How to pick your cloud?

Published on October 12th, 2017 on TI Inside

For more than a decade, we knew that the future of computing was in the cloud services. This future has arrived much faster than expected: the global cloud services market, estimated at $150 billion, is growing 25 percent per year, according to research companies. However, that does not mean that going to cloud – migrating data and tasks from local computers to outsourced servers – is a simple process.

There are two major pull factors for companies to decide to take their programs or their data to a cloud managed by a specialist company: cost and versatility. In the local storage model, the company needs to make a prior investment in equipment, technology and personnel. The cloud changes the nature of the operation: computing becomes a utility, like water or light. That way, instead of renting a structure, it pays for the amount of space used (or the programs being run) on the cloud network – and the company can expand or contract its operations at any time.

In theory, these benefits are unbeatable. In practice, there are a number of doubts that slow or paralyze this change: how to combine the systems developed internally with the programs offered in the market? What is the urgency of making the switch, if the current system is working so well? Which cloud to choose? And, perhaps more importantly, what to move into the cloud and what to keep in the company’s own servers?

To answer these questions, you must first keep in mind that there are several types of clouds. There are also several types of suppliers, each with their own strength. And finally, there are numerous types of work configurations – what we can call information architectures, which vary according to the needs and the specific conditions of each company.

The pioneering of Amazon

The leading cloud services providers are Amazon, Microsoft, Google and IBM. A pioneer and market leader, Amazon Web Services (AWS) has started out of the online business giant’s internal need. Since they had to constantly invest in data storage and processing, the idea of renting the surplus space came up.

This has become such a compelling business – revenue of $12.2 billion, $ 3.1 billion profit in 2016 – that almost every technology giant with powerful infrastructure has followed suit.

The initial advantage and aggressive pricing policy, AWS remains at the forefront of what the market calls Infrastructure as a Service, IAAS, and Platform as a Service, PAAS. It markets processing, storage, databases and connectivity tools and provides an environment for application development. Well-known companies, such as Netflix and Instagram, store and operate their movies and photos through AWS. Even the CIA, the US intelligence service, uses the company to manage some of its data. Many of the apps we use daily run unknowingly on Amazon servers.

Microsoft’s turnaround

Some heavy-weight competitors fight against this established leader. Microsoft began investing heavily in the industry in 2010 with the launch of Azure, which, as AWS, provides platform and infrastructure as a service. One lever for its growth is the fact that most companies already use Microsoft software, which is supposed to make the transition smoother.

It was in this spirit that in 2011 Microsoft transformed its popular corporate Office pack into service. By Office 365, instead of buying the box with the license, consumers can use the software to create texts, spreadsheets and presentations with an annual subscription.

To get an idea of the strength of their programs, just look at the configuration of the cloud market. According to the consultancy Synergy Research Group, AWS dominates more than 40% of the IAAS and PAAS sector, against 23% of Microsoft, Google and IBM combined. When you mix the software as a service, such as Office 365, Microsoft has a similar operation to Amazon, with virtually the same annual revenue.

No wonder, the director of Microsoft's server division, Satya Nadella, became the company's chief executive in 2014. After losing the battle of smartphones to Apple and Google, he knows he must prepare to compete for future disputes in artificial intelligence, Big Data and virtual reality. For this, Microsoft will need a much larger number of developers in its ecosystem. In addition to bringing in revenue, Azure has also been built for this.

Google’s bet

Investing since 2008 in services similar to those launched by AWS, Google is already filling the tip of the cloud services pyramid, the SaaS, thanks to the popularity of services used by hundreds of millions of people, such as the Docs productivity platform and Gmail. Its challenge is to gain more space in the profitable business market. For this, it needs to occupy the middle and bottom of the pyramid, where Amazon has a huge advantage.

IBM’s Tradition

The fourth biggest competitor in this market is IBM. In a way, the company was a pioneer: it has been selling space and data and program management on its large servers for decades. At first, they tried to resist cloud computing, but had to embrace the model.

The transformation brought it some good fruit. IBM offers a "private cloud" experience, a service to run on unique servers. However, this is not enough. To provide space on its own servers (a "public cloud"), the company bought Softlayer for $ 2 billion in 2013. The deal has accelerated the transition from IBM's many applications to the pay-as-you-go model. Their battle is twofold: keeping their traditional large clients and attracting small and medium-sized businesses, not accustomed to hiring their services.

The local’s appeal

The market is completed with a number of smaller companies. In Brazil, among the local players there are content providers such as UOL Diveo, telecom operators such as Vivo's Cloud, Server One and Oi's Smart Cloud and hosting companies that have adapted their services to cloud computing , such as Locaweb.

While offering infrastructure and platform as a service, however, its services are more expensive, there are fewer tools and news and the number of engineers working is less, as well as the money to sophisticate the infrastructure. So much so that, since 2016, Diveo has held up the white flag and started to resell AWS packages.

However, they benefit from a characteristic of the national market: Brazilian law requires that foreign companies have servers in Brazil. Since building data centers involves high investments, there is an opportunity for companies like Equinix, Ascenty and Sonda to rent space in their data centers for AWS and Microsoft, for example, to install their servers in Brazil.

The Cloud Broker

Faced with all these possibilities, how do you choose the destination for your company's data and programs? The first step, of course, is to assess whether the transition will be advantageous. For most companies that have some ambition to grow, the answer will be yes. But it will not necessarily be required to migrate everything that is already working to a new environment. And here comes one more element: the possibility of building hybrid clouds - a mix between private and public infrastructure.

To make the best decision on where to store your data and programs, it is best to understand how you want to use that data. This is not a technological issue. It's a strategic issue.

Increasingly, companies need to incorporate data that belongs to other databases into their decision-making process. Even within the company, there are often systems that do not talk to each other: from payroll to CRM or to marketing registrations, for example.

For this reason, the cloud broker, a kind of agent with consultant characteristics, is growing in the Brazilian market, helping to analyze the size and types of customer operations to indicate the best configuration for hiring cloud services.

In the next article of this series, we'll look at the key aspects of good information architecture for the company.

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