A return to the clouds

I was at the GigaOm Structure conference last week which provided me with an opportunity to reflect on trends in the cloud computing world and how my thoughts on the market opportunities and trends have changed since I last wrote about this market in depth almost three years ago.

Before looking ahead, it is worth revisiting that old post, which can be found here, as not surprisingly i got some things right and missed some things.  Observations that in hindsight I got right include:

  1. The advent of cloud computing is a fundamental architectural shift that will create numerous opportunities up and down the enterprise IT landscape.  This has, and continues, to come to pass in spades.
  2. Competing as a company in the public Infrastructure as a Service (IaaS) market is a fool's errand.  One only needs to look at the pace of innovation at AWS, which is awe inspiring, and their dominant market share, to realize that this too was correct.
  3. The cloud will be a huge enabler of innovation.  This in hindsight, is the most fundamental impact and has changed how entrepreneurs think about starting and building companies, not to mention how venture capitalists fund them.
  4. Latching on to developer communities, which I also discussed in depth here, has also proven to be a successful go-to-market strategy for many companies.
  5. Some of the specific ideas I discussed such as tools to better manage cloud environments (NewRelic, OpsCode come to mind) and SaaS applications for vertical markets (Jive, SuccessFactors) have also proven to be fruitful market opportunities for talented entrepreneurs.

Observations that, with the benefit of hindsight, I missed include:

  1. Enabling enterprise data centers to be more cloud like has not proven to be as fertile an area as I suspected.  Yes, VMware is seeing success with their software defined data center strategy, but as of yet none of the private cloud  platforms has broken out of the fray with significant revenue momentum.
  2. Bridging the cloud enterprise boundary has also not really developed into a significant market opportunity.
  3. The impact of mobility on cloud adoption.  No use case has driven cloud adoption the way the explosion of mobile devices has, and in hindsight, even three years ago this trend should have been identified more explicitly.
  4. The impact cloud scale data centers would have on networking technologies.  One only needs to looks at the >1,000 people that attended the recent Open Networking Summit to realize that the trend to Software Defined Networking and OpenFlow is gaining steam, although in my defense this was less evident in 2009.

So where does this leave entrepreneurs and investors on a go forward basis as we collectively look for opportunity in the cloud computing market?  A few thoughts:

  1. The public cloud is going to win.  Due to a combination of innovation at large companies such as Amazon, the OpenStack initiative that will enable Amazon's competitors and the fact that the vast majority of young companies developing innovative new solutions will be focused on the public cloud, it is going to be tough for private clouds other than at the largest of companies (JP Morgan and Zynga come to mind, or perhaps some highly regulated industries) to compete with the public cloud on a cost, performance or features basis.  This will, in turn, increasingly drive usage to the public cloud, in turn furthering the pace of innovation and differentiation for the public cloud creating a virtuous cycle.
  2. Driving efficiency will remain critical.  As cloud adoption continues apace, driving the efficiency of these large scale systems will be of paramount importance for cloud operators and their customers.  This means there is significant running room for companies not only that effect the labor side of the equation by driving efficiency in DevOps but also across other operating costs, especially power consumption (both in aggregate and in terms power usage effectiveness, or PUE.  As the CIO of Zynga said at Structure, "we need more innovation on power").
  3. Performance and response time demands from consumers will continue to increase.  The threshold of patience from any consumer of cloud services, whether they be delivered over the web or a mobile device, continues to decline rapidly.  Technologies that offer greater performance, or a path to developing applications with greater performance, to address this trend will see great demand.
  4. Leveraging developers to drive adoption remains critical.  As fundamental infrastructure architectural decisions get delegated into the cloud, developers increasingly will make critical application level decisions, so tools that increase their efficiency and/or offer new functionality that speed application development have the potential to see rapid uptake in the market.
  5. Look for ways to leverage the cloud to bridge data and applications onto mobile devices.  Just as Dropbox did for consumer file access, there are a myriad of applications and use cases that can harness the combined power of mobile and the cloud to provide unique user experiences.

I am sure another 3 years down the road, some of these insights will also prove to be off base, but let me know what you think or other opportunities I should be adding to the list!

 

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