Roadblocks & Opportunities in Enterprise Cloud Transformation
Cloud transformation has been a buzzword long enough that it can seem like an afterthought. But for large enterprises, the process of moving to the cloud is still ridden with potholes, and the result is a ballooning bill for cloud storage, cloud managed services, and cloud migration solutions from both a technology and professional services standpoint. 82% of companies report that they struggle to manage cloud spend. We believe this crisis will only be exacerbated by the accelerating growth in cloud over the next 10 years.
While attention is often focused on the SaaS layer, projected to hit $105B in revenue in 2020, the IaaS and PaaS layers are actually growing more rapidly at 20.2% and 15.5% CAGRs respectively. Enterprise infrastructure needs will fuel continued innovation as this shift takes place, with particular focus on cost, flexibility and portability of the application layer, and security and data ownership.
The premise of the cloud migration being a cost-saving exercise for companies to replace their expensive, inflexible data centers has not been borne out. 69% of companies report that their public cloud costs were higher than expected — at an average of 62% higher than they had budgeted for. As their data volumes dramatically increase with exponential growth in human, business and machine data, they will demand cost savings and require enhanced transparency into their cloud spend. Infrastructure solutions that promote visibility into cost centers, management solutions around monitoring and alerts, and permissions frameworks for developers will help companies manage resources and optimize spend.
Companies are adopting multi-cloud approaches to push back against vendor lock-in and latency risks, but this will require new solutions to deploy containers across public and private clouds and mix and match their managed services and applications. Kubernetes adoption is increasing, but it remains somewhat challenging for developers to run larger volumes of clusters and containerized workloads. Technologies that support this pivot towards a multi-cloud-native and containerized world, without overcharging for managed services or locking enterprises into a specific cloud provider, will be hugely valuable.
Data ownership and control will also drive enterprise IT decision-making. As all companies increasingly become technology companies, with significant resources dedicated to developing, maintaining and analyzing data assets, security and control over that data become increasingly critical. While SaaS has become synonymous with flexibility and freedom, the use of SaaS also means ceding control over data resources to an external vendor. For some companies, this is an advantageous trade-off, but many large enterprises, especially those in regulated industries like healthcare and financial services, will reject this approach. Bringing the benefits of VPCs — namely around data security — to a service offering by allowing scalability and performance that match public cloud solutions will be a dominant approach for the enterprise.
We’ve mapped some of the DevOps application landscape below but have confidence that there is much more to come in this sector.
If you’re working on solutions that help mitigate cloud costs, promote app portability and infrastructure flexibility, or support data control and security, we’d love to hear from you!
Sources:
This article is part of Primary Venture Partners’ market teardown series by their MBA associate cohort. See here for the full series.
