Singapore and Hong Kong, November 30, 2012 – The increasingly rapid evolution of both cloud services and of user understanding of its benefits and use modes in 2012 pushed consumption of cloud services to business managers as well as IT managers.
As we move into 2013, International Data Corporation (IDC) predicts this evolution to accelerate and business buyers to further test the capabilities of the available services and their CIOs to deliver them.
By 2016, IDC envisages a very different scenario, where cloud services have become an everyday sourcing option for the CIO and LOB manager alike, forcing change on both the infrastructure vendors, the owners of business IP and the consumers of cloud services and technologies.
“Over the next 24 months CIOs’ choices for cloud deployment will change. Hosted private cloud will become the enterprise preference for cloud deployments by 2015," says Chris Morris, IDC's lead analyst for cloud services in APeJ. More insights will be revealed in a forthcoming report, “APEJ Cloud Predictions: Now it's about Business ".
A combination of market trends is leading medium and large enterprise to this new preference as a way to cost-effectively deliver more flexible business services. Primary among them is cost; for critical applications, only a secure, non-shared private cloud will pass all compliance requirements.
The success of initial enterprise strategies for on-premises private cloud environments have been limited by cost and time overruns and while vPC solutions have provided an effective solution for some organizations, other factors can preclude their use.
As a result, Morris adds that by 2016, a growing share of IT infrastructure spending will be controlled by Cloud Service Providers.
“Economies of scale are a hallmark of the cloud marketplace, demonstrated by the growing concentration of physical IT infrastructure spending into a narrower group of service providers.
“IDC predicts that by 2016, in the mature markets of APeJ, over 50% of enterprises will have more than half of all their IT assets located in third-party datacenters. And by 2016, over 60% of enterprise-class storage will ship to cloud service providers. By 2017, almost 30% of all high end datacenter space (tier 3 and 4) will be in service providers' datacenters."
Morris predicts that by 2016, ‘The Cloud’ marketing label will only have value as a descriptor for as-a-service delivery models and have limited value as a differentiator for products and services.
This will occur because, by 2015, cloud will be just another common delivery model within new commercial terms for supply of business and IT services. These services then form the basis for the Outsourcing 3.0 period, providing an extensive portfolio of services for innovative business solutions as detailed in IDC's 2012 Cloud Predictions.
"To retain relevance in the market as LOB spending on as-a-service offerings exceeds that of the IT department, both technology and as-a-service providers must rapidly adapt their ecosystems to include more value-add partners which have expertise in relevant business verticals and processes," he suggests.
IDC's top ten predictions for 2012 are:
Prediction 1: By 2015, "The Cloud" marketing label will only have value as a descriptor for as-a-service delivery models and have no value as a differentiator for products and services
By 2015, cloud will be just another delivery model within new commercial terms for supply of business and IT services. These services then form the basis for the Outsourcing 3.0 period, providing an extensive portfolio of services for innovative business solutions as detailed in IDC's 2012 Cloud Predictions.
Prediction 2: By 2016, a growing share of IT infrastructure spending will be controlled by Cloud service providers
Economies of scale are a hallmark of the 3rd Platform marketplace, demonstrated by the growing concentration of physical IT infrastructure spending into a narrower group of service providers.
IDC predicts that by 2016, in the mature markets of APeJ, over 50% of enterprises will have more than half of all their IT assets located in third-party datacenters. And by 2016, over 60% of enterprise-class storage will ship to cloud service providers. By 2017, almost 30% of all high end datacenter space (tier 3 and 4) will be in service providers' datacenters.
Prediction 3: During 2013 and 2014, enterprise use of vPC solutions will begin to stabilise and then decline
Faster and cheaper to implement converged infrastructure platforms swing user interest and investment back to on-premises and hosted private cloud, with 65% of servers deployed to private clouds being cloud appliances of the converged infrastructure type.
Early user experience of private cloud implementation has been problematic for all but largest organizations. Projects have taken longer and cost more than expected (and promoted by vendors), with ROI targets being missed. The lack of skilled resources and the cost of acquiring and retaining those resources are identified as the primary reasons for project delays.
Prediction 4: Due diligence processes associated with the selection and use of as-a-service products will expand further to include business risks in addition to technology risks
During 2013, the technology risk level of cloud services will be well understood and informed purchasing decisions will be made as a common understanding of cloud service and technology risks is established.
As cloud services mature and more business buyers of cloud service emerge, providers of cloud services will expand their risk mitigation strategies from the current CIO focus to address the concerns of LOB managers as well.
Prediction 5: Active trading and arbitrage of cloud services will emerge as a business model for increasingly commoditized IT-as-a-service offerings
In 2013, IaaS offerings will become further commoditized, and begin being re-sold on cloud marketplaces (such as AWS' Reserved Instance Marketplace). This is not a new concept – telcos have long been doing this. During 2014-2015, this trading will expand to include PaaS, SaaS and BPaaS once issues around software licensing are resolved.
Cloud providers’ business models will necessarily adapt to include such options, or the providers will lose customers, revenues, and market position. Any attempt to prevent or limit resale of services will be seen as restrictive trading.
Prediction 6: Converged and integrated systems will play a key role in end-user infrastructure strategy
In IDC's view, convergence of hardware and software, as well as tighter integration with certain applications will be a key trend within datacenters in 2013. The trend is fuelled by customer intentions for bringing in a more manageable, efficient, flexible and cost effective solution within their infrastructure.
The ROI comparison for on-premises infrastructure will always be with the services which have massive economies of scale, such as those offered by AWS, Google, Microsoft, and major telcos. If a CIO or a cloud service provider cannot demonstrate best practice then the risk/cost result can get skewed because of high on-premises costs.
Prediction 7: Hosted private cloud becomes the enterprise preference for cloud deployments by 2015
A combination of market trends is leading medium and large enterprise to a new preference for the hosted private cloud deployment model as a way to cost-effectively deliver more flexible business services. Primary among them is cost; for critical applications, only a secure, non-shared private cloud will pass all compliance requirements. Initial enterprise strategies for on-premises private cloud environments have been limited by cost and time overruns and while vPC solutions have provided an effective solution for some organizations, other factors can preclude their use, for example, their often off-shore locations and that there is a level of infrastructure-sharing is still a concern.
There is also the issue of datacenter viability; many enterprise datacenters now require renewal or replacement to bring them to competitive levels of capacity and power effectiveness. The large capital costs involved in these exercises are more than enough to override any concerns from GRC committees about datacenter management by a third party.
Prediction 8: A regional talent shortage will emerge as a major differentiator for innovation and a constraint to enterprise technology adoption
The availability of talent has always been an issue across all regions, job functions and industries but no more so than in markets with relatively high growth such as those in the Asia/Pacific region. The unavailability of appropriate IT talent is being exacerbated by an expansion of technology procurement from IT to business units and consumers, with different skills foci required at each functional level. The IT team is no longer just a team of system administrators, DBAs, network managers and application developers but must also include service delivery managers, contract managers, relationship managers and business analysts.
Prediction 9: Governance issues will take center stage
Several of the super trends that have been and are continuing to transform the ICT landscape over the next several years have significant implications with regards to compliance. Big Data has implications with regards to the data that is being processed; Cloud brings with it multiple issues with regards to data location, procurement patterns etc.; Mobility and BYOD create problems with regards to data management, identity control and access; Social creates issues concerning overall control, data and content sharing.
As these four pillars of technology start impacting companies around the region, IDC expects these governance issues to become an increasingly important area in 2013 – even to the point that it may delay the uptake of new, value generating technologies and services. In fact, the ongoing waves of technological change are bound to overwhelm current IT governance processes.
Prediction 10: Vendors of cloud infrastructure and services recalibrate their sales channels
By 2015, the enterprise demand for new as-a-service offerings to meet business initiatives will force big changes onto the cloud SPs and the infrastructure providers. With the cloud SPs becoming major consumers of cloud infrastructure and also consumers of business process IP, their upstream partners must adjust to dealing with fewer but larger customers, which have very significant bargaining power. With the increased focus on the business relevance and value of the cloud service, these upstream partners – such as HP, Cisco or Dell -- will need to make significant change in their partnering relationships with traditional business management software developers and providers, fundamentally changing their business nature and models. The lines between business process and business software are coalescing.
For more information about this report,“APEJ Cloud Predictions: Now it's about Business" (forthcoming), pleasecontact Madhura Moulik at +91 80 6699 1090 or firstname.lastname@example.org.