Public cloud poised for a huge upswing this year

With Amazon and Microsoft announcing massive increases in cloud revenues many see 2016 as a pivotal year for public cloud adoption

Everyone's rushing to the cloud, right? Well things have certainly been going in that general direction, but so far it's been more of an amble than a rush. Last year Computing research found that about three per cent of data centre workloads per year were being shifted out to cloud providers.

That average figure hides a multiple of scenarios, of course, from those that have moved lock stock and barrel to cloud, to those determined to keep themselves at least one bargepole length away from anything to do with the dreaded C-word.

Between those extremes you have companies who are putting the odd commodity workload into the cloud, or who are using it to handle peaks in demand.

Nevertheless, the big public cloud providers have announced a huge growth in the adoption of their services. The largest by far - Amazon - saw AWS revenues rise almost 70 per cent in 2015, the first year for a long time in which the company has actually made a profit - while Microsoft Azure may be growing even faster, albeit from a lower base. (While Microsoft will not reveal separate cloud figures it claims that revenue grew 140 per cent last year; nevertheless the consensus is that Azure is about a tenth of the size of AWS in revenue terms, with Google and IBM SoftLayer just behind.)

One person who believes that we are about to see the start of a major uptick in the use of public cloud services is David Richards, CEO of WANdisco.

"I'd expect to see AWS go from being a $7bn to a $50bn company inside Amazon in the next two or three years. That's going to be one of the IT stories of the century," he says. "I don't know of a company that isn't trying to move significant portion data processing into the cloud."

It should be noted here that one of WANdisco's products allows large volumes of data to be migrated to Amazon S3 and so such growth figures may be wishful thinking: the more firms start pushing petabytes of data into the cloud the more demand there will potentially be for WANdisco. Nevertheless, it's hard to argue with Amazon's growth figures and there are signs that some of the traditional barriers to cloud adoption are being overcome.

The price is right

While cloud providers have always claimed their services are cheaper than in-house equivalents this has frequently proved not to be the case in the long run. However, for many use cases public cloud probably is genuinely less expensive now. Public cloud prices have fallen 66 per cent in three years according to some estimates.

What's more, pricing models have changed to pay-as-you-go - with users charged by the volume of data stored or processed. More transparent pricing means that nasty shocks down the line are less likely. A terabyte of data stored in standard S3 will cost you around £50 per month, while putting the same in the Redshift data warehouse will set you back about £500. Microsoft Azure prices are comparable and recently Redmond announced a price drop too.

Overcoming jitters

Richards says that worries about regulations, such as those around data location and security, are being overcome as the big players build data centres in Europe and as the hybrid cloud model, with sensitive data kept on-site, becomes a practical reality.

"A number of government departments of the UK and the US are looking at this architecture very carefully, and banks I know could be working to move certain data-processing into the cloud," he says. "Then it becomes a hybrid environment because you have some data behind the firewall some in the cloud."

Research director at analyst firm 451 Research, Matt Aslett, agrees that some in finance are losing their inhibitions, at least for some functions. "Many financial services firms are cautious about the cloud, but some are adopting it and some are adopting aggressively to encourage transformational change," he says.

"For example, we recently spoke to a mainstream financial services firm using Amazon Redshift as its primary data warehouse for its billing system and related reporting and analytics."

According to Aslett that company is now looking to move other services to the cloud to save money, because Redshift costs just 40 per cent of the on-premises equivalent.

Public cloud poised for a huge upswing this year

With Amazon and Microsoft announcing massive increases in cloud revenues many see 2016 as a pivotal year for public cloud adoption

Another function public cloud can provide very usefully is large-scale analytics. Aslett cites a financial services regulator that reduced the time taken to run a batch risk threat model from months to just a few days by running it as a Hadoop service in the cloud.

Yes, but...

But how typical are these examples? There are still plenty of organisations that have no plans for cloud at all (beyond a little Dropboxing, oh and we use Office 365 now, and Photoshop - does that count?).

While complete cloud refuseniks are rarer these days, they are still very much around, and their concerns have not changed, revolving as they do around issues of security, compliance and trust.

Every "Snappening", every Office 356 and AWS outage adds more grist to their mill and plenty of grey areas remain around security and surveillance, particularly if you are worried about the NSA rifling though your data, in which case neither Amazon's European data centres (due in 2017) nor Microsoft's (due this year) are going to help you.

Moreover, on the compliance side the regulations are tightening, not only in Europe but around the world, making managing data in public clouds potentially more challenging. Meanwhile we hear of numerous complaints of cloud companies failing to live up to the spirit of their SLAs, fixing a problem after 23 hours where the SLA says 24 hours, for example. All in all it's still pretty easy to be a naysayer.

Even now, the cost calculations don't always add up. Self-confessed cloud evangelist Rocco Labellarte, head of technology at the Royal Borough of Windsor and Maidenhead, was disappointed to find that moving wholesale into AWS ended up costing more money because the distributed estate was more difficult to manage.

"We anticipated that we would require fewer IT people and lower costs, but what we have found is that our costs have shifted from capital to revenue - so our revenue costs have gone up, and we need more staff [to manage the cloud systems]," he told Computing.

"You outsource your IT and have no idea what the heck is going on and then you pay through the nose," Labellarte added.

And while we're on prices, how low can they go? For how long can the giants keep cutting costs? The strategy may be working at the moment as smaller competitors are sent to the wall but it can't go on forever and eventually customers could find themselves locked into huge quasi-monopolies.

Private cloud prices are dropping too. Although a direct comparison is very difficult, 451 Research suggests that for some companies and some use cases using private cloud solutions from VMware, Microsoft or particularly the open-source OpenStack need not be any more expensive than a public cloud.

There are advantages too, such as guaranteed data sovereignty, flexibility and customisation. Indeed, the increasing importance of data governance as regulations tighten favours private cloud and other on-premises alternatives over public cloud, as recent Computing research among 100 medium to large organisations indicates.

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Then again, with applications such as machine learning, big data analytics and Internet of Things management now available in the public cloud, applications that are tricky for most to replicate on premises, there is no doubt that the public cloud will continue to grow and grow alongside the on-premises options. Of course, all the big public cloud players offer these options too.

Gartner predicts the global market for public cloud systems to rise to $204bn this year, a 16.5 per cent increase over the 2015 figure, which would see the proportion of the $1.6tn worldwide IT budget dedicated to cloud rise above 10 per cent.

The role of cloud in analytics will be a topic of discussion during Computing's forthcoming Big Data & Analytics Summit 2016 in London in March. Find out more and reserve your place now - registration is free for most delegates