The future of cloud computing relative to becoming a monopoly

In early days of Cloud computing, media frequently probed and disputed the viability of cloud computing. And not so long ago, in 2009, even the most famous futurists were skeptical. Jamais Cascio, who listed as one of the 2009 Top 100 Global Thinkers said, “I have to admit it: I’m not a huge fan of the cloud computing concept.”(Fast Company, 2009). However, not even a decade later, the positive impact of cloud computing can no longer be disputed. With that, a new concern comes to view, the likelihood of Cloud computing becoming a monopolized technology. This article is a brief look at the current landscape of cloud computing relative to becoming a monopoly.

 

The current value of cloud computing to consumer

According to Research & Innovation Estimates, the cloud computing will “replace 14.5% of global on-premise spending in 2020“(Columbus, 2017). Forbes magazine on the other hand estimates (Figure 1) that Cloud computing will grow from $67B to $162B between 2015 and 2020 “attaining a compound annual growth rate (CAGR) of 19%” (Forbes.com, 2017).

 

Figure 1 – Columbus, L. (2017).

 

 

The current value of cloud computing to provider

Amazon Web Services stats show, that as of 2017 Amazon has a 40 percent worldwide market share and the second quarter of 2017 operating income (earnings before interest and taxes) rose to “$916 million, compared to $718 million in the second quarter last year. Revenue for the second quarter was $4.1 billion, up from $2.9 billion in the year-ago” (Krazit, 2017).

https://cdn.geekwire.com/wp-content/uploads/2017/07/Screen-Shot-2017-07-27-at-1.13.38-PM-630x382.png

Figure 2 – Krazit, T. (2017)

 

The future of cloud computing relative to becoming a monopoly

In my opinion, the following three signals indicate that the cloud computing is becoming a technology monopoly.

Growing Usage and Growing Profits

The last decade’s cloud adoption stats demonstrate the linear growth in usage of cloud-computing services among customers, as well as the exponential growth of revenue shared by the largest cloud service providers. Even though the 2017 operating revenue of AWS may have slightly increased comparing to the overall revenue (Figure 2), the cloud computing is still an incredibly profitable business.

 

Large providers monopolize the Cloud business

According to Bishop (2017) and the research by Synergy Research Group (Figure 4), there is an enormous imbalance in the cloud computing market share. In 2016, the three giants of IT (Amazon, Microsoft, and Google) took combined 64% of the entire world cloud market. The unfortunate reality for the rest of the world’s cloud providers is that they are quickly losing the race to these top three leaders (actual decrease of 5% market share between 2015 and 2016). This signals that large providers are monopolizing the cloud business already.

Figure 4 – Bishop (2017)

 

The Issue of Targeting

Looking at the client portfolios of Amazon, Microsoft, and Google, it is noticeable that the main goal is to switch as many large corporations to cloud as quickly as possible, which further speaks to point #2 on my list. This trend is worrisome, because same as with people “once we are grown, we cannot become a child again,” I fear that once those big corporations switch to cloud, they will never go back to days of building their private datacenters and infrastructure.

 

Risks and Concerns

According to Virtualization Review, more than “90 Percent of businesses were using Cloud back in 2014 already”. (CompTIA,  (2014)

The cloud dominance stats are even scarier because we’re already living in a world where over 60% of entire public cloud market is owned by four large IT companies: Amazon, Microsoft, Google and IBM (Figure 1).

Figure 1 – Garcia, T. (2017).

Amazon AWS alone, in just 11 years (since they launched in 2006), signed to their cloud solution well over 1 million enterprise customers in 190 countrieswhich equals to over 40% of the entire public cloud market share (as of 2017). Companies such as NASDAQ OMX (the largest exchange company in the world), NetflixReddit, and Expedia;) as well as over 600 government agencies such as NASA or US GovCloud, they are all using AWS.

So should we worry? Well, looking at the approach Amazon is taking to dominating the retail market in the USA (Figure 2), perhaps we should. They are completely taking over the brick-and-mortar stores in America.

What are the risks of living in a world where four IT companies are the infrastructure backbone of rest of the businesses?

Earlier in 2017, so not so long ago, Amazon servers went down. The impact was tremendous. The Nest was down, and their app was unable to connect and control home thermostats. Impacted were also Instagram, Vine, IMDb, Trello, Quora, IFTTT, Splitwise and many others. According to Recode (2017), this “Amazon’s massive AWS outage was caused by human error.”

Well, and this is just a single issue. There are many other possible scenarios. Security of the vendor is one of the most crucial. Let’s say that Amazon AWS has an undiscovered security hole that is currently used by hackers, or foreign governments to spy on American businesses. The possibility of such risk is perhaps low, but it’s not impossible to imagine similar security scenario.

In a world in which the cloud is dominated by Amazon, the compliance risks can quickly become an immense safety issue for every of their clients, and it can certainly become an enormous legal problem for Amazon itself.

This topic could go on and on, but let’s imagine one more scenario that speaks against monopolizing cloud computing. How about availability risks? In case of unforeseen disruptions, what’s, are the risks of 1 million Amazon customers, including NASA, NASDAQ and US Government services going offline? What human crises and loses to the economy would it present? I will leave this question open.

 

Conclusion

So, I am asking myself, are we already on the trajectory where Cloud computing is a dominant technology?

It sure seems that way. Observing the above stats, it is somewhat apparent that cloud computing is becoming the industry dominating technology.

I’ll leave the conclusion wide open,… but perhaps it’s good to end with a quote by Henry Demarest Lloyd who once said, that the “Monopoly is business at the end of its journey.”

References

Fast Company. (2009). Head in the Clouds. [online] Available at: https://www.fastcompany.com/1313880/head-clouds [Accessed 29 Sep. 2017].

Columbus, L. (2017). Roundup of Cloud Forecasts and Market Estimates, 2012. [online] Cloud Tech News. Available at: https://www.cloudcomputing-news.net/news/2012/jan/18/roundup-of-cloud-computing-forecasts-and-market-estimates-2012/ [Accessed 29 Sep. 2017].

Forbes.com. (2017). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/louiscolumbus/2017/04/29/roundup-of-cloud-computing-forecasts-2017/#4c50a9ca31e8 [Accessed 29 Sep. 2017].

Krazit, T. (2017). Another strong quarter for AWS: 42 percent jump in revenue to $4.1B. [online] GeekWire. Available at: https://www.geekwire.com/2017/another-strong-quarter-aws-42-percent-jump-revenue-4-1b/ [Accessed 30 Sep. 2017].

Bishop, T. (2017). Cloud Report Card: Amazon Web Services is a $12B juggernaut, but Microsoft and Google are gaining. [online] GeekWire. Available at: https://www.geekwire.com/2017/cloud-report-card-amazon-web-services-12b-juggernaut-microsoft-google-gaining/ [Accessed 30 Sep. 2017].

Garcia, T. (2017). 20 years after IPO: How Amazon came to dominate books, electronics and the cloud. [onlineMarketWatch. Available at: http://www.marketwatch.com/story/how-amazon-came-to-dominate-books-electronics-and-the-cloud-2017-05-12 [Accessed 30 Sep. 2017].

Thomas, L. (2017). This chart shows how quickly Amazon is ‘eating the retail world’. [online] CNBC. Available at: https://www.cnbc.com/2017/07/07/amazon-is-eating-the-retail-world.html [Accessed 30 Sep. 2017].

CompTIA  Review. (2014). CompTIA: More than 90 Percent of Businesses Using Cloud — Virtualization Review. [online] Available at: https://virtualizationreview.com/articles/2014/11/10/90-percent-of-companies-using-cloud.aspx [Accessed 30 Sep. 2017].

Recode. (2017). Amazon’s massive AWS outage was caused by human error. [online] Available at: https://www.recode.net/2017/3/2/14792636/amazon-aws-internet-outage-cause-human-error-incorrect-command [Accessed 30 Sep. 2017].

Comments

comments