State of the cloud 2018 – as public expands, private cloud falls away

There are many ways of understanding a complex and dynamic market like cloud services and last week I examined it from the point of view of equipment, component and network provider’s point of view. To them, the cloud is a customer – an increasingly significant buyer of products and services that is significantly reshaping their market.

Cloud buyers provide another perspective since they are the impetus behind all those equipment and service orders. That enterprises large and small are using increasing quantities of cloud services is no surprise, but an update to the longstanding RightScale State of the Cloud survey shows meaningful trends that provide nuance and color to the phenomenon and the ramifications on enterprise IT infrastructure, operations and application development catalyzed by the rapid development and evolution of cloud infrastructure and services.

The RightScale survey has provided one of the better looks at the evolution of cloud usage over the years, but it comes with an important caveat – it’s not from a statistically random sample of enterprise IT, but only those in RightScale’s database, meaning there’s significant selection bias since only those already using the cloud, even if just dabbling, would know or care about the product. Indeed, 92% of its respondents currently use public cloud services in some form. Nevertheless, such sample skew has been true throughout the many years of this survey and doesn’t negate the trends one can spot in data drawn from a thousand respondents.

It’s not surprising that RightScale highlights the rate of cloud spending increases since it builds software for cloud cost management, and these are genuinely astounding with cloud costs spiking more than 50% annually for 35% of the respondents. Indeed, among large enterprises, 20% are doubling, their cloud spend. Of course, waste continues to be a problem with zombie compute instances and orphaned storage volumes adding 35% to the bill by RightScale’s estimate. As I pointed out last fall, the problem of cloud cost analysis and multi-cloud comparison shopping is overly complex, which, coupled with inertia and inattention leads to much wasted spending.

Private cloud a non-starter

I am skeptical of any claims about private cloud usage since as I detailed last year, the term conflates two very different environments under the term ‘cloud.’ Few organizations operate anything that remotely delivers the array of abstract services provided by an AWS or Azure. Nevertheless, it appears what little momentum the idea had is waning as the RightScale survey finds building a private cloud is a top priority for only 8% of respondents, down 15 points in two years. There was also a 7-point drop, to 51%, in the number of those making hybrid cloud an enterprise strategy, paired with a 4-point increase in the number with an exclusively public-cloud strategy. Indeed, 41% of the respondents report no change or an outright decrease in private cloud usage.

Again, given the ambiguity in how the term is used, this number is either too low or too high. In the purest form of hybrid, namely a comparable portfolio of application services which allow workloads to seamlessly move between private and public cloud execution environments, the number is far too high. However, in the looser way most now use the term, namely using public cloud compute instances and storage services as a deployment target for previously on-premise applications, 51% is too low. Indeed, with the growing use of containers, with their inherent portability between like cluster environments, represents the one bright spot in the hybrid story, although it’s again a mistake to conflate private container clusters with a ‘cloud’ since they too don’t provide the same breadth of application services.

The survey confirms trends in container usage that I first detailed last year, namely that industry and IT organizations have converged on a standard environment consisting of Docker images and runtime environment with Kubernetes cluster management and workload orchestration. RightScale’s data shows a 14-point increase (to 49%) in the number using Docker (which I assume means the image and runtime format, not the commercial product portfolio) and a 13-point bump (to 27%) running Kubernetes. Amazon ECS is the most popular cloud service, used by 44%, however given the rapidly changing market for container services, with products like Azure Container Instances, AWS Fargate and EKS (managed Kubernetes) being announced in the past 9 months, such numbers are guaranteed to bounce around before settling into any semblance of stable market positioning.

AWS still leads, but Azure closing fast

That AWS, which recently reported a $20 billion annual run rate, leads in any survey of cloud usage isn’t surprising. However, as the RightScale survey shows, Amazon has no room for complacency as its competitors across Lake Washington are closing fast. While 64% of all respondents use AWS, among large enterprises, Azure has narrowed the gap to within 10 points, at 58% to AWS’s 68% in this segment. More importantly, Azure narrowed the gap by 6 points in the last year, increasing usage 15 points versus 9 for AWS. Google Cloud and IBM Cloud are in the distance with 19% and 15% penetration respectively, along with Oracle, which remains mostly a niche cloud platform for its eponymous database. That leaves the public cloud market a five-horse race with two thoroughbreds leading the pack.

The survey provides insight into the usage of various higher-level cloud services (that is, things more complex than raw IaaS compute instances and storage), where relational, caching and NoSQL databases hold three of the top five positions, ranging from 28% to 44% penetration. Other services used by at least 20% of respondents include push notifications, message queues, mobile services, search, data warehouses and serverless functions. Indeed, serverless was the fastest growing category, up 75% from 12% to 21% usage. Expect this to continue, if not accelerate as both developers and DevOps teams discover the benefits of ephemeral, event-driven modules that are can be instantly deployed, easily scale, automatically decommissioned and come with a granular, usage-based pricing model.

Cloud challenges diminishing

Once again, the RightScale data shows security to be an issue, with 29% citing it as a significant challenge, however that continues an improving trend: in 2015 the number was 41%, dropping to 37% and 35% the following two years. Lack of cloud expertise and resources rounded out the top challenges, just as they have previously, although only 27% considered the expertise deficit a significant cloud barrier. Indeed, a skills gap isn’t keeping organizations from growing their spending nor planning to move new workloads to the cloud, with 51% citing the latter as a top initiative for 2018. Indeed, IDC expects enterprise spending on cloud services and related infrastructure to double by 2021 when more than 90% of enterprises will use multiple cloud services and platforms.

My take

One can’t read too much into survey results from a skewed sample of cloud enthusiasts, however the RightScale survey has credibility since it confirms trends and estimates derived from many other sources to go with a multi-year history of similar results. Although the survey illustrates how cloud services have become a viable and increasingly popular platform for enterprise applications, they are competing with decades of enterprise inertia and sunk costs in facilities, equipment and software. Indeed, one estimate pegs the market for enterprise software at almost $400 billion this year, an order of magnitude higher than the expected revenues of AWS and Azure combined. This leaves plenty of upside for cloud vendors, but it also means that we are many years away – if ever – from public clouds completely displacing a majority of private IT infrastructure and services.

The state of the cloud in 2018 is healthy and robust. While some argue that cloud centralization is a temporary fad only to be undone as the architectural pendulum swings back to favor distributed systems and edge computing, I’m unconvinced. There’s no reason that cloud services, which after all are built upon inherently distributed software with a centralized control plane and open APIs, can’t incorporate edge installations like mobile base stations, local offices and remote warehouses or manufacturing sites, under a cloud-managed umbrella.

Instead of a swing back to local fiefdoms of infrastructure, I expect to see a greater variety of cloud-based services optimized for different industries, tasks and usage scenarios. Indeed, according to a report by Bessemer Ventures, innovation and dynamism around the cloud are accelerating, with cloud funding exploding by a factor of four over the past six years, now accounting for half of its VC Investments. Far from being a lowest-common-denominator straightjacket, cloud services are evolving into a vibrant marketplace of information utilities that decouple service consumption from infrastructure and implementation. In 2018, the cloud remains the most exciting realm of IT innovation.

Image credit – Chart from RightScale with annotation by the author