director Joao Bolonha, despite the fact that Brazil is the leading market in the region; across Latin America, cloud has just 10% penetration. Argentina, Mexico, and Colombia are other high growth markets for cloud computing; it's not surprising that Google Cloud has announced plans to triple its Latin American workforce.

Frost & Sullivan believes the IaaS market in the region could grow as fast as 31.9% a year to 2022, when it will be worth over $7bn - though that's still just a tenth the size of the APAC market.

One issue facing cloud development in Latin America is that only Brazil has dedicated infrastructure. Elsewhere, traffic has to be routed to North American centres via Dallas or Miami, increasing the cost of cloud solutions and making bandwidth a major issue. The market is very much US dominated, with AWS taking a 45% share, and Microsoft Azure nearly 20%: other major players include IBM Cloud, Google, and Mexico-based America Movil.

Where is the cloud going next?

Early on, it was the quantitative benefits of the cloud that were emphasized. Virtualization led to more efficient use of IT resources; disaster recovery was easier, automatic updates could be rolled out, security could be enhanced. For many offices one huge benefit of storing documentation in the cloud was the fact that the proliferation of out of date copies ceased immediately, making huge savings in management time.

That was the world in which existing client/server systems were simply ported on to the cloud. But increasingly, savvy businesses have been looking at how to use the cloud to create new products and services that couldn't have been delivered in the pre-cloud world. For instance, the cloud can extend self-provisioning to its users, enabling them to set up and use applications themselves - but companies can further open up that possibility to their own end users.

Applications are becoming decentralised. In the UK, the Open Banking regulation demands that banks make client data available on demand. That's already led to the creation of a 'tenant passport' by fintech firm Canopy - individuals can ask their banks to provide their data to Canopy, which uses it to give them a credit assessment and reference to potential landlords. While the Open Banking initiative doesn't depend on the cloud, cloud computing makes it much easier to provide.

 A step further in decentralization is Blockchain, allowing users to store data on a peer to peer network. That's behind cryptocurrencies like Bitcoin and Ethereum, but it also, for instance, has the potential to revolutionize the way we sell real estate. Instead of lawyers, realtors, banks, lenders, vendors and buyers all chasing each other by phone and linking to each others' systems, we could have an open ledger system logging every stage of the process and letting everyone see exactly what's happening in real time. AWS and Google Cloud both got into the blockchain space in 2018.

The cloud also helps companies use Big Data. For instance, a banking cloud not only allows transactions to be effected, but can also scan them for problematic patterns, reducing the incidence of fraud. Further, unlike manual compliance which relies on outdated 'tick box' data, fraud detection algorithms can include Self Organizing Maps which are able to learn from the data they analyze, keeping up to date with changes in fraudsters' modus operandi. The computational power required for such data processing is immense; without the cloud's scalability, it would be difficult to sustain.

Perhaps the most interesting development, though, is the shift of computing power away from devices and into the cloud. Any smartphone can now access vast processing or storage power on the cloud, but it's the Internet of Things that is the real revolution. A 'smart fridge' will keep its intelligence not in the cooler, but in the cloud.

Closing Thoughts

It's easy to think of the cloud as something far away. But some of the most interesting work right now focuses on using it to bring some processing much closer to the end-user - edge computing.

Edge intelligence will enable systems to distribute computing power and data storage intelligently between the edge and the deep cloud. If you think of the old hub-and-spoke style network diagrams, we're moving towards a more flexible network that will look more like a spider's web or a piece of woven fabric, or even … more like a human brain! That's the new frontier of computing; watch this space!