Second Quarter Cloud Insights

If I had to choose a few keywords to give insight into how the second quarter in the cloud space has shaped up, they would be demand, serverless, and API. The outlook of the cloud industry, namely Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), appears to be improving, with around a fifty percent year over year growth so far in 2017. Compare that to the prior quarter of around forty-five percent, with international demand and the implementation of corporate “cloud-first” initiatives driven by C-level executives. This initiative mandates the company policy that the public cloud be the primary and default option for any net new IT projects or initiatives; this makes this initiative one of the driving factors behind the demand. The main sectors leading the adoption charge can be found in the public, financial, and healthcare spheres. On the flip side of growth and demand, lack of headcount from both sales and end users was cited as the primary inhibitor to any new growth.

An interesting insight about the long-term outlook for the cloud has described the industry as a whole as being in the early innings of the adoption game, with about fifteen to twenty percent of the total workloads currently residing in the cloud, and with the expectation that that number will climb to fifty percent within the next three years. One particular geographical area that seems ready to really see a spike in demand is the European Union, and Europe in general. It would appear the dust is starting to settle with regard to concerns about the GDPR regulations, the building out of data centers throughout the region, and companies creating marketing campaigns focusing on compliance with these regulations.

The battle for the monarch of the clouds is still in full swing, with Amazon and Microsoft continuing to win the majority of the deals. Microsoft’s share of the gains has showed an improvement over the first quarter results. It has been mentioned that Microsoft has been “winning” somewhere around forty to fifty percent of new cloud requests for proposals (RFPs). Compare that to last year, when it was somewhere around twenty to thirty percent of the deals. Other news coming out of Microsoft includes reports of strong demand for Microsoft’s hybrid cloud offering, Azure Stack. Actually, the demand appears to be unwavering, by the delay of the Azure Stack launch from the summer to the fall. Microsoft partners seem to view Azure Stack as a “differentiator” for Microsoft in the marketplace. Finally, with regard to increasing demand, Microsoft launches Azure Fast Track (its direct competitor to Amazon’s Sentinel) with new incentive structure for the sellers (reps exclusively comped on Azure consumption, incentives to recruit ISVs/SaaS companies to cloud) also expected to help demand.

Amazon has made some adjustments on the terms of its Enterprise Discount Program (EDP) by now allowing Amazon partners to offer its services from the partner, whereas previously this was direct with Amazon. The adjustment of the terms will also now allow for discounts at flat usage. whereas earlier, Amazon had a twenty-percent growth requirement. Amazon gives the appearance that it might be making a slight course adjustment to become more open to recruiting partners. Putting this in perspective, in 2016, eighty to ninety percent of AWS revenue was done direct. It is also worthy to note that the Awazon PaaS offering is expected to be around twenty to thirty percent of expected revenue, whereas previously, it was fifteen to twenty percent, with the most interest being seen for Lex, Polly, DynamoDBDS, RedShift, and Lambda. Finally, with Amazon, SAP migrations have been a very big push for AWS. The timeframe for the larger migrations appears to be set for 2018, and all indications are that AWS continues to lead across the public cloud space for SAP migrations.

There appear to be some indicators of a growing shift by the industry into more of the PaaS, with an emphasis on APIs, serverless, and containers in general. As such, there is a strong and growing demand for more third-party tools to automate cloud migration strategies and optimization of the overall cloud costs. CloudHealth and CloudEndure are a couple of names that have been brought up most frequently in industry peer discussions, while at the same time, the VMware/AWS hybrid cloud services appear to be pushing out. Also to note, the optimism and hype about the VMware/AWS hybrid cloud offering is starting to tamp down some following the announcement that the launch of the service would be delayed.

In closing, we are over halfway through the year 2017, and I thought this was going to be the year when Microsoft overtakes Amazon as the monarch of the clouds. Overall, Microsoft may be on track to achieve this, but Amazon is not going to make this easy. So, the corporate battle of the decade is on, and we will just have to wait and see.

 

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