Enterprise Cloud Economy Driven by 10 Market Forces in 2014

by Chris Preimesberger

In the wake of unprecedented security breaches and the impact on privacy expectations, the cloud marketplace will be largely focused on security and compliance. Protecting data, proving it is still compliant and customer-only encryption will become critical attributes for cloud services.

With an increased desire to track the movement and location of data, organizations will increasingly deploy techniques such as geo-tagging and geo-fencing. This will lead to more nationally built clouds that operate under local laws, rather than large, multinational clouds. A huge untapped market still remains in multinational clouds for less sensitive data, however.

A large number of early-stage businesses are looking to displace traditional software vendors with new cloud offerings. 2013 brought the acquisition of businesses such as Softlayer (by IBM), Tier3 (Centurylink), Cloupia (Cisco), Nicira/Dynamic Ops (VMware) and a number of smaller businesses as major vendors assemble cloud stacks and key functions. The level of competition and pace will continue to rise.

We believe there will be no major breakthrough for OpenStack in the enterprise family this year. While it is a great alternative for the software-as-a-service (SaaS) and developer market, it is still at least two years away from having the key features to be trusted as an enterprise-ready platform.

Although it may eventually feature in the enterprise, OpenStack’s current offering is very basic (mainly provisioning) and traditionally not user-friendly. In addition, there are currently many competing flavors of OpenStack from more than 14 vendors. Its time may well come, but the rigorous demands of the enterprise dictate that 2014 will not be its year.

As enterprise organizations become increasingly aware of the cloud deployments that will be most beneficial for their business (public/private/hybrid), greater differentiation will appear in the marketplace. In particular, large public clouds will continue to drive development of new applications and SaaS, while the rise of specialized clouds will support the migration of traditional enterprise applications to the cloud and running mission-critical workloads securely and efficiently.

This isn’t necessarily news, but it’s still a huge factor: According to IDC, the cloud market will surge by 25 percent in 2014, with an ever-increasing share of enterprise IT moving to the cloud within the next five years. As enterprise organizations realize the significant impact that embracing the cloud can bring in terms of productivity, agility and competitiveness, the market will rapidly grow and expand. Cloud is on a trajectory to be the new trillion-dollar market in IT.

Over two-thirds of enterprise organizations are looking to move business-critical applications such as ERP to the cloud by the end of 2014, demonstrating an evolution in the thinking about enterprise applications in the cloud. Cloud specialists and startups enhancing cloud security, usability, performance and compliance will expand their services to help businesses extend their legacy mission-critical applications to the cloud.

Significant enhancements to cloud performance, largely due to improvements in cloud management platforms and the use of flash memory and flash storage, will allow businesses to access large data sets more efficiently. In the era of big data, marketers, IT departments and executives will all benefit from these performance improvements. As an example, SAP HANA databases already allow order of magnitude improvements in performance and make them broadly available.

Fully 75 percent of cloud implementations in 2014 are set to be hybrid, as businesses look to find a mix of solutions that best fit their needs. However, the enterprise is not yet ready to deal with multiple suppliers. Functionalities such as compute, storage and network will be provided by a single interface as efforts are made to adapt to the needs of enterprise through the integration of infrastructure, but the diverse nature of clouds and underlying technologies still make seamless integration difficult.