There’s no doubt that cloud computing is re-energizing the technology industry. A look at what 2011 holds for the software industry finds the cloud behind just about every driver of software innovation.
But what specific developments will shape the cloud itself? Based on my primary research, executive interviews and close monitoring of vendor developments during 2010, I predict five major trends will shape the cloud space during the coming year.
1. Private Clouds Reach an Inflection Point – But Hybrid Clouds Will Rule
In their recent Software 2011 Outlook Conference Call, Goldman Sachs said they expect 2011 to be the inflection point for private clouds. IDC agrees, including private clouds on their list of the top ten technologies for 2011. Sand Hill Group’s “Leaders in the Cloud“ study found 44 percent of IT executives that have adopted cloud solutions are either currently running or planning to run private clouds, and that number will reach 54 percent in three years.
2010 year was a year full of debates about private clouds. Many experts argued private clouds were only a blip on the radar screen, predicting they will go away after companies realize how challenging it is to build private clouds that can compete with public clouds. And yet, tech companies big and small came to market with private cloud management tools and technologies, including IBM (CloudBurst), VMware (vCloud) and Eucalyptus Systems (Eucalyptus 2.0).
Our recent interviews suggest that large enterprise CIOs are investing in building private clouds to move both existing and new solutions to the private cloud and continuing to improve the efficiencies of their data centers. There is also considerable interest in community clouds and data-as-service. As a result, cloud and virtualized environment management was a hot and crowded space in 2010. We will see some consolidation and some winners in this category in 2011.
The cloud solutions from winners will compete in performance and cost with the public cloud vendors such as AWS, Google, Salesforce.com, Microsoft, and more.
This is not to say that large enterprises are not moving their workloads to the public clouds at the same time. There are a number of workloads that are perfect for the public cloud including dev/test, archiving, disaster recovery, redundancy, web-serving workloads, and so on – particularly those workloads that experience a lot of demand variations. We have also seen a number of cases of “cloud innovation sandboxes” where enterprises are experimenting and innovating with new products, new applications, and new markets using the public clouds.
In the end, though, it’s going to be a “hybrid world,” where enterprise customers will pick and choose applications and their IaaS, PaaS, and SaaS vendors based on their business needs thus creating a diverse and heterogeneous cloud environment. And the industry has responded to that need in 2010 with introductions such as Microsoft’s “Software + Services” and the AppFabric framework, CloudSwitch and VMware’s vCloud API and Cloud Director.
2011 will see large enterprises build out private clouds and consolidate their data centers both for their internal use as well as for bringing to market innovations such as data-as-a-service or other new on-demand offerings to their existing and new markets. Financial services, healthcare, and many other industries with large data center footprints will move aggressively in this direction. Their simultaneous use of public clouds will drive the need for integration and hybrid management technologies.
2. The Battle for PaaS Supremacy will Become Red Hot
At the end of the day, the real value of customer technology investments in cloud computing is in the applications and data. We are seeing an increasing blurring of boundaries between infrastructure and applications in the cloud computing world. Infrastructure vendors such as Amazon and VMware are increasingly moving “up the stack” with more “platform-like” features. Meanwhile pure-play platform players such as Microsoft Azure are starting to provide some “infrastructure-like” capabilities (VMrole for example).
Microsoft has long demonstrated that the path to software success and dominance lies in attracting and “locking-in” enterprise developers – and the applications that naturally follow – to a platform and its associated ecosystem. Windows Azure Platform is Microsoft’s attempt to repeat the past success in the new cloud market by providing an enterprise-class platform aimed at capturing enterprise developers, Microsoft channel Partners, and other cloud services providers.
Force.com is salesforce.com’s play to become the platform of choice for enterprise IT to develop and deploy cloud applications. However, enterprises were slow to adopt Force.com for a variety of reasons, not the least of which is concern over lock-in to Force.com’s proprietary languages and interfaces. What we saw instead was that Force.com was deployed more widely among existing salesforce’s CRM customer base and to a lesser degree among ISVs and start-ups.
With its partnership with VMware, the acquisition of Heroku, and the announcement of Database.com, salesforce.com is signaling its strong commitment to become a leading contender as the PaaS platform of choice.
In the meantime, VMware realizes that it needs to move beyond its virtualization strategy — which is in danger of total commoditization—into the upper layers of the cloud stack (including SaaS and PaaS) and into enterprise-grade systems management of private and hybrid cloud deployments. It’s recent acquisition of SpringSource signals VMware’s entry into the application development space.
The list of PaaS players is long. However, in the end, the company that wins will be the one which creates “a virtuous cycle” of building new applications and attracting new developers to its platform. Success will be determined by the ability to provide powerful capabilities to woo developers – a tough crowd to please. Developers would want to develop software applications in the cloud, for the cloud and for the massive explosion of mobile apps we are going to witness.
While the vendors are battling for PaaS supremacy, enterprise use of PaaS will be in its infancy. Customers are concerned about vendor lock-in, architectural re-design efforts, and the readiness of PaaS platforms to handle enterprise production applications. Furthermore, CIOs are waiting to see which platform will emerge as the dominant one before committing. For an ISV aiming to build, sell, and support a product, the time horizon is long — it might take up to ten years to build a significant market share and revenue stream.
In the near term, PaaS will be a favorite for early adopter and progressive companies. It will be two to three more years before this space stabilizes and mainstream adoption begins. Once it does, however, the PaaS space will be a sweet spot for many product and services vendors because it will be where most of the tools, custom development and migration revenues will be generated. In contrast, SaaS will continue to dominate in the “off-the-shelf” software/services category.
3. Databases in the Cloud Will Be the Next Big Frontier
Much work remains on the vendor side involving research into the data technologies that make the most sense in the cloud. In many cases, there is no real need for a heavy-weight, full-featured database in the cloud. A lot of investment and engineering work is needed to get this all fleshed out in the next several years.
As the industry moves to public and private clouds, the old database paradigm of RDBMS systems that emerged during the client-server days is no longer valid. What enterprises now need is a cloud-native database, one that offers all the essential characteristics of the cloud – elasticity, multi-tenant, horizontal scalability, high-performance, geographical redundancy, measured service, and so on.
Salesforce.com’s Database.com is the first step in that direction. CIOs are demanding an enterprise-class, robust database platform for transactional data processing based on well-known successful data-management architectures, tools, skills, and historical data, while reducing the traditional overhead associated with database tuning, maintenance, updates and replication.
For all non-transactional systems and large data processing, the “No SQL” companies will continue to make great in-roads in 2011.
The cloud is a great platform for data-as-a-service as well as storage for which we will see exploding demand.
4. Cloud Computing Will Go Global
For the past several years, the United States has been on the forefront of cloud innovation and adoption. Now, Europe and Asia are fast catching up. Emerging markets, in particular, have a huge opportunity to leap-frog directly to state-of-the-art technologies driven by cloud solutions.
Cloud technologies are now far reaching and are opening up previously inaccessible market. Cloud computing levels the playing field for new companies from emerging markets to adopt new business models so they can compete and win against leaders in the global markets.
And competition on the vendor side will increase as well. Interestingly, telecommunications companies in Europe and Asia are building highly-competitive clouds targeted to their local markets. Many of these offerings – such as Tata Communications InstaCloud and Korean Telecom’s offering – are as innovative and cost-competitive as solutions from Amazon and Google. In Europe, British Telecom and Orange are making significant inroads in their cloud computing services as well.
Clearly, the prospect for U.S. telcos to develop competitive cloud offerings is significant – in fact, AT&T and Verizon have offerings in the works – but there is also a global opportunity for U.S.-based cloud providers to go after the Asian and European markets in order to help them build out their clouds.
5. Mobile Devices and Applications will Accelerate Cloud Services
People often overlook the explosion of mobile device and applications when talking about cloud computing.
There will be 1.1 billion smart phones by 2013. This year at the Consumer Electronics Show (CES), it rained tablets.
And 2011 will be the “Year of 4G” – more bandwidth, more mobile applications. All these mobile devices will eclipse PCs and will become the predominant mode of connecting to the Internet in the next few years.
The proliferation of smart mobile devices of all types fuels massive demands for data needed to power social networking, sensors, and video and digital entertainment. This demand is powering an exponential need for compute, storage, and bandwidth – which, in turn, is leading to an explosion of new applications and platforms.
A Morgan Stanley study from September 2010 found 41 percent of mobile peak hour traffic is due to “real-time entertainment,” most of which is video. This statistic is not surprising considering that YouTube is adding approximately 35 hours of video every minute.
To service this demand on the back end, the industry is rapidly moving from individual craftsmanship and proprietary IT “assembly lines” towards a public utility model with massive scale, highly automated, self-service consumption. Mobile developers need cloud computing to increase the end-user experience by lowering latency to the devices, increasing throughput, and reducing costs.
Agility and innovation will be key drivers for companies leverage in order to stay ahead in these times of economic uncertainty and global change.
With the convergence of smart mobile devices of all shapes and forms, anywhere, anytime access via high-bandwidth connectivity, and massive-scale cloud-powered datacenters and applications, CIOs have an impressive array of technologies to drive business at their disposal today. Cloud vendors will work hard in 2011 to deliver on the promise of the cloud and stake their competitive claims in the cloud era to come.
Kamesh Pemmaraju heads cloud research at Sand Hill Group and helps enterprises and technology vendors accelerate their transition to the cloud. Follow him on Twitter @kpemmaraju.