Sticker Shock Comes to the Cloud ⛅

“Disruption” is among the most beloved of tech buzzwords, but in the case of cloud computing, the term is entirely appropriate. Our friends at Gartner foresee no slowdown in “cloud shift” — defined as the movement of IT spending from traditional (noncloud) markets to new, public cloud alternatives. Growing 16% annually, by 2022  the market for cloud computing will exceed $360 billion and comprise 28% of enterprise IT spending (up from 19% in 2018.) For the famously (or infamously) slow-moving world of enterprise IT, this is a massive, genuinely disruptive shift.

“Over the next five years, digital business, cloud, and AI will reshape buyer behavior and priorities across all industries." — Nikita Patel (Gartner)

The number of enterprises implementing artificial intelligence (AI) grew 270 percent in the past four years and tripled in the past year, according to Chris Howard, distinguished research vice president at Gartner, “If you are a CIO and your organization doesn’t use AI, chances are high that your competitors do and this should be a concern.”

The widespread adoption of cloud computing is unquestionably a major factor in our new age of AI, enabling rapid intake and analysis of billions of data points and powering the trillions of calculations required for the training and deployment of machine learning models in the enterprise. Pay-as-you-go business models enable greater flexibility in resource allocation, but there are potential risks too. According to a report in The Information, the recent experience of some major Amazon Web Services (AWS) customers serves as a cautionary tale.

Pinterest, Capital One and Adobe all saw their AWS bills rise in excess of 40% in 2018 vs. 2017, highlighting a need for smarter forecasting and increased governance. According to research firm Canalys, while first-mover AWS continues to dominate the public cloud computing market in 2018 with 2x the revenue of its nearest competitor, Microsoft’s Azure platform, the competition is heating up, with Microsoft, Google and Alibaba all nearly doubling in size vs. AWS’s comparatively glacial YoY rate of 47%.

Generally speaking, increased competition in the public cloud computing market is good news for the CIOs of the world and for the future of AI in the enterprise overall. There are payoffs and pitfalls with any cloud migration and optimization strategy, and out of the 500 companies in the Fortune 500 there almost certainly 500 different plans. Finding the best fit for your organization is not a trivial exercise, and cost is only one consideration. Many retail or e-commerce CIOs will likely feel some trepidation about running their SaaS portfolio, including AI-powered initiatives, on the cloud infrastructure managed by their largest and fiercest competitor.

The Forecast: Mostly Cloudy, but What Kind?

As cloud computing continues to grow, the underlying market dynamics are shifting just as rapidly. With both Microsoft and Google putting AI, cloud, and enterprise services at the top of their to-do lists for the foreseeable future, the competitive landscape for public cloud computing will likely change significantly over that same timeframe. Will AWS’s early bet on catering to developers keep them in the top spot, or will Azure, Alibaba and Google succeed in creating meaningful differentiation and carve out distinct niches. Will a new competitor emerge, perhaps one focusing on high-growth, high ROI use cases like AI? Can enterprises successfully manage multiple clouds, or does that path involve even greater risk in terms of governance? One thing is certain: with the rise of AI and cloud computing set to consume more and more of the total IT budget in any enterprise, the CIO who chooses their provider wisely will enable the cloud as a competitive advantage, and not the commodity it once seem destined to become.

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