There’s no denying that cloud is arguably the most important and in-demand segment of the global IT landscape, but new research suggests the business world is far from saturated by cloud technology, leaving plenty of room for further growth.
Indeed, fewer than 20 per cent of organisations have put more than 50 per cent of their operational data in the cloud, according to market analyst firm IDC.
This is despite organisations ranking cloud highest in terms of investment priorities for operations over the next five years, IDC’s recent Future of Operations survey, which looked at the top operational technology investment priorities, found.
Cloud, as the top investment priority identified by organisations, was followed by wireless connectivity and artificial intelligence (AI) and machine learning (ML), although actual investment in current AI and ML projects tell a more complicated story, according to IDC.
While many organisations cited AI and ML as an important future technology investment area, most survey respondents indicated that they had no plans to use AI to analyse operational data in the next several years, the firm noted.
At the same time, as indicated by IDC’s survey respondents, many enterprises had yet to move their operational data from on-premises to the cloud.
But this is changing.
"A point of resistance just a few years ago, organisations are now prioritising investments and building strategies for putting operational data into the cloud," said Leif Eriksen, research vice president, future of operations, at IDC.
"And, while the momentum is irrefutable, organisations will need to develop a specific cloud data management strategy that addresses organisational needs and objectives,” he added.
Finding the foundations for the next level of cloud maturity
Clearly, despite the existing prevalence of cloud technology, which today seems to have infiltrated just about every aspect of the business world's collective IT footprint, many companies remain very much at the beginning of their cloud journeys.
However, organisations’ use of cloud is moving to the next level of maturity, spurring the adoption of a cross-functional set of services to drive innovation in a digital-first economy, according to IDC.
From the analyst firm’s perspective, these so-called ‘foundational cloud services’ (FCS) for compute, data and app frameworks will drive competitive development across the whole cloud market.
In fact, IDC estimates that annual recurring revenue (ARR) derived from its FCS catch-all category will increase from just under US$100 billion in 2020 to more than US$300 billion in 2025, with a compound annual growth rate (CAGR) of 28.8 per cent.
"Digital is now a permanent, yet dynamic fixture in our world, built on the digital infrastructure and platform technologies of a cloud foundation," said Rick Villars, group vice president, worldwide research at IDC.
"When organisations want to pursue some digital-based capability or intelligently leverage data to their advantage, they can do so because they have rapid access to the foundational cloud services offered by the leading cloud services providers,” he added.
IDC defines its FCS category specifically as containing elements of the infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and system infrastructure-as-a-service (SISaaS) markets.
Breaking down the compute, data and app frameworks areas further, IDC classes compute services as including technology elements such as virtualised x86 compute, bare metal compute, block storage, accelerated compute and software-defined compute software.
Meanwhile, data services include data management systems, object storage, file storage and event stream processing software. At the same time, app framework services include integration software, deployment-centric application platforms and AI lifecycle software.
Around these core offerings are what IDC calls ‘usage multiplier services,’ which are largely low or no-fee services that encourage greater or more effective use of high-value services by making it easier to adopt, connect, deploy, track, secure and update those services. Such services include load balancing and DNS, as well as marketplaces and bundles of open-source software solutions.
Combined, the services within these combined portfolios accounted for more than half of all IaaS, PaaS and SISaaS revenue in 2020 and are expected to grow to more than two-thirds of all revenue in 2025, according to IDC.
Unsurprisingly, these service segments and the markets that house them are dominated by the top public cloud service providers on the planet, with Amazon Web Services (AWS), Microsoft, Google, Alibaba Group, IBM, Tencent, Huawei and Oracle together holding a combined market share of more than 60 per cent last year.
Enterprises on the hunt for robust partner ecosystems
It is expected that organisations will adopt a range of strategies for embracing FCS portfolios, according to IDC, with some enterprise customers set to select a primary FCS partner while others likely to choose more diversified cloud deployment strategies.
However, regardless of the FCS strategy selected, enterprises are expected to place a high priority on extensions to providers’ FCS portfolios in the areas of expanded service deployment options, such as edge, network and core, automated governance services and robust partner ecosystems.
These factors are set to keep vendors on their toes.
"Demand for FCS is increasing, indicating customer expectations are being met by the providers in these areas. However, this is no time to rest,” said Lara Greden, research director, PaaS at IDC. “In a market characterised by rapid innovation, FCS providers must continually prove that they are willing to invest in innovation at a high level.
“Customers are seeking outcomes, not technology solutions. The key will be to differentiate, build mindshare and redefine [or] productise portfolios by use cases."
From IDC’s perspective, several factors are behind the rising demand for foundational cloud services rather than similar IaaS and PaaS services from individual providers.
A big part of the differentiation between foundational and non-foundational services, according to IDC, is the available, affordable and standardised infrastructure offered by FCS providers, which give developers the ability to rapidly build, test and deploy innovative applications.
Meanwhile, the availability of multiple deployment options, as is the case with hybrid cloud, and technologies that bring portability to applications enable customers to choose the best-matched cloud provider for a given workload are also driving factors.
Another draw is that service-based consumption of IT infrastructure has the potential to let end users reduce capital spending, optimise operating expenses and focus the efforts of IT personnel on achieving business goals rather than routine infrastructure and data management.
Finally, data-centric foundational cloud services can provide fully automated data capabilities that address the significant increases in data volumes and storage associated with mobile and edge devices, IDC said.
Earlier this year, fellow industry analyst firm Synergy Research Group claimed that 2020 marked the first time global enterprise spend on cloud infrastructure services outstripped enterprise spending on data centre hardware and software.
Synergy's analysis suggested enterprise spending on cloud infrastructure services continued to ramp up aggressively last year, growing by 35 per cent, to reach almost US$130 billion.
At the same time, in 2020, worldwide spending on the enterprise data centre hardware and software typically used in on-premises environments – comprising servers, storage, networking, security and associated software – was US$89 billion.
The analyst firm pointed out that the ratio between the two market segments continued a decade-long trend of explosive growth in cloud and virtual stagnation in the market for enterprise-owned data centre equipment.