Cloud Service Innovation: Who’s Investing in What? By Jeremiah Caron

May 4, 2015

Jeremiah Caron, Senior Vice President - Analysis, Current Analysis

Jeremiah Caron, Senior Vice President – Analysis, Current Analysis

Cloud market as defined as perhaps as broadly as you could define it, maybe not, is already a $100b market. Wow, that’s phenomenal. $100b, that’s tremendous. We do a number of studies of enterprises, as a lot of companies do. I don’t really see enterprises putting up their hands saying, “Yeah, we’re going to spend $100b more than we did last year, or whatever”. So, the issue is that there is all these suppliers out there who need to fight each other and kill each other to get a piece of this $100b that is not new money. It’s money that’s being shifted from somewhere else, right. It’s not brand new money we’re talking about here.
So, there is an intense competitive dynamic amongst all kinds of companies, service providers, whether they’re carriers or pure web-based service providers, or whether they’re technology companies or ISPs, or resellers, integrators, you name it, to get a piece of this action which is not new action. It’s just being shifted from somewhere else.
That leads us to innovation. How do you differentiate? How do you innovate and that’s what we’re going to talk about right now? So, let me quickly, before I introduce the panel, go through a few thoughts to guide the discussion. I’m with Current Analysis. I lead the analyst team worldwide.
Current Analysis is about competitive differentiation. We help our clients create competitive differentiation in the markets that they play in, mainly in the telecoms and technology space.
So, the innovations in cloud service, there is a couple of thoughts. What we’re going to talk about, first of all, enterprise requirements. The Keynote speaker mentioned you’ve got to start with the requirements and we’ll talk about that. What are service providers doing and what should they be doing and then we’ll have a panel discussion?
So, a couple of quick thoughts. Some no-brainers. Okay, what’s happening with Cloud? Yes, this is from a study we did of 874 enterprises around the world just a couple of months ago. Large number use cloud services. The rest that don’t, plan to.
Then there is a small percent who gosh knows what they do, but they’re not going to do it. But, the point here is that yes, cloud is important whether we’re talking about software as a service, platform as a service, or infrastructure as a service. Really, we’re reaching the point where we can no longer talk about Cloud because we’ll just be talking about enterprise, computing and everything like that without making adistinction.
What kind of Cloud are you using? Well, it turns out the majority are using what we would call private Cloud, where they built it and manage it themselves and created that sort of agile environment themselves, or they’re doing it in a managed way. Or, an increasing number are creating a hybrid solution where they use a mix of Internetbased Cloud solutions as well as their own private-based Cloud solution. So, that’s interesting. We expect to see the hybrid portion of that grow rapidly over the next couple of years, but it’s primarily private Cloud.
Well, why is that? Well, no-brainer again, what are the concerns in moving to a Cloud-based strategy? It’s security. It’s reliability. It’s privacy. It’s controlling costs. These are these things why moving to a public environment right away is a bit scary, particularly as you get to more sophisticated mission critical applications.
Now, that’s an opportunity, obviously, for the suppliers. That’s the case today. But, these are the concerns. Certainly no shocks here for anybody.
What I find interesting about this information is look how many concerns there are in double digits on a percentage basis. That’s a lot of concerns. This industry has a lot of work to do, frankly, to create differentiation as they work to innovate because what this tells me is what’s out there now raises a lot of questions and a lot of problems.
Okay, so, service provider action. What are the service providers that we work with? What are they doing? Well, first of all, facilitating hybrid connectivity and facilitating that hybrid approach. That is where the market is going and that is where all service providers that we work with are moving toward is figuring out how to work the security, how to work the reliability to support Internet offload or whatever when the customer wants it in addition to a more locked down approach. Security dominates the discussion. That’s good. That’s a no-brainer.
Then on the private side engineered systems so the market can move down, where people can put in a solution and it’s sort of in a box and works.
Now, why is this important? So, if we ask the question how many suppliers do you use for infrastructure as a service, or how many suppliers do you use for platform as a service, or how many suppliers do you use for software as a service, you can see that in a large number of cases it’s more than one. This creates a problem that the industry is working on, but it creates a tremendous opportunity to innovate and this is where we’re seeing the most innovation among cloud service providers today is in the act of supporting this multi-cloud environment. That is where the innovation is happening.
They’re not out there trying to beat up Amazon on price. They’re not trying to come up with the next great Sass offering. They want to support that. What they want to do is differentiate in supporting this multi-cloud environment.
So, here the big things happening and it’s all around APIs. Cloud interoperability is the big thing – working together, creating co-operative partnerships. We’re already seeing this happening. Think about AT&T and their bond service where they’re recruiting partners to create a benefit in differentiation by using AT&T network services. That all drives down into linking up this discussion with internal telco, or carrier discussions around SDN and NFV and how to make that work for them.
So, what are carriers’ or service providers’ primary driver for SDN and NFV? The great thing about this one is we’re now down to less than 30% is about saving money. The majority is about service enablement and revenue generating things. That’s really good for the industry.
When are you going to spend money on SDN? And again, the issue here is if you want to talk about Cloud to enterprises, the first thing that service providers have to think about is cloudify thyself. You cannot cloud other people and help them until you cloudify thyself, yourself. So, when is this going to happen?
Interesting bits are the red and green. In a very short amount of time, 12 to 18 months, you know, a tremendous number of the companies we talk to are planning to spend money and deploy SDN in this timeframe. Now, the one thing you need to know about studies like this is the companies you interviewed lie. They don’t think they’re lying. They think that they’re going to spend this money in the timeframe they talk about, but it always shifts out. We should create some sort of law like Moore’s law or Metcalfe’s law, or whatever about looking at this and then shifting it out another two years or whatever. But nevertheless, that’s what they say.
NFV, even shorter timeframe. You know, creating your own telco cloud environment to better support the APIs, the enterprise services and consumer services by doing their own thing in a very short amount of time. So, that’s what’s going on in the marketplace.
Jeremiah Caron, Senior Vice President – Analysis, Current Analysis

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