The 2013 North Bridge Future of Cloud Computing Survey* in partnership with GigaOm was released this week and has some interesting findings that echo our thoughts and opinions at Flexiant.
The Growth of the Cloud
Cloud computing adoption continued to rise in 2013, with nearly 75% of respondents using some sort of cloud platform, up from 67% last year. Software as a Service remains the most popular form of cloud service, used by 63% of organizations, up from 55% last year. But the real growth was in Infrastructure as a Service, which saw usage rise from 35% to 45%, a 29% increase over the previous year.
IaaS and SaaS will continue to dominate cloud computing adoption. However, PaaS is hot on their heels. Cloud service providers must acknowledge this growth and provide the requirements necessary for competitiveness today while also future proofing their investments, technology and infrastructure to serve their customers tomorrow.
Consideration must be given to how to deliver the IaaS capabilities your customers want – self-service provisioning, metering and billing, scalability up and down etc. Service providers that are not currently offering IaaS (perhaps they are only offering VPS) also need to consider how moving to IaaS can launch a range of higher margin cloud services.
The Changing Vendor Landscape
On the vendor side, the cloud landscape is changing as well. Respondents expect that multi-cloud providers and integrators will rise over the next 2-3 years to challenge the existing cloud industry. This is supported by our finding that while most cloud users today are in a private or public cloud, the majority expect the hybrid cloud to overtake either model in the next five years. This may challenge the existing business models of cloud firms. Currently, two-thirds of cloud firms derive their revenues from subscription fees (down from over three quarters last year), but many are increasingly supplementing their revenue with services offerings (28%) or consulting fees (21%).
The survey showed that Amazon, Microsoft, Google, and Rackspace are all the top cloud contenders in an unprompted question. But as the above states, over the next two to three years, these providers will be challenged. Why? Customers are willing to pay for services beyond IaaS. They want value. If a cloud service provider can offer this value, then subscription fees and supplemental revenue from added services will help them become stickier and more dominant market players. It is important, though, to understand exactly how to differentiate against your competitors or the large dominant players.
IT Readiness & Competitiveness
We also found a number of new challenges for IT departments. Business departments that need flexible and scalable businesses services are the main adopters of cloud services, with File Sharing, Business Productivity, and CRM/Marketing tools as the most popular cloud offerings. This stands in contrast to IT’s own infrastructure, which is less likely to be in the cloud, possibly leading to a future where business leaders become frustrated with their IT organization’s inflexibility or complexity.
This is where cloud service providers can offer SaaS related services. The number of different SaaS opportunities out there is long. The vast majority of cloud service providers are happy to find ways to work with resellers and partners who can help better serve new customers through a joined up value proposition. Some examples include CRM, online collaboration services, accounting, project management or file sharing/storage.
IT may also be looking to the outside for help. It’s likely that the next generation of Cloud Eco-system companies will be assisting in this transition while internal resources and knowledge get up to speed. Those who get it right and get ahead of the curve will become more competitive and take full advantage of the benefits of the Cloud – business agility and responsiveness to change. Cloud leaders are investing ahead of either customer demand or internal mandates.
The cloud service provider able to offer IaaS, PaaS and SaaS will help to convince business leaders and IT that a hybrid solution, with value added services, can make a marked difference on the organization.
The inevitable adoption of cloud is here. In fact, someday soon the cloud will just be called computing. What this survey echoes is that the opportunity to gain significant market traction is possible if you are offering customers the right solutions now and are prepared for the future. If market dominance will change over the next two to three years, why not position yourself for that growth?
The 2013 North Bridge Future of Cloud Computing Survey is the third annual wave of the survey, conducted by North Bridge Venture Partners in conjunction with GigaOm research and 57 collaborating organizations. 855 people responded to the survey, sourced from various channels and mailing lists. 57% of respondents were cloud vendors and 43% business users or IT decision makers. There were not substantial differences between the responses of these two groups. Over 1/3 of respondents were at the C-level in their organizations. The data was collected and analyzed by independent consultants.