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The public cloud market is taking off: Fasten your seat belts

Cloud expert David Linthicum discusses what is expected from the public cloud this year, why AWS is in the lead and new accounting regulations that could threaten cloud adoption.

Corporate America is embracing the cloud due to its low cost, agility and ability to scale. Many enterprises have deployed public cloud and most are big consumers of Amazon Web Services, Google and Microsoft Azure. IT pros are starting to think differently, in terms of expanding their IT infrastructure and stopping the automatic building of data centers -- a move David Linthicum, SVP of Cloud Technology Partners, a cloud consulting firm based in Boston, says is a "great stride."

In a recent podcast, Linthicum and Ofir Nachmani, cloud blogger and speaker at IamOnDemand, discuss the rise of public cloud services, Amazon Web Services' lead in the public cloud market and recent accounting changes that might impact cloud users.

As the public cloud market grows, will AWS continue to dominate?

According to Gartner, the public cloud market is expected to hit $204 billion this year, a 16.5% increase compared to 2015. "There is solid growth showing across public cloud services … and I guess most of that will be in Amazon's hands," Linthicum says.

Nachmani says it's not surprising Amazon Web Services (AWS) is leading the market because the vendor "knows how to serve [and] deliver to the masses."

It comes to the point where cost is not the only measure for success.
Ofir Nachmanicloud blogger and speaker at IamOnDemand

In addition, AWS has the financial backing to optimize its margins and manage a large, scalable business that serves many users. "Traditional vendors cannot cope with this tremendous change. This is because they don't have the DNA -- the financial DNA, maybe we call it -- that Amazon has," Nachmani says. Because of this, AWS is able to innovate and look for more ways to improve its services, such as the recent addition of AWS Certificate Manager, which can provide SSL certificates for free in AWS. [6:20 – 11:14]

With the cloud services market growing, what trends might we see this year?

The cloud services market is also exhibiting growth around software as a service (SaaS), with Gartner predicting the SaaS market to grow 20.3% in 2016, reaching $37.7 billion. Platform as a service is trailing close behind with a predicted growth of 21.1%, but the largest advancement of the year is coming from infrastructure as a service, which is expected to see 38.4% growth in 2016, reaching $22.4 billion by the end of the year. For enterprises, "it's easier to consume these expensive enterprise systems and expensive enterprise databases as a service over the network," instead of building similar services from scratch, Linthicum says.

With increased interest in the public cloud, the cloud market is seeing new services and vendors enter the mix. Big companies are not afraid to try these new services and providers, Nachmani says, and they put aside funds for that specific reason. The investment in new services and small startups promotes growth that will benefit enterprises in the future. [11:15 – 14:10]

Will new accounting standards or taxes hurt the public cloud market?

In 2015, an accounting standard update made by the Financial Accounting Standards Board could make it harder for some organizations to capitalize upfront cloud implementation or migration costs -- a change some vendors, such as Google, said could provide a "disincentive" for some organizations to move to the cloud.

Meanwhile, there is still debate over how to tax cloud computing services. "You're not really taxing a piece of hardware you bought or software you bought that shows up on a DVD and, to me, it seems like something that's almost going to be very difficult to regulate, if not impossible to regulate," Linthicum says.

While new accounting rules and cloud taxes might remove some of the benefits of migrating to the cloud," they won't stop cloud migrations," Linthicum says. Enterprises need to evaluate what cloud brings to their enterprise because "it comes to the point where cost is not the only measure for success," Nachmani says. [14:10 – 22:06]

Next Steps

IaaS market consolidation to continue in 2016

Cloud experts make their cloud predictions for 2016

Is the size of the cloud market accurately represented?

This was last published in March 2016

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