In 2016, four clear leaders emerged in the cloud provider market, and in 2017 we can expect these leaders to innovate and differentiate through simplicity, automation, analytics and cognitive computing.
Without question, the clear leaders in enterprise cloud at the end of 2016 were Amazon Web Services (AWS), Microsoft, IBM and Google. In terms of capacity, market share and revenue growth there is a wide gap between these four and the rest of the market. While these four will continue to jockey for market share, it seems highly unlikely that any of them will be displaced within the top four in 2017.
Having left the rest of the market behind, each of these four giants is paying increased attention to the other three. Key differentiators of the past – security, capacity, flexibility, and cost – now are table stakes. Indeed, the vast majority of corporate computing has not yet moved to the cloud, and none of the major providers can assume that their existing customer relationships will guarantee continued client loyalty.
In fact, there are good reasons for enterprise clients to spread their cloud business among providers.
In financial services, for example, regulators have voiced concern over a potential over-reliance on AWS in the industry, fearing that consolidating so much of the industry’s information within a single provider increases the risk of cyber attacks and service disruptions. Corporate boards likely will share some of these same concerns for the companies they oversee, and direct company executives to lessen these risks by spreading cloud compute capabilities across several providers.
Simplicity and ease of use already is emerging as a focus among cloud providers.
While moving to, and operating within, the cloud has become simpler in the past year, the approach remains complex enough to support a wide array of cloud brokerage services and tools. In 2017, cloud providers will simplify their client-facing portals, and add more of these cloud management and brokerage tools in-house.
At the same time, cloud providers will continue to build capabilities that outside providers are less-able to provide – namely automation, analytics and cognitive computing. One benefit that cloud providers gain from their vast scale is that additional capabilities they build within their platforms can be offered to customers at a very low cost of sale, and can thereafter provide a steady and reliable revenue stream.
As providers compete to add new services, the lead may go to the cloud provider that can provide the best combination of offerings, even though it may not be the leader in any one element. IBM, for example, is arguably well ahead of the other cloud providers in cognitive computing and analytics with its Watson offerings, but this may nonetheless not be enough to lure major customers away from AWS and Microsoft. In fact, one could argue that Microsoft’s increasing cloud market share is due to its ability to be “second-best at everything,” and thereby create the most compelling overall package for customers.
It’s far too early to predict how events will play out, but it’s clear that companies looking to move additional computing to the cloud in 2017 will be able to choose from four large providers that are innovating and competing hard to win their business.
Bill Fiora leads the Competitive Strategy Team within CSC’s ResearchNetwork, a group dedicated to helping CSC leaders understand the changing market, technology and competitive landscape.