In 2015, German companies are going to invest around 10.9 billion euro in cloud services, technologies as well as integration and consulting. Although, the German market has developed quite slow as compared to international standard. However in 2015, also this market will mature. The reasons can be find in this article. Crisp Research has identified the drivers behind this development and deducted the top 10 trends of the cloud market for 2015.
1. Cloud Ecosystems and Marketplaces
This year cloud ecosystems and marketplaces are becoming more popular. For some time the Deutsche Telekom Business Marketplace, Deutsche Börse Cloud Exchange or the German Business are present. Service providers are offering marketplaces to increase the scope of their services. However, the buyer side is still not keen. This has several reasons. The lack of integration and less demand are just two reasons. However, along with the cloud market maturity the demand could rise. Cloud marketplaces are part of the logical development of the cloud to give IT buyer a more convenient access to categorize IT resources. Distributors also had understood the importance of cloud marketplaces and are in motion to offer own marketplaces in order to preserve the attraction in the channel. Vendors like the startup Basaas are offering a „Business App Store as a Service“ concept, which can be used to create multi-tenant public cloud marketplaces or internal business app stores.
Integration is a technical challenge and is not easy to solve. However, with a powerful ecosystem of providers under the lead of a neutral marketplace operator, the necessary strengths could be bundle to ensure a holistic integration of services in order to take the biggest burden from the buyer side.
2. Secret Winner: Consultants and Integrators
Complexity. IaaS providers are keeping it a secret. However, for some customers this already ended in a catastrophe. IaaS looks quite simple on paper. But to start a virtual machine with an application on it has basically nothing to do with a cloud architecture. In order to run a scalable and failure-resistant IT infrastructure in the cloud more than administration know-how is necessary. Developer skills and comprehension of the cloud concept are basic skills. Modern IT infrastructures for cloud services are developed like an application. For this purpose, providers like Amazon Web Services, Microsoft Azure, Rackspace or HP are providing building blocks of higher value added services to exactly achieving the scalability and failure-resistance, since this is the responsibility of the customer and not of the cloud provider. ProfitBricks provides “Live Vertical Scaling” setting on a scale-up principle that can be used without special cloud developer skills.
The challenge for a majority of CIOs is that their IT teams lack of the necessary cloud skills or still not enough investments in advanced trainings have been taken. However, this means that a big market (2.9 billion EUR in 2015) opens for consultants and system integrators. But also classical system houses and managed services providers can benefit from this knowledge gap when they are able to transform themselves fast enough. The direkt gruppe and TecRacer are two cloud system integrators from Germany that have impressively shown that they are able to handle public cloud projects.
3. Multi Cloud as a long runner
The multi cloud is an abiding theme. Eventually its importance is propagandizes for years. However, besides the growing demand for cloud services on the buyer side and the increasing maturity level on the vendor side, the area of use for cloud spanning deployments is constantly increasing. This is not only due to offerings like Equinix Cloud Exchange that is enabling direct connections between several cloud providers and the own enterprise IT infrastructure. Based on APIs a central portal can be developed that offers IT buyers a consistent access on IT resources of various providers.
Within the multi cloud context OpenStack and technologies like SaltStack and Docker are playing a central role. The world wide propagation of OpenStack rises continuously. Already 46 percent of all deployments are in production environments – of this 45 percent are on premise private clouds. In Germany also already one third (29.8 percent) of the cloud using companies are dealing actively with OpenStack. In parallel with the increasing importance of OpenStack the relevance of OpenStack for cloud sourcing in the context of multi cloud infrastructure is growing to ensure the interoperability between a various of cloud providers.
To support DevOps strategies and to relinquish writing comprehensive Puppet or Chef scripts, SaltStack is used more often for the configuration management of big and distributed cloud infrastructure. In this context the Docker container wave will grow in 2015. Until December 2014 the Docker Engine was already downloaded 102.5 million times. This is a growth by 18.8 percent within a year. In addition, the team announced extensions for multi container, to support the orchestration of applications across several infrastructures. In the context of container technologies it is worth to take a look at GiantSwarm from Germany. They have developed a micro service infrastructure based on container.
4. Public Clouds are on the rise
In the past public cloud providers faced a barrage of criticism. However, in 2015 they will experience a distinct number of new customers. One reason is the groundwork of necessary requirements they did in the recent past in order to address also enterprise customers. Another reason is the strategic change of managed cloud providers and already cloud transformed system houses with own data centers.
Public cloud players like Amazon AWS or Microsoft Azure massively have made prices spiral downwards. Of course also the customer side have recognized this. Local managed cloud providers (MCP) are getting more and more in a price Q&A with their customers – an unpleasant situation. Virtual machines and storage are sold on a competitive price a small provider is not able to keep up.
The strategies are changing that – for certain situations – MCPs are falling back on public cloud infrastructure to offer their customers lower costs on the infrastructure level. Thus, they have to create partnerships and build knowledge for the respective cloud infrastructure in order to run and maintain the virtual infrastructure and not only offer consulting services. At the same time they also benefit from new functions by the public cloud providers and the global reach. A provider with a data center in a local market is only able to exactly serve this market. However, customers have the demand to enter new target markets without big additional efforts in the short-term. Public cloud provider’s data centers are represented in many regions worldwide and offer exactly these capabilities. MCPs still keep their local data centers to offer customers services referring to local requirements (e.g. legal subjects). In this context hybrid scenarios are playing a major role by which the multi cloud has a priority.
5. Cloud Connectivity and Performance
Because of the continuous shift of mission critical data, applications and processes to external cloud infrastructure leads to the fact that CIOs not only rethink their operational IT concepts (public, private, hybrid) but also have to change their network architectures and connection strategies. A crucial competitive advantage is the selection of the right location. Modern business applications are already provided over cloud infrastructures. From a CIOs today point of view a stable and performant connection to systems and services is essential. This trend will strengthen on and on. Based on direct connect connections like AWS Direct Connect or Microsoft Express Route this can be handled more easily. In this case direct network connections are established between a public cloud provider and an enterprise IT infrastructure in a data center of a colocation provider.
The ever increasing data traffic requires a reliable and in particular stable connectivity in order to get access to the data and information at all times. This becomes more important when business critical processes and applications are outsourced to the cloud infrastructure. The access has to be ensured at any time and with low latency. Otherwise this could lead to essential financial and image damages. The quality of a cloud services significantly depends on its connectivity and the backend performance. Here an essential and important characteristic is the connectivity of the data center to guarantee the customer a stable and reliable access to the cloud services at all time. Data centers are the logistics centers of the future and experience as a logistical data vehicle its heyday.
6. Mobile Backend Development
The digital transformation is affecting each part of our life. Around 95 percent of all smartphone applications are connected to services that are running on servers, which are distributed over data centers worldwide. In addition, without a direct and mostly constant connection these apps are not functional.
This means that modern mobile applications without a stable and global oriented backend infrastructure are not working anymore. This is equally with services in the Internet of Things (IoT). A mix consisting of distributed intelligence on the device and at the backend infrastructure ensures a holistic communication. In addition, the backend infrastructure ensures the holistic connection between among all devices.
For this a public cloud infrastructure provides the ideal foundation. On the one hand the leading providers are offering the global reach. On the other hand they already have ready micro services in their portfolios, which represent specific functionalities that don’t need to be developed from scratch. These services can be used within the own backend service. Other providers of mobile-backend-as-a-services (MBaaS) or IoT platforms have been specialized on the enablement of mobile backend or IoT services. Examples are Apinauten, Parse (now part of Facebook) and Kinvey.
7. Cloud goes Vertical
In the first phase of the cloud providers of software-as-a-service (SaaS) applications concentrated on general respectively horizontal solutions like productivity suites or CRM systems. The needs of single industries weren’t consider very much. One reason was the lack of cloud ready ISVs (Independent Software Vendor), which didn’t find their way into the cloud.
With the emerging cloud transformation of ISVs and the continuous entrance of new vendors the SaaS market growth and with that the offering of vertical solutions tailored for specific industries. Examples are Opower and Enercast in the area of Smart Energy, Hope Cloud for the hotel industry and trecker.com in the agricultural sector.
One example for the importance of verticals is Salesforce. Besides investments in further horizontal offerings Salesforce is trying to make its platform more attractive specifically for single industries like the financial sector or the automotive industry.
8. The Channel to turn on the gas
The majority of the channel has recognized that it needs to demonstrate its abilities in cloud times. First of all the big distributors started initiatives to preserve respectively increase their attractiveness on the customers side (reseller like system houses). 2015 can mark a watershed. At all events a practical test.
The success of distributors is directly connected with the successful cloud transformation of system houses. Many system houses are not able to make this way on their own and need help from the distributors. Different cloud scenarios will show which services are still being purchased from the distributors and which services are directly sourced from the cloud providers.
The whole channel needs to rethink itself and its business model and to align it to the cloud. Except for hard- and software to build private or managed private clouds the access to public clouds via a self-service is a cakewalk. For some target groups the system house and thus the distributor won’t have any relevance. Other customers still need help on their way to the cloud. If the channel is not able to help someone else will do it.
9. Price vs. Feature War
In the past price reductions for virtual machines (VM) and storage hit the headlines. Amazon AWS went first and after a short time Microsoft and Google followed. Microsoft even announced to follow each price reduction by Amazon.
It seems that the providers reached their economic border and that the price war is over for now. Instead features and new services are coming to the fore to ensure differentiation. These include more powerful VMs or the expansion of the portfolio of value-added services. For a good reason – pure infrastructure like VMs of storage are no longer a differentiator in the IaaS market. Vertical services are the future of IaaS in the cloud.
Although the IaaS market is getting its real pace now, however, infrastructure is commodity and doesn’t have much potential for innovation. We have reached a point in the cloud where it is about to use a cloud infrastructure to create services on top of it. Thus, besides virtual compute and storage enterprises and developers need value-added services like Amazon SWF or Azure Machine Learning in order to run the own offering at speed, scale and failure-resistance – and to use it for mobile and IoT products.
10. Cloud Security
The attacks on JP Morgan, Xbox and Sony last year have shown that each company is a potential target for cyber attacks. Whether it is because of fun (“lulz”), financial interests or motivated by political reasons, the potential of threats increases constantly. Here it shouldn’t be neglected that mostly the big cases appear in the media. Attacks on SMEs are unmentioned or worse, the victims didn’t realized it or if too late.
One doesn’t need to be part of the Sony executive board to realize that a successful attack is a big threat! If it’s about the reputation because of stolen customer data or sensitive company information – digital data have become a precious good that needs to be protected. It is just a matter of time until one is getting into the crosshairs of hackers or political motivated extremists and intelligence agencies. This must not happen in 2015. However, the ongoing digitalization leads to a higher connectivity that hacker avails oneself to plan his attacks.
Compared to standard security solutions like firewalls or email security, Crisp Research estimates that more investments in higher-value security services like data leak prevention (DLP) are taking place in 2015. In addition, CISOs have to address strategies to avert DDoS attacks.