Cloud : Making the Loudest Buzz

The biggest buzzword which has been going on in the solutions space for over 2 years now is definitely the emergence, adoption and practicability of cloud solutions. For some system integrators in channels, cloud is just another extension of virtualization bundled with remote service and positioned in the market in such a way to eyewash clients while some SIs have taken the notion seriously exploring different opportunities across verticals.

Cloud computing brings flexibility in businesses to increase their IT capacity or functionality without having to add infrastructure, personnel, and software. The success of the world's leading clouds and increasing adoption is driving service providers to come up with more cloud offering to stay competitive, retain customers and win market share. There are various types of cloud computing solutions which include delivering web based applications, software, platform, infrastructure or utility through cloud services. Besides that there are managed cloud services and service commerce which is a mix of SaaS and managed services.

"While a private cloud platform offers nearly full control and manageability as it's built within the local data center, the public cloud platform is relatively hassle free as the host is not responsible for the management, maintenance or updating the data centres periodically and it drives more revenue as it caters to a larger customer base", said Manish Nigam, Manager - Sales, Cloud Platform, Citrix India.

At the most basic level the cloud universe is divided into Public, Private and Hybrid Cloud. The Public Cloud commands the maximum revenue with an estimated US$100 Billion being spent in 2012 with targets to grow by 6 times by 2016 (source - Akamai Technologies).

"From being just a pure access medium, the cloud has now evolved into a resilient pillar for any component of the enterprise infrastructure stack. Models such as PaaS, IaaS and SaaS give companies (and divisions within) provide the ability to offload with varying degrees of autonomy", said Harish Menon, Product Manager, Asia Pacific & Japan, Akamai Technologies.

Standard Chartered bank showed Infrastructure savings of over $1 million annually, by delivering retail and commercial banking applications centrally to users worldwide and utilizing Akamai's Enterprise Cloud services.Cathay Pacific reported anstimated annual savings of up to $1.5 million.Two major insurance providers reported conversion of visitors to online quote applications are up from 10-15% since installing Akamai, resulting in annual revenue increases of $4 to $15 million. These are all instances of cloud computing technologies reducing operational costs for enterprise while optimizing RoI.

IDC has reported that global spending on public IT cloud services will be more than $40 bn this year with a compound annual growth rate of more than 25% which looks like 2013 will be the year that cloud pays off for many vendors and customers.

"This represents a significant shift, from the testing/development stage that characterized a large share of enterprise cloud activity in 2012, towards a much broader adoption and deployment of cloud solutions. The evolution and rapid industrialization of cloud is transforming nearly every facet of information and communications technology," said Steve Caniano, VP, Hosting, managed applications and cloud solutions, AT&T Business Solutions.

With such an enormous market size and the agility cloud solutions has seen in the recent years, cloud may be said to retain itself as the biggest revenue generator in solutions (enterprise segment).

HP, by the means of research revealed that enterprises see hybrid delivery as the future of cloud and highlights the challenges they face in creating hybrid environments.
As cloud adoption gains momentum, it is clear that enterprises anticipate using a hybrid delivery model consisting of traditional IT, managed cloud, private and public cloud offerings going forward. According to a new study commissioned by HP, 69 percent of organizations in Asia Pacific and Japan surveyed said that they intend to pursue a hybrid cloud delivery model.

The study also revealed that more than 60 percent of senior business and technology executives surveyed are concerned about vendor lock-in when implementing cloud solutions. Seventy-two percent of respondents said that portability of workloads between cloud models also is important when implementing cloud solutions.

When considering adoption of a public cloud solution, technology executives stated that their organizations need an open, transparent underlying infrastructure (68 percent), service level agreements (60 percent) and enterprise billing (47 percent), before putting production applications in the cloud.

Interestingly, from the survey, it is noted that the industry although taking up cloud solutions are adopting it in fusion (Hybrid model) instead of opting for the Public variant which previously was thought to be "the future for enterprises".

Also, it needs to be pointed out that according to most of the cloud providers and enablers, the overall industry, including the government, SMB (mid range) and medium start-ups have started adjusting to the philosophy of cloud although at a limited pace. The biggest contributor, bringing in this change of mindset is the question of RoI, especially relevant in today's cost-cutting situations.

As an example from Akamai Technologies, Standard Chartered bank showed Infrastructure savings of over $1 million annually, by delivering retail and commercial banking applications centrally to users worldwide and utilizing Enterprise Cloud services.

Also, Cathay Pacific reported an estimated annual savings of up to $1.5 million. Two major insurance providers reported conversion of visitors to online quote applications are up from 10-15% since installing Akamai, resulting in annual revenue increases of $4 to $15 million. These are all instances of cloud computing technologies reducing operational costs for enterprise while optimizing RoI.

The biggest question facing the industry is however, not the impact and adaptability cloud is going to bring in or the competition solutions in the line, but the very future of Cloud in India as well as globally.

In the first place, a definitive increased adoption of applications as a service (AaaS) is supposed to occur now. Businesses are now seriously considering buying services on-demand rather than purchasing physical hardware software licenses, and maintenance contracts which was also highlighted by Citrix.

This shift is not only limited to public clouds, but also to private clouds, where more and more businesses are moving towards paying for X-as-a-service type solutions on-demand within their own datacenter or that of a provider. Part of this can be summarized as a trend towards a business model that favours op-ex rather than cap-ex. Conversely, cloud service providers are becoming much larger customers of hardware and software vendors.

The crucial change, that is poised to take place now is the evolution of specialised cloud providers and enablers in the channels space. These very companies, originating in the channel tier are poised to become the next level of enablers and may climb up the ranks especially after Best-of-Breed (BoB) adoption picks up momentum. In the cloud scenario, vendors are enabling cloud in accordance to their particular suites which leaves the CIO's mind fragmented with compatibility issues, migration issues and related things. BoB, on the other hand may bridge this gap and it is here that cloud resellers (also working with BoB enablers) may start playing their crucial role. It is particularly interesting to note that pure virtualization is now deemed to be nearing its end (in terms of solution development and market) and in this vacuum created thereby cloud, combined with BoB may get its much needed breakthrough.

As per the recent trends, Bring Your Own Devices (BYOD) has started becoming the philosophy for enterprises and SMBs alike in their push for controlling establishment capital costs. Now, with the implementation of BYOD (although at a very poor and impractical scale in India), cloud may find its next targeted segment in mobility. In this environment, security becomes more important than ever. As a result, enterprise IT will be entrusted with setting clear policies that provide security for accessing cloud applications on mobile devices and doing so without squashing the innovation enabled by cloud.

"IT organizations need to take advantage of the power of cloud computing while leveraging the security of the datacenter. Security is a prime aspect and in any public or partner cloud scenario it shouldn't be compromised. The cloud solution must provide the same types of safeguards and controls that are otherwise implemented privately", Nigam said while discussing the security aspects of cloud.

As the industry has been vocal enough to state their successes about the adoptability of cloud and the pessimism from the channel tiers has started waning away, a clear clarity between cloud and related solutions over the deployment mode is likely to take place this year.

"Today there still exists a great deal of confusion over the conflicting approaches to deploying cloud by various vendors and service providers and it's not clear who businesses should turn to. This fragmentation should begin to dissipate later in 2013 and beyond as the marketplace coalesces around standards and clear winners emerge", Caniano stated.

Further, Canaino said that according to Gartner, by 2015, low-cost cloud services will cannibalize up to 15% of top outsourcing players' revenue, and more than 20% of large IT outsourcers not investing enough in industrialization and value-added services will disappear through merger and acquisition. In the meantime, open source alliances will make a play against the traditional vendors. Open source (especially in mobility) will continue to gain relevance, and more commercialized services based on open source platforms is poised to come in the market.

Further according to AT&T Business Solutions, for cloud to truly go mainstream it needs to evolve from a vendor-by-vendor solution, as it is today, to a utility platform differentiated by reliability, scalability and standardization. Marketplace standards are driven by vendors, standards groups and market forces. APIs will have to be standardized, and interoperability and federated cloud formations will need to happen - both in a geographic sense and within industry verticals.

Following the evolutionary trajectory of equally transformative periods in IT history, cloud has shifted from hype to hyper growth and its impact is not just changing IT delivery models but overall business models as well, unleashing innovations that have the force to reorder not only the IT industry but also nearly every industry.

The predictions over cloud for this year highlights the maturity and standardization of the solution that is most likely to take place with market research agencies seemingly confident about the growing market for cloud.

"At Akamai we foresee more than 50% of all workloads will be processed in the cloud by 2014. SaaS will be a big driving force. Business IP traffic is right now 2 times the private WAN traffic and it is expected to be 7 times by 2014. Technologies that are needed to address five core problems; performance, availability, visibility, scale and security are the ones that will be evolving the fastest", Menon stated.

Gartner has stated that the public cloud services market is forecast to grow 18.5 percent in 2013 to total $131 billion worldwide, up from $111 billion in 2012. Infrastructure as a service (IaaS), including cloud computing, storage and print services, continued as the fastest-growing segment of the market, growing 42.4 percent in 2012 to $6.1 billion and expected to grow 47.3 percent in 2013 to $9 billion.

Further, cloud advertising continues to be the largest segment of the cloud services market, comprising 48 percent of the total market in 2012. Gartner predicts that from 2013 through 2016, $677 billion will be spent on cloud services worldwide, $310 billion of which will be spent on cloud advertising.

"The continued growth of the cloud services market will result from the adoption of cloud services for production systems and workloads, in addition to the development and testing scenarios that have led as the most prominent use case for public cloud services to date," said Ed Anderson, research director at Gartner.

"Evidence of this growth is found in the increasing demand for cloud services from end-user organizations, met by an increased supply of cloud services from suppliers", he added.

With such an enormous revenue potential and the opening up of enterprises' and SMB's mindsets, cloud computing remains as the key technology to watch out for in 2013.