Finding the best cloud services provider can be a nerve-wracking business for a chief information officer. It means handing over a company’s most sensitive resource – its data – to an outside cloud computing company. So many things could go wrong, from a problem with migrating data to the cloud, a reputation-destroying security breachOpens a new window , or an outage by the cloud solution provider that takes down the back-end of a company’s operations for hours.
Some companies are happier to stick with their own data centers or to have these managed by a third party while still hanging on to control over the data.
But the emergence of public cloud providers over the past decade offers businesses the opportunity to take a weight off their shoulders and outsource their servers and cloud storage to a third party. This presents big advantagesOpens a new window . Businesses can dial up and down their server storage and bandwidth as they need, and monthly rental charges means there is no crippling one-off investment cost for cloud servers.
Cloud Computing Mega-Providers
On the other hand, many businesses are concerned about putting data security into the hands of a remote company. And there is the problem of vendor lock-in, where the cloud service provider becomes so enmeshed in a business that it becomes difficult to break away and switch to an alternative.
With so many cloud service providers offering variations on a cloud computing theme, how does a CIO select the one that is right for his business? The mega-providers – Amazon Web Services (AWS), Microsoft Azure, IBM and Google Cloud – dominate the market, and are often the first choice for CIOs as they are perceived to offer a safe pair of hands and are trusted to handle data migration to the cloud seamlessly.
AWS is the runaway market leader in providing public cloud services, allowing businesses to outsource their servers and storage and offering unrivaled coverage with data centers in the US, Brazil, Europe and Asia.
A key benefit of AWS is scalability so that services can be expanded easily through the Elastic Compute Cloud (EC2 for short) offering that allows users to rent virtual computers to run their applications. AWS offers, among other services, storage, databases, networking and configuration management – the science of making sure all servers work in the same way.
Pay-As-You-Go Convenience
AWS is reckoned to offer a total cost of operation that beats building one’s own service. The pay-as-you-go model means businesses can dial up their cloud services as they expand and increase or reduce them to cope with peaks in demand such as Black Friday or Christmas, as well as the ensuing troughs.
Amazon, which established its cloud service in 2006, was the first of the big public cloud infrastructure providers. It has used first-mover advantage over its rivals to grab a sizeable lead in market share, currently bigger than its three nearest rivals combined. In the fourth quarter of 2017, AWS had a 35% market share, according to Synergy Research Group, outstripping Microsoft Azure with about 12%, IBM at 8% and Google Cloud Platform with 6%.
The global public cloud market was forecast to reach $146bn in 2017, up from $87bn two years earlier, according to Forrester. The big story this year is that AWS is at last losing market share to Microsoft, which has leaped ahead over the past year, as well as to IBM and Google Cloud Platform. Why are businesses shunning the market leader in favor of its rivals?
Microsoft Azure has a similar offering to Amazon, although it may not be able match the range of services of its larger rival. But Azure leverages Microsoft’s existing enterprise customers and offers compatibility with a wide portfolio of software services ranging from Office to Microsoft Exchange servers.
Outage Risk
The mega-providers have built their market dominance partly through aggressive pricing, but their low prices can spiral. Some analysts caution that prices can rapidly become exorbitant when users start dialing up their cloud storage and data usage.
Another problem with any cloud service provider is the threat of outages that can take a company offline and disable websites, mobile apps and Internet of Things systems. Amazon has suffered three major outages since 2011, with a significant event in Virginia in 2017 when the service was down for five hours.
The mega-providers offer the infrastructure for companies to build their own cloud services, known as “infrastructure as a service.†This differs from accessing software in the cloud from companies such as Salesforce, which offers a suite of customer relationship management in the form of “software as a service.â€
IAAS assumes that customers have sophisticated in-house IT departments capable of building on the infrastructure and providing support if problems arise. Some complain that the biggest providers offer only rudimentary support – fine for large corporations or tech-savvy start-ups but scary for smaller companies without extensive in-house knowledge.
Open-Source Services
Some businesses are turning to smaller providers such as Rackspace, a managed cloud service that uses the open-source OpenStack system. The company says this removes the danger of vendor lock-in that can occur with the proprietary AWS technology stack.
Rackspace is reported by various studies to deliver much faster data connectivity than AWS, and the firm claims to offer a degree of customer service that outstrips the mega-providers, which makes it better suited for mid-sized organizations.
However, Rackspace is generally seen as less competitive on price than some of the bigger providers and has a less flexible pricing policy. It offers a smaller range of data centers and has access to fewer software developers to keep updating its systems.
Technology Alignment in the Cloud
Businesses need to ask numerous questions before signing up with a cloud service provider. An important consideration for CIOs and boards is technology alignment – how well do the cloud provider’s systems align with those of the business, and will it require a change in system architecture?
It is important to read the service level agreements carefully – they may be complex and jargon-filled, and incorporate important exclusions. Perhaps the biggest question for any business is how deciding on a cloud provider will change their operations.
Below the tier of mega-providers are a number of rapidly-growing cloud solution services. Salesforce is huge in SAAS and also provides infrastructure and platform cloud services. China’s Alibaba Cloud, an offshoot of the Alibaba e-commerce business and China’s equivalent to Amazon, is the sixth-largest provider worldwide; another significant player is database software provider Oracle. A host of smaller players specialize in different categories and types of business such as financial services or retail.
The alternative to hiring public cloud services is to build a private cloud, which may be more expensive but gives the business greater control over security and dataOpens a new window .
The Walmart Example
Over five years, US retail giant Walmart has built what is thought to be the biggest-ever private cloud project, creating its own in-house data centers with six, vast, cloud server farms. This allows Walmart to crunch its own customer data and is credited with enabling the retailer to boost its e-commerce operations to take on industry leader Amazon.
An emerging trend is for businesses to pursue a hybrid strategy by which they keep their most sensitive data in private clouds and divide other data among public cloud providers. Some businesses use up to eight public and private cloud solution providers as part of their hybrid strategies, which requires a high degree of expertise within the business.
The advance of the public cloud service providers is set to continue over the coming yearsOpens a new window , but businesses should recognize that one size does not fit all. They need to do their research and take into account all the relevant factors as they seek a cloud computing provider with a silver lining.