Fasten your seat belts: how the cloud industry will change
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Forecasts and Reality
Forecasts of economists for 2020 were rather restrained. Experts of the International Monetary Fund (IMF) notedthat global economic growth in 2020 will be 3.6%. This could be 0.3% higher than a year earlier. In the United States, where unemployment has reached its lowest level in 70 years, too did not see reasons for pessimism. In turn, in the Ministry of Finance spoke about accelerating GDP growth by 2%, and in the Ministry of Labor – about lowering unemployment rate.
Everything looked even better in the cloud industry. For 2017 only, global revenue for IaaS solution providers increased as much as 45%. A similar picture was observed in Russia as well – in 2018, the volume of the domestic cloud services market, including public and private clouds, exceeded $ 804 million (24% more than in 2017). The experts expectedthat growth will continue this year, but today you can only laugh at last year’s economic forecasts.
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The virus, which appeared on the news radar at the beginning of the year, quickly spread beyond Southeast Asia. The tourism industry took the first blow, followed by everything related to mass events, and then other areas.
Record high employment gave way to record high unemployment – in a few months they lost their jobs more 36 million Americans, 60% of UK businesses either forced to close, or reported a loss. In turn, for the first time in 40 years, the Chinese economy at risk go negative, and the Bank of Russia appreciated GDP decline in 2020 at 4-6%.
The future of many industries and industries is in limbo. But what about the cloud? Is it possible to say that in this area, despite the circumstances, steady growth continues? And are there any pitfalls?
Cloud vs. a crisis
One of the global crises that the cloud industry has found occurred in 2008. Providers at that time fast strengthened their position. IaaS-, PaaS- and SaaS-suppliers managed to attract customers by reducing the costs of companies, preferred pay only for used capacities (pay as you go model). And this story repeats itself.
IDC Analysts they saythat the global economic crisis triggered by an epidemiological catastrophe has accelerated the growth of the cloud. According to them, despite the overall reduction in business costs, budgets allocated to pay for SaaS solutions are only growing. According to MarketsandMarkets, similar a picture can be observed in the IaaS and PaaS sectors.
This is due to the fact that the virtual infrastructure is not tied to the fall of a particular industry – cloud computing is used by companies from various fields: from retailers and travel agencies to IT corporations and industrial enterprises. Even if the former fall under the most severe influence of the crisis, the latter more and more often pass into the cloud.
IaaS, PaaS, and SaaS Product Developers go towards customers and understand that they have difficulties now. They offer new functionality that simplifies distance work and study. So providers hope to attract a new audience – those who before the crisis doubted the expediency of migration. And they are trying to help customers transfer their activities to the online, plus – to adapt to the changing requirements of regulators.
[[The Aktion clients did not have any difficulties with information and legal support when switching to the self-isolation regime – our reference and educational system available from the cloud, and, unlike competitors’ products, there was no urgent need to install it on a home computer. This allowed managers, human resources personnel, entrepreneurs and lawyers to continue to work on the “remote” in the usual mode].
Finally, providers try to be at the forefront of the fight against epidemiological difficulties – their computing power helps analyze medical data – a number of Western IaaS providers collaborates with the World Health Organization and research centers. They also run funds for development tools that diagnose the disease.
Experts note that the crisis plays into the hands of the cloud industry, and providers come out winners out of this whole situation, and the difficulties they experience with increasing workloads will only help strengthen the Internet as such (improve the quality of the services provided, expand the network infrastructure). But we must not forget about the reverse side of the coin and possible risks.
While large players can adapt to the conditions of increased workloads, startups and small businesses lose their competitiveness. Large providers attract more customers, they have more powerful financial and infrastructure resources, but small businesses may not survive such turbulence. There is a chance that the viruswill clear»The playing field of the cloud industry will strengthen the position of large corporations and monopolists of this market.
But if the unstable situation in the global economy drags on and go bankrupt a critical percentage of companies from a wide variety of industries, the cloud IT giants will also fall under the distribution. Even if this scenario can be avoided, their customers can simply abandon IaaS and SaaS solutions when everything is back to square one. This is evidenced by more and more experts – they cast doubt on maintaining the demand for services for remote work after the crisis. Such systems are not suitable for everyone and can even cause emotional overload.
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How events will develop is difficult to say, but you can try to assess the resilience of the cloud market to the crisis by five criteriaoffered by Investopedia.
Experts say that it’s possible to survive the difficulties if:
- You sell essential goods or services;
- Work with companies that are not subject to economic downturn;
- Engage in the repair or maintenance of critical systems;
- Perform mandatory functions (ensure the safety of citizens);
- Provide any specialized services.
The second and fifth paragraph, the cloud easily closes due to its business model. Providers offer a service that helps reduce costs, which is very important in a crisis. Clients from IaaS, PaaS and SaaS suppliers are companies from a wide range of areas. Among them, with a high degree of probability are firms that the crisis has not affected or has affected to a lesser extent. But with the rest of the criteria, everything is not so clear.
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Kevin Xu, founder of Interconnected, drew attention to the fact that cloud providers are difficult to categorize as essential service providers (first point).
In addition, not all of them are engaged in the maintenance of critical systems (the third item from the list), although almost all offline infrastructure of large cities is tied to the cloud. Without such systems, it is difficult to imagine the work of transport, video surveillance and other government services. And, apparently, our state relies precisely on such a path of development of this sphere – literally last year, the Ministry of Communications approved a single cloud platform development project. To do this, it attracts providers who will receive large-scale state. tasks (paragraph 4).
It turns out that the cloud industry confidently passes only on three of the five criteria (and that, if you take not all cloud providers at all, but only the largest ones). Would that be enough?
The experts they saythat the planet’s economy will not return to its previous level for a long time, and many companies (mostly small businesses) will be forced to close. In Russia, the picture looks no less depressing – experts from the VEB.RF Research Institute note that the country’s economy in the second quarter of 2020 may fall by 18%. And they expect a reduction in GDP for the year.
The cloud services model itself is quite resistant to such phenomena – it proved this back in 2008. Then a number of western providers reportedthat their income grew by more than 40%, and after the crisis, the market kept upward trend. But as our analysis of the situation shows, this time everything may turn out differently if the industry is not flexible.
The speed of adaptation to today’s conditions is becoming a key aspect of the survival of any business. We at Aktion help managers and professionals from various fields learn how to do this in an effective way.[forexampleasubscriptionto”[напримерподпискана«Aktion 360“Provides an opportunity not only to gain access to specialized journals, judicial practice and help systems, but also to consult with experts on any issues related to doing business – taking into account all the latest legislative changes and new requirements].
P.S. How to establish work in ever-changing conditions: Aktion courses.