Beyond the large analyst houses views on the future of Cloud Computing, there are a number of trends and new variables starting to emerge into the market as of mid-2013. These trends are worth watching in the coming months as the rate of change in Cloud is still extremely rapid both from a pricing and functionality perspective.
The enterprise is still wary of Cloud, though we see increased adoption rates in the U.S., U.K., and parts of Europe, the rest of the world is still somewhat suspicious of, or investigating, Cloud services.
This section is opinion based on several years of market scanning, talking to companies directly, and commenting in the media on Cloud growth.
The Cloud War will continue
Amazon has dropped its Cloud pricing over fifty times in a row in the last few years. It has the lion’s share of the market and is now challenging the older, established global ICT companies both competitively and legally when it thinks it is getting a raw deal.
Every day sees Cloud startups and Cloud deaths in the market, the fringes of the market are cutthroat with companies collapsing, being bought, merging, or simply vanishing overnight.
Microsoft, Rackspace, Google, and other early to market Cloud companies (which is what they are becoming, they are changing their business model) are likely to remain and provide continued competitive tension. Those traditional global ICT companies that do not change their model to Cloud based will suffer and become casualties of the war.
Small to Medium Business will challenge enterprise
Cloud service are most easily adopted by small to medium businesses. This gives the SMB a distinct advantage over established companies that cannot adapt their ICT systems fast enough to compete with the very agile SMB. As yet, the Cloud providers have not exploited this market fully, preferring to target the enterprise as a clear source of revenue.
An SMB, less than 200 staff, has the ability to rapidly deploy competitive technology by tightly managing risk in a smaller environment. That, coupled with the “just do it” attitude of more agile executives in those companies, is starting to see the older business model of large enterprise become irrelevant. The cost model is easily managed using Cloud as a subscription and the SMB does not usually have to deal with older, complex, ICT systems. Cloud gives the SMB instant access to the global market.
The large enterprise is still commonly bound by the shareholder and suffers “short terminism” thinking. An older business model that sees focus put on every quarter rather than the long-term strategic life of the company. Worse, the margins in a large enterprise are high, because the structure demands that everyone, including the shareholder, take a cut. The days of an 80% margin on manufactured ICT products are over, and the SMB is going to lead the charge.
Some traditional Global ICT companies face extinction
Companies that have come late to the Cloud market, or have not yet arrived, are likely to be made extinct. Amazon, Microsoft, Rackspace, Google, and other mature Cloud providers have assured themselves a life in the future. Many other companies are doing one of three things, all of which are delaying the inevitable.
Trying to rebrand and move their product to a Cloud that they own, manage, and control. An example of this would be Oracle, who until recently, only allowed customers to utilise Oracle Cloud, on Oracle premises, using Oracle hardware. This was roundly condemned as non-Cloud two years ago, and Oracle has only now started to release the controls forming agreements with Microsoft and others. However, it may be too late for them to recover.
Similarly, Hewlett Packard has been late to the Cloud market after missing the chance to trounce Microsoft and other global players around five years ago. HP had delivered their converged infrastructure product set to market, which at the time was a brilliant first stage for Cloud. They had reduced their number of total datacenters as well, and were well positioned to do the next step, which was migrating their customers from internal HP hardware to HP Cloud. Instead, they dithered, and now find themselves trying to sell that story now in a market that is very competitive.
While there is still a strong market for mainframe and high-end compute infrastructure, proprietary is being increasingly viewed as a bad thing, and these providers will have to face the fact that the Cloud can scale almost infinitely, meaning that large mainframe style hardware providers will slowly lose their customers.
There are moves afoot across the world, in particular the U.S., to tax the use of Cloud services. While this is still in its infancy, it is reasonable to expect to see taxation of Cloud services both cross-border and cross-state within a few short years.
The rise of integrators and brokers
One of the areas that is holding back the wholesale adoption of Cloud services by companies is a lack of skilled resource coupled with a complex Cloud front-end interface. Amazon may provide the cheapest Cloud services on the planet, but gaining access to them can be daunting for an organisation with no skills in Cloud.
This is a major challenge for Cloud providers. Bridging the gap between what their customers do today and the promise of Cloud.
Worse, enterprises have complex ICT systems, often with old, legacy information systems at the core. These are usually tightly coupled, often using non-standard or aged interfaces, so moving a service individually to Cloud can be very difficult.
To bridge those gaps, we are seeing the rise of integrators and brokers. An integrator providing the design work to couple enterprise services with Cloud while providing a roadmap to get there, while brokers work as the agent of the enterprise managing the often complex interface a Cloud service provider presents to the world.
The time of the broker will be short, five years, as Cloud providers smarten their offerings up with standardised tools and dashboards. The time of the integrator will be long, especially as Cloud providers move to the ability to seamlessly port customer workloads between various providers in real-time.
Security, Privacy, and Data Sovereignty will drive new innovations
Still listed as the primary reason for suspicion of Cloud is security. This coupled with privacy concerns, as a result of perceived security weaknesses, is holding back adoption of the Cloud. Adding to that complex mix is the fear of housing data outside of one’s country where it may be subject to laws that allow for it to be accessed by the nation state in which it is physically housed.
This has the most effect on Government agencies across the world who are delaying Cloud deployment until these issues are resolved.
The U.S. Government and its “Five Eyes” partners have done nothing to help the Cloud cause with PRISM and NSA revelations of spying causing enterprises to flee with their data from the continental U.S. in favour of countries that are seen to be safer, such as Switzerland and other European countries.
This is seeing a rise in innovative security systems and tools that are being specifically created to mitigate these perceived risks.
Encryption as a standard is growing rapidly. Cloud services that are storing static data that do NOT store their customers encryption key along with it, are increasingly popular as the provider can’t read the customer data.
For data that has to be processed at the Cloud provider (Salesforce for example), encryption does not work as the data needs to be in its original format. Tokenization takes care of this issue and we will increasingly see this as an offering.
Tokenization also to some extent takes care of Data Sovereignty as the data technically doesn’t leave the enterprise.
Further down the track we will see homomorphic encryption, the ability for an enterprise to encrypt AND process its data within a Cloud provider without the provider every having access to its decrypted state.
A much marketed term at the moment, Gartner themselves have Big Data at the very top of their hype cycle, the “peak of inflated expectations.” The idea behind Big Data is that as we add more devices to the world, we collect more data, and as we seek increased intelligence about our enterprise, we increase data collection.
However, the actual growth of Big Data does not seem to be occurring as swiftly as expected, and again, we see a serious shortfall in skills that are able to manipulate and turn it into something sensible. However, there are two other emerging Cloud powered technology trends that will certainly drive the growth of Big Data in years to come.
The concept of a smart (or “sensing”) city is trending. Cisco, IBM, and Microsoft are dedicating a lot of their marketing power to the idea, ostensibly because they will benefit at the Cloud end of the idea.
Smart cities are effectively a city where real-time data, about everything, is made freely available so that companies can innovate to create a richer, more sustainable, better living experience for citizens. For example, real time public transport information that allows more people to see exactly where their bus or train. Or street lights that dim or switch off on public roads when there are no cars in the area.
Smart Cities will be driven by a large number of wireless sensors embedded in the city’s infrastructure as well as ourselves. Our smart phones for example, will tell the city how fast traffic is moving and where problems are, as well as providing localised information that may be relevant.
That data is fed back to a Cloud system where it can be centrally accessed by the city and used to improve services. This will drive Big Data in turn.
The Internet of Things
The Internet of Things (IoT) is a concept whereby devices capture information in real-time and make it available via the Internet, both private and public. If you consider the example of the Smart City using sensors, these would make up the IoT.
What makes this interesting is the predicted growth rate of the devices, tipped to pass one trillion in the next five years. All that data will go into Big Data, which will be powered by Cloud.
Application of the IoT are most linked with Smart Cities, sustainable environment, and home automation. Future applications fuse IoT with augmented reality to provide a manageable stream of digital data about their environment in real-time.
Balkanization of the Internet
Balkanization is the process by which larger states fracture and splinter into smaller states that are often hostile or at odds with each other. In the context of the Internet, balkanization was coined in 2001 and describes a future state of the Internet whereby it is fractured into smaller “states” defined by politics, national borders, religion, economic, and other interests.
The process of balkanization seems to be accelerating and the revelations from PRISM and the NSA appear to support that view. Balkanization, or at its neatest maxim, the creation of Internet borders, is about to speed up and we need to be prepared for it.
When the Internet was conceived, it was called the “Intergalactic Computer Network”, a phrase which was met with ridicule but shows the ideological science fiction thinking behind its creation. The Internet was meant to be a ubiquitous network that no one owned, that was free for all men, that was not subject to borders nor censorship. For a long time, this was the case. It was the free world.
Today, the Internet is effectively controlled by four telecommunications companies and governments. It is increasingly seen by government as an area that must be strictly regulated and controlled. The balkanization of the Internet is well underway and the first place that we see this evidence is in censorship, otherwise called filtering, of content. Erich Schmidt from Google describes this in his book The New Digital Age (Cohen, 2103) as falling into one of three models: The blatant, the sheepish, and the politically & culturally acceptable.
It’s about creating border control points for the Internet that can be utilised to balkanise it. We also know, now, that surveillance programmes such as PRISM and its various tentacles require border control of the Internet. The information that they capture passes through specific physical nodes where it is copied or analysed as it is passed. It is fair to say that this is also the place that the national firewalls reside (or close too).
So, what happens from here with balkanisation of the Internet? We have the borders in place and we are censoring information between our various internet states along with monitoring it as well.
Part of the problem governments are facing with balkanisation is that tools exist that allow you to anonymously traverse those border nodes either as a complete ghost, or in disguise. Governments are going to have to put an end to that and we’ll see it from a covert and overt perspective.
Services that allow anonymity will come under increasing attack. VPN providers (anonimiser services) are suffering increased cyber-attacks and you can be absolutely certain that they are not coming from hackers or criminals (these services ensure their anonymity) so that logically means that it can only be coming from physical nation states who want those services out of action.
Secondly, expect some form of Internet “passport” to be mooted, it has been discussed before, however it is starting to trend in chatter again.
Third, expect some kind of internet “visa” to start to trend.
Effectively, we are seeing a trend to create internet borders the same as we have physical borders. It’s creeping up slowly, but when you start to look for it, you see it. The ultimate scenario works like this.
If you don’t have a verified digital passport, you won’t be able to use the Internet. Effectively you’ll need some kind of username and password, verified by government, which allows you to log on to the Internet. All your actions from that point are effectively traceable once again, as any use of an anonymising tool would mean that the borders did not know who you were, and as such, would simply block your access.
Some states may require a virtual visa for you to access services inside their Internet state. For example, if you come from an Internet country that is seen as high-risk (a place that sees many cyber-attacks launched from it or a proliferation of spam) then you may be required to use your Internet Passport to gain access to that virtual country, which will include you turning over your private information along with heightened monitoring and surveillance.
Other countries may choose to establish free Internet states, where anything goes. The Cayman Islands of the Internet, others may choose to have very strict security measures in place, the Switzerland of the Internet.
The impact of this on Cloud services is likely to be one of localisation. Rather than traversing internet borders, companies are likely to favour services inside their own country. Balkanization is many years away in its full form, though we see the beginnings of it in New Zealand where an authenticated digital ID is required to transact with government and firewalls are already in place.
The Death of the Data Centre Cloud construct
The death of the traditional data centre is already underway. Even the large providers are supplementing their large, rigid, tier 3 centres with smaller, more frequent, installations. Google build their own infrastructure as it is, further eroding the old architecture model of the data centre.
A number of companies are developing Consumer cloud services that do not require a data centre. These are small, autonomous devices that are installed in the user’s house or business. Files are encrypted as they join the device, and it acts as a local file server over wireless.
The files are then “sharded” out to other devices on the Internet. Sharding is when the actual file is split into pieces and distributed. Your files could end up scattered all over the planet across a number of devices. This gives protection in case your device is stolen and it makes it difficult to hack or spy on your content.
This technology is in its infancy, but it is likely to see a market in the small to medium business, as well as home users, given ease of use and the fact the data is “touchable” (you can see it sitting in your office), which lends a high-degree of comfort to the end user.
A number of other trends are emerging rapidly and a long view down the next few year’s providers some insight into other impacting factors for Cloud services. It is worth tracking these trends over time as the have the potential to alter the “Cloud industry” significantly. Each represents threat and opportunity.
|Privacy War||With the recent revelations of whistleblower Edward Snowden, the war for privacy has started. Cloud providers are under intense scrutiny as to a) their security and b) their involvement with international spy agencies. This is driving significant investment in crypto-engines. Data sovereignty has risen to the foreground again with the U.S. and the U.K. now no longer seen as friendly and safe places to house data.|
|Death of Enterprise Infrastructure||As Cloud becomes more pervasive the days of an enterprise owning its own infrastructure will be over. There will be a renewed focus on the telecommunications sector as the service uptake increases. Companies that are in the business of selling infrastructure will need to adapt, or die.|
|Exchange Rates||It is worth noting that exchange rates do fluctuate and this offers a risk or benefit depending on which way they move.|
|Bandwidth Congestion||It is estimated that bandwidth usage will increase sevenfold in the next two years. With bandwidth already constrained this could become an impediment to Cloud take up, particularly across international connections.|