Cloud computing is deeply intertwined with today’s digital business models. While many enterprises originally began their cloud computing journey in a tactical way, such as through data center consolidation, organizations now view cloud as highly strategic.
Cloud is the core platform that underlies the shift to digital; drives new business applications; and supports environmental, social and governance (ESG) objectives. This in turn requires cloud providers to offer much more sophisticated capabilities.
Here are five key ways that cloud is driving the next era of digital business and how cloud providers are evolving in response:
Cloud enables digital transformation
The move to digital is highly predicated on cloud as the fundamental underlying platform. Digitalization requires organizations to break down barriers and data silos to enable new business models. Cloud computing provides a new digital model for organizations that formerly used on-premises and isolated computing technologies.
New capabilities began to emerge as companies migrate to cloud, such as artificial intelligence (AI) and machine learning, robotic process automation and DevOps. Cloud computing also supports scale for new business models that emerge through technology. For example, without cloud, digital cryptocurrencies would be difficult to scale, and edge digital scenarios that use independent physical pieces such as drones or self-driving vehicles would be more difficult to sustain.
Digital business models and cloud computing are evolving simultaneously as cloud and digital initiatives share common requirements for growth. Cloud’s true potential is realized when these digital outcomes are achieved.
Cloud supports environmental sustainability initiatives
Concerns about climate change and mounting pressure from customers, investors, regulators and employees are motivating organizations to pursue sustainability initiatives. Gartner’s latest CEO and Senior Business Executive Survey found that environmental sustainability is now a top CEO priority.
Implementing sustainability practices in a private data center can be complex and costly, and it may not produce the sustainability outcomes most organizations want. Public cloud services are typically much more capable of achieving sustainability outcomes. This is due to their efficient operations models, use of renewable energy at scale, use of innovative data center cooling technologies to reduce or eliminate water usage and circular economy principles that reduce or eliminate waste. Consequently, cloud computing has emerged as a key technology domain to drive sustainability improvement.
Cloud purchase decisions are likely to be increasingly influenced by the sustainability objectives of customers. Cloud providers are investing in sustainability as a core value proposition, but much progress remains for cloud providers to fully meet the sustainability needs of their customers. As leading cloud providers compete for positioning in the global cloud sustainability market, customers will have a strong voice in shaping the prioritization of cloud sustainability capabilities.
Cloud products evolve for business markets
The traditional relationship between technology providers and technology users has radically changed. Business units operating outside of the organizations’ central IT department are increasingly well-funded, well-skilled and motivated to take control of the outcomes of their digital investments. Instead of passively receiving solutions from technology providers, modern business leaders are engineering targeted solutions that reflect the current and changing needs of the business.
The traditional architecture of applications, designed by the providers and imposed on the business, has become a barrier for growth. It is being replaced with modular, composable architecture, empowering business technologists and fusion teams in to use the software as building blocks for differentiating and fast-paced digital business innovation.
These dynamics create a collision amongst the leading providers of cloud platforms, business and services, all vying for leadership in the highly lucrative cloud-native business platform market. Cloud hyperscalers are focusing their new product investments on the business layers of cloud application and platform services, igniting a wave of innovation. Gartner predicts that by 2026, more than 50% of new product announcements by hyperscale cloud vendors will target business application markets. This is where the industry will realize the full potential of the cloud model.
SaaS governance needs emerge
The software-as-a-service (SaaS) market has been growing at a double-digit rate for about a decade. Although the SaaS model has proven effective, its widespread use drawing enterprises to pay more attention to its shortcomings. These include a high rate of unused seats, difficulties validating security and regulatory compliance, challenges in integrating its islands of automation and the sheer confusion of having so many tools.
IT and business leaders are increasingly recognizing that widespread and ungoverned SaaS usage creates significant wasted spend. Organizations are beginning to impose higher levels of control over SaaS use, in some cases through SaaS management positions that are responsible for coordinating SaaS procurement, finance, security and applications across the enterprise. The market for SaaS management platforms capable of reliably tracking SaaS spend and centrally automating administration is also gaining momentum. Gartner anticipates that at least 50% of enterprises will begin forcing formal decisions before new SaaS services can be used, and by 2026, most requests will be turned down.
As SaaS customers methodically eliminate vendors and cut back on low-activity seats, vendors are responding by implementing extra cost functions to increase revenue from existing customers. As the SaaS market reaches saturation and as customers continue to refine their approach to renewal negotiation, providers will become increasingly flexible on consumption-based pricing.
Cloud-native accelerates digitalization
Cloud-native adoption will be essential for accelerating the execution of enterprises’ digitalization plans over the next two to three years. Hyperscale cloud service providers (CSPs) are providing a broad and deep set of cloud-native services intended to meet a wide range of enterprise requirements. These CSP-native services enable the use of modern technologies with less operational burden than utilizing third-party software offerings. This will expedite and enable innovative business solutions that improve customer engagement, agility, elasticity and resiliency.
Sid Nag is a Vice President Analyst at Gartner, Inc. covering cloud services and cloud technologies from the vendor, service provider and buyer perspective.