The emergence of a new Cloud Ecosystem beyond 2020
While 2019 saw several global technology companies adopt a multi-cloud approach, 2020 seems to be the year where we see the hybrid multi-cloud strategy gain momentum. The COVID-19 crisis has humbled many industry views and forecasts, including ours. Still, we see this momentum continuing unabated as communities worldwide have experienced the importance of Cloud first hand. Corporations now realize dependency on Cloud for business continuity, remote work environments at scale. It has been a lifesaver for many organizations and individuals throughout the pandemic.
Cloud remains the most preferred technology for any enterprise looking to reduce costs while boosting productivity. Increasing the adoption of a multi-cloud strategy only accelerates this paradigm further. It enables a future-proof foundation for digital transformation. Benefits are transparent to most organizations. However, several issues are emerging from the complex cloud ecosystem as multiple emerging technologies, products, and services need to fit in and deliver value together. Competing for a place in the future requires Cloud companies to innovate new ways to create solutions, automate, and optimize them to meet industry challenges. Advanced security solutions are another growth area that is ripe for disruption with opportunities for new solutions across industry verticals.
Is it demystifying the hype over Cloud? Why are organizations keen to adopt a cloud strategy?
Every Enterprise has different reasons to transition to the Cloud
Some organizations want to move to the Cloud as an alternative solution after reaching the end of a product/service lifecycle.
They want to leave behind old vendors and hardware with low security and flexibility to an upgraded, resilient, and scalable cloud solution.
Most organizations that have grown through a series of Mergers and Acquisitions leverage the Cloud to realize technology synergies. They consolidate different sets of applications over the Cloud and make them available across different geographies. To ensure consistency and efficiency in operations, they migrate all their solutions and data on cloud premises.
To stay compliant with evolving data security and privacy regulations, utilizing cloud services with embedded compliance functionality for running applications becomes essential. Additionally, having a strict security protocol with a scalable and flexible infrastructure is the need of the hour for some organizations.
A well-executed cloud strategy brings significant benefits to Enterprises.
Cost Savings: Companies can scale cloud computing and storage as per demands at the time, reducing resources. It has effects on indirect costs as well.
Ease of maintenance: Cloud infrastructures take off maintenance load from the IT resources, which can be utilized in project development instead.
Disaster Recovery: Cloud technology has the provision of the fastest data recovery in case of a system outage, which not done well affects business revenue significantly.
Increased Collaboration through mobility: Cloud platforms provide rapid collaboration ground for teams to work on a project from anywhere.
Insight: Cloud platforms are evolving to automate the complexities of running different technologies while analyzing data and highlighting insights that affect business.
In recent years, growth in cloud computing has been off the charts. We have seen the five largest global players break away from the rest of the pack. These include Amazon Web Services(AWS), Microsoft Azure, Google Cloud, Alibaba, and Tencent. In 2019, Amazon, with more than 30% market share, reported Q1 and Q2 combined AWS revenue of $16.1 billion. The second-largest player, Microsoft, reported H1 2019 YoY growth of 70% in Azure revenues. Alibaba continued its impressive growth into 2019, reporting Q1 and Q2 combined revenues of $2.2 billion, a growth of 66%. The aggregate Hybrid cloud market represents a $1.2 trillion opportunity.
The M&A landscape for Cloud remains dynamic, with some of the largest global players now looking at add-on capabilities to fill key portfolio gaps. After some significant deals in 2019, we saw IBM making a game-changing move to acquire Red Hat, the largest hybrid multi-cloud and open source technology company. This acquisition brought together complementary capabilities across hybrid Cloud, Linux, Kubernetes, and seems to have helped IBM solidify its position and accelerate the migration of business applications to the Cloud.
Future of Cloud Technologies
Before we see enterprises adopting a mass working model of quantum computing, we may need to overcome more imminent challenges with current cloud infrastructure.
Automation of cloud operations, security, and centralized view
Hybrid cloud technologies house multiple diverse applications and enable cloud operations to run in a smooth and resilient manner. Yet, the process of ensuring this remains complex. Starting in 2020, we envision the development of new automation tools - preferably using AI will help organizations reduce this complexity. These tools will have advanced data visualization and a dashboard that can display overall cloud operations' real-time status and performance. Advanced predictive analytics capabilities will help enterprises plan cloud resources according to the need of the hour, optimizing workloads as appropriate. This system will also provide a centralized view of security operations. The security tools can uncover security insights and respond to incidents faster through dashboard technicalities.
The road ahead of Kubernetes
We expect more proliferation in containers and Kubernetes, as cloud ops will be the norm. Developers will turn more into these technologies. The interest will be such that companies will start identifying the shortcomings and complexity level of these technologies and will either advance these technologies or override them with newer ones. The goal is to seek a greater abstraction level, and that will churn the innovation wheels.
Demand of partnerships with cloud technology firms
We expect companies will be building out specialized Cloud, security, compliance, and performance improvement capabilities. Companies will position themselves in an exciting space at the forefront for financial and strategic investors in 2020. The past couple of years saw the major cloud players drive the most significant M&A opportunities. We expect a larger number of mid-sized companies to drive platform investments and acquisitions to sharpen their cloud strategy and strive to level the playing field with the top 5 players.
We believe most companies will rethink their current infrastructure strategy as they adopt cloud solutions and make investments to keep pace with the Digital Transformation opportunity. For cloud service providers, it is time to look beyond the services they currently offer. They should now make build, buy, or partner decisions to increase their relevance and deliver competitive advantage.
At SA Global Advisors, we are excited about partnering with great companies in this emerging cloud ecosystem. We can help them realize accelerated growth and enhance strategic value through new investments and partnerships. Please write to us about your interest. Or, if you have any questions about our views on the cloud ecosystem and current investment opportunities, please feel free to connect with us.