Cloud computing is having a moment. No longer an emerging trend, Gartner predicts public cloud service and user spending to grow nearly 22%, totaling more than $597 billion in 2023, up from $491 billion in 2022. Gartner also reports that 75% of organizations will utilize a cloud-driven digital transformation model by 2026.
If the massive $2 billion commitment by KPMG for investment in Microsoft Cloud and AI services is any indication, the AI arms race will fuel further investment in the cloud platforms required to store and process the large data sets required for AI applications.
As the demand for cloud services continues to rise, there is still growing concern around “cloudflation” driven by the rise in storage costs fueled by higher energy prices – pain that is being felt around the world. And there are also valid concerns about how cloud data centers contribute to higher carbon emissions. This is especially relevant given how climate change is wreaking havoc across the U.S, and the globe.
Why Cloud Will Remain Dominant
There are four key reasons why the cloud will be a dominant force, and continue to be the centerpiece of enterprise and business computing for years to come:
The generative AI-fueled arms race
The economic uncertainty may factor into IT budgets and buying decisions, but this doesn’t seem to be slowing down investment in the cloud. In fact, going forward, generative AI will be a major factor that drives many organization’s tech stack purchase decisions. Whether in the public or private cloud, generative AI is supported by large language models (LLMs) which process data in real time, requiring powerful – and highly scalable – computing power. When you combine this point with the fact that the best AI solutions are now offered primarily as cloud services, organizations are more motivated than ever to accelerate their transition to the cloud.
Also see: Top Generative AI Apps and Tools
Even with rising energy costs, cloud computing is the far more affordable option: And this is true for the largest Fortune 500 enterprises down to SMBs.
Committing to the on-prem model means spending more on IT systems, applications, and hardware infrastructure because it has to keep up with performance objectives, and those can change over time. This can be especially challenging for retail brands and their supply chain partners during holiday sales peaks, for example.
IT must support the increase in performance needs even if only a temporary or seasonally related. A usage-based model is always going to be less expensive than buying an on-prem system or software, which leads to contract lock-ins. As mentioned earlier, the cloud data centers do require energy and water to operate, yet companies are in a better position to meet their ESG and sustainability goals because they’re not using on-site servers to power IT infrastructure.
Application updates, security, and economies of scale
The cloud is better at regular application updates, security, and economies of scale: Despite a recent high profile cloud data breach, overall, cloud platforms offer better security because their reputations as trusted partners depend on it.
For example, the big cloud platforms have hundreds of top-notch engineers, cybersecurity professionals, and IT staff that united in the goal to keep their customer’s data safe. Microsoft, AWS, and Google also have what most small to mid-sized companies do not – economies of scale. They provide seamless application updates, which includes patching applications, and detecting and quashing vulnerabilities before breaches occur.
Companies with strapped or overworked IT staff benefit from the 24/7/365 support that global cloud platform providers offer. From a security, scale, and even a sustainability/ESG standpoint, the cloud is the clear winner.
Issues with On-Prem
On-prem isn’t a good fit for the way we work today: While some CEOs seem to be souring on the work from home trend, some form of hybrid work ecosystem will likely continue well into the foreseeable future. The changed 9-5 landscape demands high levels of accessibility for teams that may be in multiple regions, time zones or countries that on-prem software doesn’t offer.
The growth of software-as-a-service (SaaS) over the past five years, boosted heavily by the pandemic, provides the widespread application and network accessibility that companies require to be efficient, productive and remain competitive in today’s business landscape.
Bottom Line: The Cloud and Sustainability
A growing number of companies are making commitments to being better “corporate citizens” and achieving carbon neutrality, which is good news. And even better news is that carbon footprint reduction is top of mind for the Big Three: Microsoft, AWS and Google. All three have confirmed their commitment to sustainability, energy efficiency and the reduction of their carbon footprint. Both Microsoft and AWS plan to power all of their respective data centers with 100% renewable energy by 2025.
Companies don’t have to rely entirely on their providers for a “greener” cloud, they can also make a conscious effort by being more selective about how they consume cloud services, how much data they’re storing unnecessarily, and where their cloud data providers are located.
Despite some downsides to the cloud, it’s still the best strategies for the SMBs to the global Fortune 500 from a productivity, green, and affordability standpoint.
For more information, also see: Digital Transformation Guid
About the Author:
Scott Francis, Technology Evangelist at PFU America, brings more than 30 years of document imaging expertise to his position where he’s responsible for evangelizing Ricoh’s industry leading scanner technology.