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The expanding financial imperative of cloud services

As most technologies in the market today appear to have reached some level of maturity, the cloud services business seems to be bucking the trend, as Amazon Web Service (AWS) and Microsoft’s Azure report impressive financial numbers in the most recent quarter. Microsoft’s cloud grew by 76 percent to $9.4 billion, or a run rate (projected sales in a year) of $37.6 billion; while AWS grew 46 percent to $7.4 billion, or a $29.6 billion run rate. For AWS, this performance is up from $5.11 billion a year ago.

Cloud computing has come a long way. The technology was at its infancy when this column in Daily Trust was founded. In fact, the very first article in this column, “Understanding Cloud Computing,” which was published in the 21 November 2011 issue of the newspaper, was written when most people didn’t know what the technology was about. There are lessons to be learned from the way that this technology has evolved.

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For starters, and borrowing from the maiden article in this column, the “cloud” in cloud computing could conveniently be taken as the Internet. So, essentially, cloud computing is “computing on the Internet.” That is, from your desktop, laptop, or smartphone, you log into some “far away” website and start “computing,” which means running some applications or developing yours. The cloud infrastructure is essentially that of a data center. Depending on the scale and the degree to which the cloud allows other people access, we could have private clouds, public clouds, and hybrid clouds (private plus public). You can do one of three things in a cloud. The first is “Infrastructure as a Service (IaaS),” whereby you upload your application to the cloud site and run it there for a fee, using the hardware (servers, storage capacity, network bandwidth, etc.) in the site. The second mode of usage, “Platform as a Service (PaaS),” allows you to log into the cloud site and use software tools in the site to build your own applications. This obviously enhances quick roll-out of your software. In the third utilization mode, “Software as a Service (SaaS),” you access the cloud site in order to use available software (developed by others) on the site. The cloud supplier, not the user, is responsible for the hardware that delivers this service, as well as for the creation, updating, and maintenance of the software. In all cases, you pay for only what you use.

As of 2011, only a few companies in Nigeria were catching the cloud fever. And even then, virtually all the exposure to the cloud in Nigeria as of that time was restricted to placing applications in cloud installations that were mostly located abroad. AppZone Limited in Lagos was at the time housing its application software with the Go-Grid cloud (USA), where customers go to use the software. TTC Technologies (Nigeria) Limited, in collaboration with the Obafemi Awolowo University (OAU) in Ile-Ife, is the only Nigerian company that I know of that was actually building (private) clouds, by carrying out the requisite distributed and cluster computing tasks.

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If you think the great tech companies beat a path to cloud computing when it came out, think again. When the cloud computing (CC) technology first surfaced, it brought with it a large number of naysayers: companies who felt the whole idea was a hoax, a fad that would go away as quickly as it came; that it wouldn’t catch on. On this side of the fence were the tech giant IBM and, particularly, Oracle, who felt the idea was basically “vapor-ware.” Amazon kind of started CC in the way that we know it today, popularized it, had it to itself for a while, and has stuck with it from the beginning. This gives the company the power of being the first. While Microsoft (MS) and Google didn’t exactly “bad-mouth” CC the way that Oracle did – they were kind of neutral or in a slumber, later finding themselves in a position of having to catch up.

Thanks to business agility, as some of the original naysayers jumped on the cloud bandwagon, swallowing their pride. Ditto for the companies that were initially “neutral” about CC – Microsoft and Google. The appointment of Satya Nadella as the CEO of Microsoft on 4 February 2014 came with it a strong focus on cloud services, and the company hasn’t looked back since then. IBM also changed its disposition about that time and, last year, actually bought Red Hat for $34 billion with the hope of rapidly catching up on the hybrid cloud market. IBM reported last week that its cloud revenue grew by 12 percent for 2018, which is not much.

As of 2014 market value, Microsoft was Number 2 after Amazon, with 10% of the cloud business. IBM was Number 3 (7%). Others are Google (5%), Salesforce.com (4%) and Rackspace (3%). Amazon Web Service led the pack at 28%. In October 2018, according to a Canalys (UK) report, the Top 10 vendors that accounted for over seventy percent of global cloud business by revenue are: AWS (32%), Microsoft (17%), Google (8%), Alibaba (China, 4%),while IBM, Salesforce, Oracle, NTT, Tencent (China) combined account for 12%.

 

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