Are we getting into a market dominated by a few? With cloud becoming the dominant IT services model, does it open up a possibility of a vendor lock in?
Consider this. In the 60s, IBM held more than two-third market share in computer. The front-runners among its competition, often called BUNCH (Burroughs, UNIVAC, NCR, Control Data Corporation (CDC), and Honeywell), had less than one-third.
Did you say Déjà vu? Fast forward to 2017. Take cloud Infrastructure as a Service. In a similar stack up, Amazon Web Services (AWS) now holds 34 per cent of the market share while the next three – you can call them MIG (Microsoft, IBM and Google) together account for the same share.
One is tempted to say, the similarity ends there. But honestly, no one knows yet. Microsoft is growing faster than others and has been taking market share consistently but is still way far behind AWS.
But the big story is that the bigger ones are getting bigger. New Q2 data from Synergy Research Group (SRG) shows that the four leading cloud providers have actually taken away market share from others.
Microsoft and Google have almost doubled their quarterly revenues since Q2 of 2016 and both have increased their market share substantially; but AWS has not been losing share. Going by SRG data, it has actually grown its share by a percentage point last quarter.
AWS market share now stands at 34 per cent, compared to 11 per cent for Microsoft, 8 per cent of IBM and 5 per cent for Google, according to SRG. IBM’s impressive show is primarily due to a strong hosted private cloud story.
While the next 10 has lost market share of about a percentage, according to SRG, others have lost 5 per cent. The four top players have taken away 6 per cent of market share.
The market is getting consolidated around four players. But do not write off some of the challengers yet. Oracle and Alibaba particularly are doing very well.
Interestingly, the cloud landscape and the stacking of players show the diversity of players – something that cloud has come to symbolise. You have the old warhorse IBM, the PC age software maker Microsoft, making a strong comeback; a web-native tech player Google and of course, a retailer which was – and still is – known for its customer service. The same story is there in the next set too – Oracle and Salesforce, software makers; Rackspace, an infra player, Alibaba, an e-com company like Amazon. It is as diverse as it could get.
But the question that can be asked is: are we getting again into a market dominated by a few? With cloud becoming the dominant IT services model, does it open up a possibility of a vendor lock in? These questions have been asked initially by buyers – purely as technical questions. But now with a commercial scenario like this, is it time to raise the question again?
Among the next 10 top-ranked cloud providers, Alibaba and Oracle are achieving the highest growth rates. Continuing recent trends, it is the lower rank cloud providers who in aggregate are losing share to the market leaders.
Cloud Security is not a Pushover; not yet
In public forums, any question regarding cloud security is summarily dismissed by vendors and some enterprise IT managers as being too 2012-ish. While vendors do maintain that stance during private conversations too, trying their best to convince you, many CIOs and CISOs do open up. Cloud security is still a significant issue in their minds but expressing any doubts about it is seen as politically incorrect, a sort of backwardness is evolving with time.
To be fair, public cloud backers have their point too. For a majority of small and medium companies for whom today’s sophisticated security threats are too complicated to handle, public cloud is a more convenient and safer option. Add to that the complexity of management; and public cloud seems like God’s gift.
It is an entirely different story for the enterprise, though. According to a new study, 2017 Data Economy Report, based on responses of more than 9,000 IT leaders across 24 countries spanning North America, Asia-Pacific & Japan (APJ) and EMEA/Russia, a significant number of companies that ran workloads in public cloud environments have actually moved some or all of those workloads back on-premises in last 12 months. As many as 43 per cent of businesses in North America and 65 per cent in EMEA said they have reduced use of public cloud in the last 12 months because of security concerns.
The study results are not an exception. Another such study, involving responses of 1,500 professionals, by cloud services company, Evolve IP, results of which were released recently, has similar findings.
As many as 50.5 per cent respondents in this survey said security was a concern for them when it comes to public cloud. Asked where their data was safest under three common risk scenarios: environmental disasters, malicious attacks and hardware failure, executives and IT professionals said it was safest in private cloud. For hardware malfunctions, the most common scenario for disaster recovery, 49 per cent felt their information was safest in a private cloud compared to 33 per cent who said it is safest in a public cloud. For malicious attacks, 51 per cent felt private cloud is safest while only 14.5 per cent public cloud is safest. In fact, significantly more respondents (34.5 per cent) said traditional on-premises was safest. For environmental disasters, 49.5 per cent found private cloud to be safest as compared to 40.5 per cent who thought public cloud is safest. This survey was restricted to North America, considered to be the most mature cloud market.
It’s Three Cs – Cost, Cost and Cost
Despite the security concerns, public cloud adoption is expected to go up. According to the above report (2017 Data Economy Report) as many as 61 per cent say that they will increase their investment on running the workloads in public cloud, as compared to only 52 per cent who say they will do the same with private cloud. Their planned storage strategies are in sync with where they plan to run the workloads. Public cloud storage investment is tipped to increase in 56 per cent of businesses while 50 per cent increase is expected in private cloud storage in the next 18-24 month time frame. About 35 per cent of organisations expect to see increase in traditional on-premise storage during this time. On average, 39 per cent of storage is currently run on traditional on-premise, with less on public cloud (26 per cent) or private cloud (24 per cent).
So, clearly public cloud is the model that businesses are moving to. On one hand, there is so much of concern around security. Yet, there seems to be a rush to public cloud. What explains this anomaly?
Elementary, My Dear Watson. Cost.
While many may not directly get into a conversation with an Indian CIO and in 15 minutes, it will be clear that cost is the driving factor and in today’s hypercompetitive ‘business outcome’ driven IT, no CIO would like the opportunity to impress the big bosses by drastically reducing cost.
In short, the attraction of cost is so high that it makes IT managers overlook all other perceived shortcomings, including security. Are public clouds really less safe than private clouds? That is a bigger debate but what clearly seems to be a myth is that security is no more a concern for public cloud.
While other perceived advantages and concerns about cloud remain, it seems to be a trade-off between cost and security mostly. The organisations have found their solution by going hybrid, combining the best of both worlds, as the vendors promoting the model describe it as.
‘Best of both worlds’ reminds us of this conversation between George Bernard Shaw and Isadora Duncan: “My dear Mr. Shaw: I beg to remind you that as you have the greatest brain in the world, and I have the most beautiful body, it is our duty to posterity to have a child, whereupon Shaw replied to Miss Duncan: ‘My dear Miss Duncan: I admit that I have the greatest brain in the world and that you have the most beautiful body, but it might happen that our child would have my body and your brain.”
A hybrid strategy would be best of both worlds only if it leverages the best of both worlds. It could just be the reverse. The Data Economy Report suggests it is. There is a high degree of variation and fragmentation here which suggests there is still a lot of confusion around the most optimal solution for each workload,” notes the study.
A good hybrid strategy should be optimised based not just on workloads but the existing infrastructure, organisational structure, availability and many other factors.
Of course, cloud is a journey. And organisations are still on the learning curve. With technologies as well as business environments changing, it is as challenging as it could get.
It is tough. Lack of a perfect or even optimised cloud strategy in place is not something one should be defensive about.
But then, pretending otherwise is not the solution.
(First published on http://www.itnext.in)