Customers Lead the Charge When It Comes to Cloud Use

By Eric Lundquist  |  Print this article Print
Cloud Revenue

NEWS ANALYSIS: Enterprise customers realize public cloud services can be reliable and secure. Growth in Amazon's and Microsoft's cloud revenues reflect this.

I attended the Bloomberg Enterprise Technology Summit this week, which was the same week that Apple, VMware, Microsoft and Amazon issued robust quarterly financial reports. You might not think the conference and earnings reports are linked, but the trends discussed at the conference are already showing up in the vendor's numbers.

So what were the trends? Certainly, cloud computing was a big topic. But cloud computing is not new and the question is now what happens after the cloud frenzy? 

The characteristics of cloud computing:  capacity on demand and Internet standards as the basis for communicating were evident in the financial sphere and the conference floor.

Amazon doesn't specifically break out its Web Services operation, but it is a good bet the Seattle digital giant's cloud platform is now cooking along at about $1 billion per quarter.

Meanwhile, at the Bloomberg conference, Infor President Duncan Angove described how Infor has re-architected its products to run on the Amazon platform and the company is transitioning to a subscription-based model with a focus on key vertical industries, including health care.

Amazon as a platform for enterprise vendors is a phenomenon not unnoticed by competitors Microsoft and Google.

Microsoft continued to show a strong financial performance under its new boss Satya Nadella. Nadella was vocal in reiterating Microsoft's commitment to the cloud platform as the basis for its future enterprise computing products. Nadella said during the analyst conference call following the earnings announcement that Microsoft is "well on the way" in its emphasis on cloud and mobile computing .

At the Bloomberg conference, Google CIO Ben Fried described the next generation of internal corporate networks as essentially mimicking the public Internet. If you adopt the concept that your internal networks will operate much like the public Internet, you will be forced to rethink data security from the ground up and work first at protecting the data rather than building digital moats around the corporate headquarters. Also, once you think about your internal operations as mimicking the public cloud vendors, you will not only rethink security but also the physical infrastructure. 

VMware is building a robust business out of developing hybrid cloud architectures, which allow you to easily tie your on-premise systems to public clouds. The OpenStack architecture is designed to give your on-premise infrastructure the same characteristics of low cost, scale and flexibility of the big public cloud providers.

The confluence of on-premise systems with cloud providers was a theme emphasized by the CIOs speaking at the Bloomberg event. CIOs are conducting an application triage in their organizations. Old, legacy applications of questionable value and no known advocates are being killed off, legacy applications that contain valuable corporate data and would require a massive rewrite to move the apps to the cloud are being left on-premise, and commodity applications, including office apps and email, are heading to the public cloud providers.

New application development is being done on cloud-based platform-as-a-service (PaaS) infrastructures and then either pushed to public cloud deployment or hosted on on-premise cloud-like platforms. Vendors such as Infor are leading the way in providing services that allow for either on-premise deployment or the tools and professional services to aid customers in moving their applications to, in Infor's case, Amazon Web Services.

Enterprise customers have now recognized that public cloud services can be as reliable and  secure as what was once only available on-premise. Those customers are now voting with their wallets as Amazon's and Microsoft's cloud-based revenues indicate.

With customers leading the charge, the traditional vendors are now playing catch-up in offering the open-source, scalable, low-cost services their corporate technology customers are demanding. The customer leading the market may indeed be the biggest trend of all.

Eric Lundquist is a technology analyst at Ziff Brothers Investments, a private investment firm. Lundquist, who was editor-in-chief at eWEEK (previously PC Week) from 1996 to 2008, authors this blog for eWEEK to share his thoughts on technology, products and services. No investment advice is offered in this blog. All duties are disclaimed. Lundquist works separately for a private investment firm, which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made. 

Originally published on www.eweek.com.