Global Analyst Insights by Rene Buest

Cloud Market 2015: The Hunger Games are over.

By on February 18, 2015 in Cloud Computing

Last year, the cloud market gave us great pleasure with a lot of thrilling news. Lots of new data centers and innovative services show that the topic has been established in the market. The hunger games are finally over. Although, the German market has developed quite slow as compared to international standard. However, an adoption rate of almost 75 percent shows a positive trend – underwritten by two credible reasons. The providers are finally addressing the needs and requirements of their potential customers. At the same time more and more users jump on the cloud bandwagon.

Cloud providers at a glance

In 2015, cloud providers will enjoy a large clientele in Germany. For that, the majority of the providers have strategically positioned themselves with a German data center to empower local customers to physically store their data and to fulfill the requirements of the German Federal Data Protection Act (BDSG).

  • Amazon Web Services made the biggest step from all US American providers. A region especially for the German market shows an acknowledgement of the IaaS market leader to Germany. At the same time Amazon has strategically positioned in central Europe and also enhanced the attraction for customers in adjoining countries. From a technological point of view (reduction of latency etc.) this is not a neglectable step. Services especially for enterprises (AWS Directory Service, AWS CloudTrail, AWS Config, AWS Key Management Service, AWS CloudHSM) show that Amazon has been developed from a startup enabler to a real alternative for enterprises. This Amazon has underwritten with significant German enterprise reference customer (like Talanx, Kärcher and Software AG). However, Amazon still lacks of powerful hybrid cloud functionalities at application level and need to improve. After all, enterprises won’t go for a pure public cloud approach in the future.
  • Microsoft’s “Cloud-First” strategy pays off. In particular, the introduction of Azure IaaS resources was an important step. Besides an existing customer base in Germany, Microsoft has the advantage to support all cloud operation models. Alongside Azure public cloud also hosted models (Cloud OS Partner Network, Azure Pack) as well as private cloud solutions (Windows Server, System Center, Azure Pack) are available, customer can use to build a hybrid scenario. In addition, rumors from 2013 grow stronger that Microsoft will open a German data center in 2015 to offer cloud services under German law.
  • ProfitBricks, one of the few IaaS public cloud providers originally from Germany growth and thriving. Besides a new data center location in Germany (Frankfurt) several new employees in 2014 show that the startup develops well. An update of its Data Center Designer (WYSIWYG editor) underwrites the technology progress. Compared to other IaaS providers like Amazon or Microsoft there is still a lack of a portfolio for value added services. This has to compensate with a convincing and powerful network of partners.
  • Last year Rackspace started to refocus from public IaaS to managed cloud services to bethink itself on one of its strength – the “Fanatical Support”. However, when it comes to trends like OpenStack or DevOps, Rackspace is forward pressing. After all no company can’t afford to focus on this technologies and services in the future in order to offer its developers more liberty to create new digital applications faster and more efficient.
  • At the end of 2014, IBM announced an official Softlayer data center in Frankfurt. As part of the global data center strategy this happened in cooperation with colocation provider Equinix. The Softlayer cloud offers the benefit to provide bare metal resources (physical server) like virtual machines.

Even if the market and the providers made a good progress, Crisp Research has identified following challenges that still need to be addressed (excerpt):

  • The importance of hybrid capabilities and interfaces (APIs) for multi cloud approaches is getting bigger.
  • Standards like OpenStack and OpenDaylight must be supported.
  • Advanced functionalities for the enterprise IT (end-to-end security, governance, compliance et.al.) are needed.
  • There is a big need for more cloud connectivity based on cloud hubs within colocation data centers.
  • Price transparency has to improve significantly.
  • Ease of use needs to have a high priority.
  • Enablement services for the Internet of Things (IoT). Only the ones with an appropriate service portfolio will be in the vanguard in the long term.

Depending on the provider’s portfolio the requirements above are fulfilled partly or predominantly. However, what all providers have in common is how to address their target groups. Historically, direct dealings in Germany are difficult within the IT market. New potential customers are mainly addressed with the aid of partners or distributors.

View of the users

More than 74 percent of German companies are planning, implementing and using cloud services and technologies in their production environments. This is a strong signal that cloud computing has finally arrived in Germany. For 19 percent of German IT decision makers cloud computing is an integral part of their agenda and operations. Another 56 percent of the companies are planning and implementing or using cloud as part of first projects or workloads. Here, hybrid and multi cloud infrastructures play a central role to ensure integration on data, application and process level.

This leads to the question why now – after more than 10 years? After all, Amazon AWS started in 2006 and Salesforce was already founded in 1999. One reason is the fundamentally slow adoption of new technologies – this arises from caution and German efficiency. The majority of German companies are usually waiting until new technologies have been settled and prove the successful usage. Traditionally, early adopters are very few in Germany.

But this is not the main reason. The cloud market had to develop. When Salesforce and later Amazon AWS entered the market not many services were available that fulfilled the requirements or were an equal substitute for existing on premise solutions. For this reason IT decision makers still set on well-tried solutions at that time. In addition, there was no need to change something, which was down to the fact that the benefits of the cloud weren’t clear respectively the providers didn’t clarify it good enough. Another reason is the fact that sustainable changes in the IT industry are happening in decades and not in a couple of years or months. For all those IT decision makers, which set on classical IT solutions during the first two cloud phases, the amortization period and IT lifecycles are ending now. The ones, who have to renew hard- and software solutions today, have cloud services on their list for the IT environments.

Essential reasons that defer cloud transformation are (excerpt):

  • Insecurity due to misinformation from many providers that sold virtualization as cloud.
  • Legal topics had to clarified.
  • The providers had to build trust.
  • Cloud knowledge was few and far between. Lacks of knowledge, complexity and integration problems are still the core issues.
  • Applications and systems have to be developed in and for the cloud from scratch.
  • There were no competitive cloud services from German providers.
  • There were no data centers in Germany to fulfill the German Federal Data Protection Act (BDSG) and other laws.

German companies are halfway through their cloud transformation process. Meanwhile they are looking to multi cloud environments based on infrastructure, platforms and services from various providers. This part of the Digital Infrastructure Fabric (DIF) is the foundation of their individual digital strategy, on which new business models and digital products e.g. for the Internet of Things can be operated.

About the Author

About the Author: Rene Buest is Gartner Analyst covering Infrastructure Services & Digital Operations. Prior to that he was Director of Technology Research at Arago, Senior Analyst and Cloud Practice Lead at Crisp Research, Principal Analyst at New Age Disruption and member of the worldwide Gigaom Research Analyst Network. Rene is considered as top cloud computing analyst in Germany and one of the worldwide top analysts in this area. In addition, he is one of the world’s top cloud computing influencers and belongs to the top 100 cloud computing experts on Twitter and Google+. Since the mid-90s he is focused on the strategic use of information technology in businesses and the IT impact on our society as well as disruptive technologies. Rene Buest is the author of numerous professional technology articles. He regularly writes for well-known IT publications like Computerwoche, CIO Magazin, LANline as well as Silicon.de and is cited in German and international media – including New York Times, Forbes Magazin, Handelsblatt, Frankfurter Allgemeine Zeitung, Wirtschaftswoche, Computerwoche, CIO, Manager Magazin and Harvard Business Manager. Furthermore Rene Buest is speaker and participant of experts rounds. He is founder of CloudUser.de and writes about cloud computing, IT infrastructure, technologies, management and strategies. He holds a diploma in computer engineering from the Hochschule Bremen (Dipl.-Informatiker (FH)) as well as a M.Sc. in IT-Management and Information Systems from the FHDW Paderborn. .

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