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BlogCloud OverviewsWhat Astronomical Cloud Growth Really Means For Your Business in 2022

What Astronomical Cloud Growth Really Means For Your Business in 2022

Unclouded Blog | Linode

As the year comes to a close, experts across the industry are sharing their predictions for the cloud’s future; from soaring adoption rates to increased spending to sheer market size

Over the past two years, a pandemic-induced hunger for cloud has fueled many trends, including the rise of multicloud, an uptick in alternative provider usage, and a greater emphasis on security. In 2022, users can expect to see these trends accelerate. 

But, there’s much more to come, too.

With most companies now embracing the cloud, expectations for true ROI are rising. Already, businesses that have made the cloud leap since 2020 are seeing increased sales, higher web traffic, and greater operational efficiency, Structure Research analyst Phil Shih says. So what’s next? How much bigger—and better—will the cloud get as optimization improves and companies get savvier about maximizing its potential?

We sat down with Phil to discuss what users can expect as we head into 2022.

The following transcript has been slightly edited.

Mike Maney: It’s that time of year. Massive predictions are swirling around in the cloud industry. Gartner estimates cloud spending can reach $1 trillion as early as next year. And the market as a whole could surpass 10 trillion this decade. But what do these bold estimates mean for users that rely on the cloud to power their businesses every day? As users spend more and providers’ revenue grows, how is the market changing? Are providers evolving to meet companies’ needs? I’m sitting down today with Structure Research’s Phil Shih to look ahead to next year, and discuss how the cloud is not only getting bigger, but also better, especially for small business users. Welcome, Phil.

Phil Shih: Hey, thanks for having me again.

Mike Maney: So this will be a fun one to close out the year on. Gartner’s out there estimating cloud revenue’s going to surge by something like $66 billion next year, on top of—what it was—$408 billion that was spent this year. 98%, people are saying something, upwards of 95% of businesses are making cloud a strategic priority in 2022. So the question that I have is: the last two years have been huge for cloud investment. Are companies starting to see some ROI in this?

Phil Shih: You know, some great numbers. I’m starting to lose track, because I can’t really count that high. But I would say, organizations, both those that have been on the cloud for some time, or more recent, or even late adopters of cloud, got to see ROI. For the purpose of this conversation, let’s frame that in terms of positive impact on business operations, and IT operations. 

And we’re just seeing from the analyst side, different types of impact and turns on return on investment, whether that’s increased sales, increased website traffic, whether that’s, harder to measure, but not insignificant, increase levels of engagement. Obviously, the underlying positive impact when it comes to operating efficiency, and total it costs freeing up resources for internal IT. So those are just some quick snapshots of where we’re seeing positive impact. 

But I think the main point I would make is that you’re seeing it, at least for the end user of cloud, you’re seeing the investment, both from a business perspective, sales, engagement, marketing, as well as an operations, their internal IT infrastructure operations, you’re seeing efficiency and just expanded capabilities, given all the tools that are now available to them through cloud.

Mike Maney: It’s incredible how wide the swath is of criteria for ROI and cloud, how much how much it impacts inside of a business?

Phil Shih: Absolutely, it spans the business itself, IT operations. It really is all encompassing. I probably just highlighted a few, but there are others.

Mike Maney: Are our expectations shifting, starting to look into this new year, knowing how cloud took off this year? What are users expecting from their cloud and deployments as investments grow?

Phil Shih: Yeah, expectations are always on the rise. And in this kind of unique environment over the last close to two years, I think that’s picking up the pace. A large part of that is because of what’s just the increased reliance on cloud infrastructure. The increase criticality. So absolutely users’ expectations are up. They’re expecting things to be easy to use, they’re expecting more tools, they’re expecting to be able to impact their business in more ways. 

They’re thinking about how they can take certain things that they do as a business and translate into an online medium. I think that’s a big one, in terms of expectations, a lot of these new or recent users, especially those that have kind of doubled down or jumped on during the pandemic are thinking, ‘hey, this is great for this part of my business, or this application, or this website, but what about my back end? What about the other parts of my business? Are there ways to use cloud to make them more efficient and of course to drive that business impact?’ 

As an industry, that’s been a pretty consistent trend over the last 15-20 years, which is that every year, users that adopt are asking how to get more efficient, asking how can I save more money? Asking how can I enhance or propel my business further. And that eventually just comes back to interacting with your cloud infrastructure provider, and your partners for when it comes to digital. And that, in turn, I think just raises the bar. Don’t expect expectations to dim or to decline anytime soon. This is a tectonic shift. And you should expect that there’s going to be more of everything happening in 2022.

Mike Maney:  One of the trends that we see is around the topic of multicloud. And today, only 3% of companies rely on a single provider is what some of the stats are showing. That’s a dramatic swing from 2019, when 1/3 of enterprises used one cloud service. 

And multicloud growth is also fueling alternative cloud adoption. So alternative providers, people like us, like Linode, like DigitalOcean, like OVH, are now part of the mix for 1/3 of cloud users. A third of all cloud spending is being done at this alternative category level. /data actually ran a survey and found that 6% of companies rely primarily on alternative providers, which is interesting. So we know enterprises are adopting multicloud. Are small businesses jumping in as well, and how are they leveraging multicloud?

Phil Shih:  It’s a great question. I think that the adoption at the small business levels may perhaps be a bit slower, perhaps a bit less process driven, a little more ad hoc, if that’s how you would describe it. I think just because in the small business segment, companies are still more at the early stage of getting familiar. They don’t necessarily have all the resources, they can’t hire an MSP or consultant to map out a path and make recommendations. So there is that certain element of it being a little bit just like how they got to cloud in the first place, a little bit of the wild, wild west of experimentation. 

That’s how I would describe the current situation. That’s not to say people aren’t making use of the flexibility to be able to use other other services, perhaps dabbling a bit in the public cloud while still using alternative cloud or maybe using two different types of alternative clouds, or a traditional hosting type of service. But absolutely, in general, it’s a natural byproduct of where this is all going. 

As small businesses ask the question, what else can I do with cloud? What other things or other workloads applications? Can I move to the cloud? They’ll find—and I think we’ve had this conversation in the past that—they find quite quickly that there’s no such thing out there as a one size fits all platform. And it’s that realization, once they get there that this has may not be the right fit. But where is the solution that is the right fit? And that’s kind of what opens the door to them considering the alternatives. 

And that’s what I think just makes this industry just so fascinating. You have these huge public clouds, you have these more traditional hosting services. And you have this alternative cloud category that is emerged very prominently in the last couple years especially. And so that gives organizations when they’re thinking about cloud, they’re realizing quite quickly, ‘hey, there’s a lot of options out there. And what I should be doing is making sure I’ve assessed my organization, assessed my needs, assessed my requirements, and then picked the cloud infrastructure platform for us. To make the right fit.’ 

That’s where we are right now. I guess my last comment would be, it certainly isn’t an easy and seamless process. It can be pretty messy. But people find their way through. And good service providers are good at handling and managing and accommodating those types of customers. And that’s why they grow. Those businesses grow. Don’t expect that to slow down anytime soon as well.

Mike Maney: I know there isn’t a one size fits all service provider. But with the holidays coming up, and all the cookies, I will be wearing my one size fits all holiday pants, that’s for sure.

Phil Shih: Good, good plan. Good idea.

Mike Maney: Yep. My alternative pants. So how do alternative providers enable smaller companies to get the most out of these sort of multicloud setups? Is there anything special that they can do?

Phil Shih:  Well at a very basic level, I think they’re just more interactive with their customers. That’s a huge part of it. It’s about simplicity. They provide a service that’s more user friendly, and more simplistic. They’re not as keen on locking people down, as some of these bigger platforms are, that are harder to use. And then for you to create an environment that incentivizes you to lock into their platform and make it difficult, or not cost effective. That’s the backdrop, the framework of what end users are looking at. 

They want to have their questions as they want to, they want something that’s simple to move in and out of, they want to have that flexibility in those options. And alternative cloud services have always been frankly good at that. They’ve never created a moat around their service. They’ve always talked to their customers and tried to do right by them. Sometimes, that doesn’t necessarily help them. But this part of the market has always been great about, ‘hey, we want to do right by the customer, we feel that they’re going to stay with us long term, or refer us or come back to us or stay with us for a certain workload, but have that option with another platform.’ 

And that’s just the kind of neutrality of alternative cloud providers that has been really well received by the end user community. And that’s how they’re enabling, back to the original question, how they’re enabling multicloud. Just their ethos, and just the way they approach the business is a really good fit. And that’s, that’s why you’re continuing to see this category grow and gain prominence.

Mike Maney: Staying on that multicloud theme, the growth in multicloud means cloud data is more widely spread than ever. Despite increasing cyber threats targeting cloud data, 83% of US organizations still leave most of their sensitive data  unencrypted in the cloud. Security is a hot topic for 2022. Are our threats truly increasing? Or is awareness just growing? 

Phil Shih: It’s a bit of both really. These kinds of things happen in tandem. As more stuff moves online, there’s just more to attack. As more businesses get more reliant and dependent on the cloud, as everything becomes more mission critical. Yeah, that raises the awareness, and so they get better at what they do. And the bad guys get better too. And then the good guy is trying to respond again. It escalates and escalates. So, it’s happening a bit on both sides.

Mike Maney: If you take it from both sides, that leads into my next question on this. Are providers doing enough to protect businesses? And then the flip side, are companies doing enough to protect themselves?

Phil Shih: It’s a great question. I think everybody can do better. I think providers, some of them can be faulted for not necessarily being as proactive as they could be. Sometimes, they’re a bit passive and a little bit more reactive. That’s the original DNA of the cloud and hosting sector, which has been it’s very reactive kind of service and support framework that’s shifted, like everything in the sector is shifting very quickly, to be more proactive, to be more predictive. Creating the tool, having the tools and then producing data in insights that you can deliver directly to customers to help them plan ahead, not just to plug a leak or react to a problem that has already happened. 

The next level is mitigating that from happening all together or planning ahead. The sector, is just making those first steps to getting to that level. Tt’s certainly not going to happen overnight. And I know we’re talking a lot about next year, it’s certainly not going to happen. That process won’t be complete next year. But it is an evolution of the sector. It’s one that is really exciting, because it’s going to just make these kinds of third party infrastructure, independent services, so much stronger, so much more valuable. 

Have you heard the phrase, ‘a rising tide lifts all boats’? You’ll find that the end users learn and become smarter as well, once they get access to these tools, once they know how to use them, once they implement them. And drive business value drive IT infrastructure operations value. You’ll see them catch up too. Long way to go is the bottom line. But there’s also an evolution that’s already well in motion.

Mike Maney:  You mentioned earlier the challenge of lock in, just by design, from some of the larger players. We’ve seen reports on some of these big providers, breaking down their walls and starting to give customers more free rein and even building bridges to connect to two rival rival clouds. 

There’s a great line from Tom Krazit, in Protocol, reliable options for smaller companies, which don’t want to get lost alongside mega corporations at the big providers are starting to get serious traction. So we know cloud is getting bigger. We’ve said that at the start, and the numbers just keep just keep going astronomical. But is it also getting better? And if so, in what ways?

Phil Shih: Absolutely. This is a young industry. The thing to keep in mind is that there’s a long road ahead. And there’s plenty of upside, plenty of room for improvement. I do absolutely think that year by year, you see incremental progress. Sometimes it doesn’t slap you right in the face. But when you look back, you pause, and you’re like, ‘wow, you know, these are big steps that have been taken over the last, say, three to five years.’ 

And if you look back further and compare what you’ve done, what these services were doing 5-10 years ago, then it becomes even more clear and more apparent. But absolutely, if you just look at the capabilities that these cloud services are able to deliver, if you look at how the user experience, some early stage portals were just pages of links. 

It wasn’t that long ago where you log in, you get a whole bunch of links, and then you had to read some user guides. It was just so unappealing. Now you log in, and it’s like, wow, you know, you got a beautiful user experience, you got charts, you got beautiful UI. It’s easy to interact with, easy to understand. That’s just an evolution of the user experience. Obviously, the infrastructure itself is performing. It’s much more performant than it was,  speed is unbelievable, infrastructure is more, it’s less centralized than it was even a few years ago. 

You’ve got infrastructure, this movement around edge, which is probably a topic, we’ll have another day, maybe, hopefully, in 2022. But that’s already underway. The global footprints right in your company Linode, was not always global in terms of its coverage, but it now is, and so it can serve so many more end users around the world. It can also extend your existing users, say in the United States, to reach audiences around the world. 

So you just put all that together, the user experience, the technology and the capabilities, things like Kubernetes, the footprint, the levels of performance, the network capacity. It’s hard to think that things have not improved and gotten better. It’s very apparent and you throw in the mix everything that’s going on with people becoming more reliant. That exerts a certain pressure on providers to keep delivering, to keep improving their service, keep improving capacity. Innovative creating new tools. 

And of course, at the end of the day, what’s so critical for especially this category, the alternative category, is how you deal with customers, right? That’s evolving, as I mentioned, from reactive to being proactive to being a break fix model to a more kind of DevOps, see consultative slash, throw a bunch of buzzwords in there, but you see where I’m going with this? 

Mike Maney: Oh yea. We take a lot of this for granted. It’s the equivalent of I can get in my car, go to the airport, jump in a metal tube, and in a couple of hours be someplace else. And we forget how infrastructure is often seen as unsexy. But it is the unsexy that makes all of the sexy work that everybody sees. We take that for granted a lot of what makes that possible are standards and interoperability. We’re starting to see a little bit more of that. I’ve been around long enough to know how valuable that is. 

Is 2022 going to be the year of a more open cloud. And, is an open cloud a better cloud?

Phil Shih: It’s a great point. I think you’ve given me a lot of room here with the way you’ve phrased it. I really do think that this isn’t just the nature of outsourced IT infrastructure, cloud data centers, hosting, has always been incremental, and evolutionary. The way it evolves and grows, there are certain starts and stops. There are certain times, like in the 08-09 financial crisis, and now with the global pandemic, where things do accelerate. 

And so do I think things will be more open? I think you’ll see that movement in 22, that will carry on for many years, and that already is in motion. If you point to this year, what were some developments I saw that gave me hints of that. Some of the disruption that you’ve seen from the likes of CloudFlare, trying to disrupt the whole egress free pain point with AWS. And then you saw just before their event made a not insignificant announcement that they would make a significant drop in some of their, the way they charge egress fees, which I think kind of flew under the radar, but is a huge kind of hint that things can happen. 

Things aren’t gonna stay the same. And these large platforms have weak points and places where they are vulnerable to disruption. The smart companies will go after it. Just seems like it would be ripe for disruption, and something that would eventually be a wall that will come down. So I think that’s a great hint as to what you might see. On that front, I think you’ll see more of that might be a little more subtle. This one was a big one probably been a long time coming and a big pain for a lot of people. So expect to see some smaller, more subtle shifts. But yeah, it’s in motion, it’s going to continue to develop.

Mike Maney: What else is—you get to talk to a lot companies out there—what are they saying? What’s top of mind for you as we head into 2022?

Phil Shih: One of the things that I’ve come across, in speaking to both sides, the user side, the provider side, and being an industry watcher, I’m paying a lot of attention and hearing a lot of feedback on supply chain. That spans small business, midsize business, large business. Supply chain issues have really just caused so many different issues. The impact is so extensive and so far reaching. 

It’s hard to think that organizations won’t be impacted in some shape or another. And when you know, when you take that to the IT infrastructure world where we’re operating, you can just see the impact. What would an organization do that can’t get servers on time? Would you deal with that issue, maybe lease it from a cloud platform that already has them installed and ready in place? That would be one good way of doing it. 

So that opening created by these challenges, which are a product of this pandemic environment, are really interesting. Obviously, not to downplay the fact that providers also have to deal with the same issues. But providers operate at scale. Providers have a roadmap that plans much further ahead. It is their job to have inventory, and to do everything they can to have that available, and they just do it better and faster and at scale versus say, you know, individual organization. 

We saw that supply chain stuff play out. It’s got parallels to last week’s outages, or the most recent outage as well, right? Because people are starting to inconstant companies are starting to look at sourcing things closer to them. Looking at alternative sourcing for raw goods, for what they need, and then making plays into edge as well, I would imagine.

Sourcing closer and having options, not relying on one supply chain one source. That’s critical. People have probably, again, taken a lot of this for granted, but realize that planning is required with where the world is right now, and probably where it’s going. 

I guess maybe I’d leave with another just quick comment, which is that supply chain can also be impacted by what’s going on with the climate. I’ve seen certain parts of the markets we follow, like, I’ll raise one example Western Canada, where I was recently where there were these extreme weather events that basically destroyed highway routes where a lot of the supply from eastern Canada moves, travels by truck, West. And, with the pandemic, the southern border is not easy to get through. 

All that put together, I definitely knew of organizations and providers that were expecting delays in terms of their equipment. So that would slow down their timeline for expanding capacity. So these are real. I think the pandemic is, neither you or I are scientists, but you know, is related to what’s going on with the climate. And when the pandemics over the climate issue and challenge will still be there. It’ll just manifest in different ways. Not necessarily, and hopefully not in the form of a virus. But the weather challenges, how they can disrupt supply chains, and it’s something that’s probably not going away at all. And it’s going to reorient people in terms of how they plan. Yeah, supply equipment, inventory, it’s pretty challenging,

Mike Maney: HugOps to all of the dispatchers that have to get all of these planes and trucks and trains to places with all the weather that’s been going on? That’s for sure. Yeah.

Phil Shih: So unbelievable.

Mike Maney: It’s been a great year talking to you on this series, and looking forward to continuing it next year, it’s gonna be a blast. But let’s leave on what’s got you most excited about next year?

Phil Shih: Hopefully a shift away into a more clear post pandemic environment. I gotta say it, we’d love to go back to quote, normal. But I’m really excited to see how, we’ve been talking a lot about the new normal, and how things that have changed will be changed. And I’d love to see what those are. How they play out. And if this theory of mine that I’ve been bending about, which is that I think things are going to accelerate, holds true. 

I’d love to see how permanent the changes are in terms of things like the way we work, the way we travel, and how people use infrastructure. How that drives new users, how that drives organizations to completely do away with legacy IT, which probably should have been sent away to the graveyard. How fast does that happen? 

As the move to a post pandemic environment drives that, I’mm fascinated because I want to test some of my theories. I want to see which ones are right and which ones are wrong. 

Mike Maney: Well, here’s to a fresh start with a running start as well, in 2022. So, Phil, thank you so much once again for taking the time and spending time with our listeners. And I’m looking forward to talking to you again in a hopefully much better 2022. 

Phil Shih: Me too. I’m looking forward to it as well and very optimistic moving into the new year.

Mike Maney: Thanks, Phil.


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