According to Gartner, we are in the midst of a global cloud service market explosion that will reach a figure of $150 billion by 2014, up from $50 billion in 2011. Forrester, on the other hand, recently estimated the cloud market in 2012 to be USD40.7 billion, with that value increasing to USD241 billion by 2020, with public cloud accounting for $159 billion of that. Whichever numbers you go by, cloud technology has truly moved beyond the Gartner hype cycle and into reality, and this has led to a change in the way technology buying decisions are made.
CIOs and CTOs know what cloud technology can do for their organization from an IT perspective, but the conversation has moved from the technology to the bottom line. CEOs and sales directors do not worry about the size or speed of the cloud infrastructure being used; they focus on what a cloud offering can do for the business. In today’s environment, one of a CEO’s top priorities is the delivery and management of the end-to-end customer experience across all products and solutions.
Cloud value chain
By defining the cloud computing segments across the value chain required to deliver the service, a view of the key players in each segment, the assets they control, and, subsequently, the strategic investments required to manage an end-to-end customer experience across the cloud computing ecosystem, is enabled. Over the next decade, the cloud’s ecosystem and players will change in ways that are difficult to predict. Nevertheless, three high-level components required to deliver applications to end users will still exist in 2020; they are network connectivity (to the end users), data centers (where applications reside), and the business application ecosystem.
Network connectivity – Telcos have been the providers of end-to-end network connectivity, giving them a unique selling proposition in this realm. They can use that connectivity to refine and enhance a variety of cloud offerings, and control the E2E customer experience of the same. Operators have the ability to fully control the quality of service at every point in their networks, allowing them to augment cloud offerings with far-reaching network optimization and tailored quality of service, across both their fixed and mobile platforms.
Data centers – The data center is the workhorse of the cloud computing era. Virtualization technology, automation, and management have delivered enterprise-scale IT resources to small and medium-sized businesses for a fraction of the cost. The key players in this segment of the value chain are predominantly the independent data center operators and large-scale web players such as Amazon and Google.
Business applications – End users utilize cloud business applications to deliver on business objectives. The business application cloud stack is often a collective term that encompasses the infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) stacks. In addition, new business models for the consumption of IT services and business applications on a “pay as you go” basis have moved IT expenditures from CAPEX to OPEX, while delivering enterprise-caliber applications to SMBs.
Current cloud adoption
Over the past decade, the majority of cloud deployments have been private as opposed to public. Morgan Stanley recently estimated that the private cloud workload exceeds the public by tenfold. The high number of private deployments can be attributed to enterprise and government customers utilizing private connections to virtualized data center resources. This, in turn, guarantees E2E application performance across the cloud. Public clouds cannot deliver E2E application performance, thanks primarily to the public nature of the data centers’ Internet connections. As a result, public cloud deployment has been driven primarily by non-critical enterprise applications, or business applications specific to SMB needs.
Morgan Stanley research indicates that cloud workloads are shifting away from managed, in-house private cloud hosting to public clouds. Market dynamics relating to greater bandwidth, data center multiplicity, and business software application maturity are shifting critical and non-critical applications to the public cloud. The industry consensus is that this trend will continue and accelerate into the future, creating a unique opportunity for telcos to build E2E cloud offerings unmatched in the industry.
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