2013 Cloud Computing Predictions

Antonio Piraino

blog-201212-2013-cloud-predictionsAs a former analyst, I’m used to looking ahead and sharing my perspective on new innovations in the cloud computing industry.  As 2012 comes to an end, I put together my top 10 predictions for 2013.  I would love to hear your comments and thoughts on where you see the industry going next year.

1. Cloud wars are picking up speed. Last year, I predicted cloud computing would become more mature, and as a result, consumer cloud environments at Google, Facebook, Microsoft and Salesforce.com would begin cut-throat competition for consumer and business dollars.

This prediction will continue to play out in 2013 as the cloud wars really begin to pick up speed. Rich now, Microsoft, Amazon Web Services (AWS), and Red Hat have cloud Infrastructure as a Service (IaaS) models; Google and Facebook provide Platform as a Service (PaaS) options; and hosting providers basing themselves on greater and greater converged infrastructure like Cisco UCS and Microsoft 360, all hoping to be the future default cloud platform whether housed locally or externally. The head to head scrimmaging is just gathering steam and it will be interesting to watch further developments unfold next year.

2. More regulation to come? Just as the Patriot Act, HIPAA, and SOX have impacted datacenter and cloud operations globally, so too, will European Data Protection Supervisor, the OECD and APEC initiatives around privacy concerns, US data security concerns, and other large data sensitive bodies begin to impose their will on the global cloud market. To illustrate the complexity and era of ferment we’re in, even use of security and information event management (SIEM) monitoring of employee network usage is something that does not easily conform to European ideas of data privacy. 

And the interest in this new model of IT consumption is getting attention from a wide spectrum of regulators concerned with everything from energy availability and consumption, through to national commercial interest groups. AWS deployments in various countries, for example, have incited local IaaS providers to create fear for their users by illuminating the need for AWS to play within the confines of the Patriot act. The online-bookstore has countered that US regulations are still less invasive than many non-US regulations.

And where that is genuinely the case such as in Indonesia, regulation has provided an advantage for local tech and service providers, in the form of market protection.   So is it all doom and gloom for global cloud providers and industrious enterprise users looking to exploit the benefits of cloud?  Mitigating this fear, is the pending Senate bill, called the “Independent Agency Regulatory Analysis Act of 2012,” that would undermine the independence of the independent agencies, and with it, their ability to do their jobs in an efficient manner; ironically benefiting large banks and corporations. 

But it will be a mad race for the pen, as regulations such as those taking effect by the CFTC in January 2013, unintentionally impacting hundreds of datacenter operators who unintentionally will violate several provisions in the legislation if there is, for example, a hint of a trading transaction that goes unmonitored by the datacenter operator.  With it will come a new breed of digital watchdog for our benefit or hindrance – depending on your point of view.  

3. Another Y2K for financials and tax filings?  The ramifications of so much financial focus around the Fiscal Cliff, has energized M&A deals in the tech sector, as well as distributions, and questions around Cloud Computing taxes.  All of this is manifesting itself in interesting ways, including the now higher multiples amongst what would otherwise be smaller deals, taking place at a scramble prior to the end of the year. 

That bodes well for enterprise values (EV’s) for service providers and tech vendors in 2013, given the all-time highs they are reaching right now.  And that kind of convergence leads to opportunities and threats in itself.  With the unsure results of the sequestration and debt ceiling, the ability of the IRS to keep up with budgeting and appropriating taxes, as well as electronic filing and the XBRL mandate, becomes exceptionally challenging. 

Add to that the looming recommendations from a Special Sales and Use Tax committee, due to legislature in January around Cloud Computing Tax and filings and pro forma statements are unlikely to be submitted expeditiously.

4. The next presidential imperative – cybersecurity. There is no question that cybersecurity needs to be a priority in 2013. There is an increased awareness of the issue of cybersecurity and it is only set to rise further as more and more people transition information to the cloud. Beyond that, in 2013 I predict there will be a convergence around those who the government calls on for help in this matter.

Today it’s just the big names in the technology industry. Next year, the president might pull together equal representation from small and large technology vendors who can really exemplify the differences between security threats, network threats, IT threats, and more. 2013 will focus on cross functional interaction and collaboration by companies of all shapes and sizes to bridge the gap between network operations, security operations and IT operations. Up until now it has been siloed and it must connect over the next 12 months.

5. New ways to measure your enterprise value.  The New Year will see more investment not just in IT infrastructure but also in automation and management tools.  Manual workflows in all forms of the business place should be reduced in order to create the best operational leverage possible. Most critical to gaining operational leverage is in the IT management platform – a central axis around which work gets done, policies are governed, automation is controlled, and where cost efficiency can be maximized with respect to IT operations.  

That leverage is adjudicated by a number of factors, including: Infrastructure freshness and the affiliated modernization cost, how unified the IT management platform is, the predictability/proactive intelligence embedded in one’s IT operations, the incremental headcount attributable per new customer, and the cost of customer  acquisition/onboarding to name but a few.  Executives need to look internally to better understand how their day-to-day practices are influencing their true enterprise value. 

The true value of consolidating legacy tools, and offering modern tools to your operations teams becomes critical to creating greater efficiency – of both time and money.  And to leverage those tools to create new value added services that are monetizeable and supplemental in contributing to improving overall leverage are what make your daily grind most valuable.  

6. Digital decisions in the dark will have some falling off the cliff. Business intelligence and the analytics feeding the concept, will become the true differentiator of business operations: making smarter decisions around your capacity needs, human resource needs, future spending and ability to increase business productivity will be the separating point of winning and losing firms.  However, business analytics will no longer be purely focused on the correlation of customer experiences or their interactions with applications, but rather on the back end where the majority quarters of capital spend is going to come from within the average enterprise.

This practice will be a requirement of day-to-day operations for a CIO. That means not only having the correct data points, but having those data points correlated and presented in the right fashion to make intelligent decisions, especially around IT operations, as they become central to all business operations.  

7. Data center shrinkage and the rise of the public cloud. Data centers are consuming more power, more cooling and their density continues to rise, and are no longer cost or space effective. Data center shrinkage isn’t just impacting the enterprise; this is now an issue in the federal space. Nowhere is it more critical to search out cost-effective, secure technology solutions then within federal agencies. Private cloud computing offers them just that.

In 2013, we will see a shift in the direction of IT managers thinking more intelligently about data centers and power centers. Next year more pressure will be put on vendors to stop thinking of the impact of power and data centers on actual workloads. Instead, the focus will shift to merging the management of power and IT workloads – Data Center 3.0.

8. A large-scale cloud outage creates a ripple effect.  As enterprises shift resources to the cloud, there will be at least one major outage from a corporate enterprise, or possibly a major financial entity. Inadvertently, this will set off a chain reaction of penalties. The number of sources of this kind of outage is growing, and not unique to cloud computing per se. The scary part is, the outage itself need not be an elaborate one in order to yield server reaction.  A recent article from Data Center Knowledge lends proof to this prediction, with an article on the top 10 outages of 2012.

9. Crowdfunding becomes the norm for technology ventures. In the world of highly interactive Internet usage, and increasingly homogenous pockets of partakers within a common set of web content, means not only that individuals can be quickly organized, but now anyone can become involved in research, philanthropic movements or even Venture Capitalism (VC).

Part of the bipartisan supported (while simultaneously criticized for exposing investors to fraud) JOBS (Jumpstart our Business Startups) act signed into law in 2012, means that the US SEC will be setting up guidelines for less restrictive legislation allowing for a wider pool of small investors into US businesses with more shareholders, extended fundraising capabilities, and greater freedom on advertising of private placements of securities. 

That means more availability of capital for startups, most especially in the tech world, that is bursting at the seams with innovative technologies needing financial support.  Expect to see an eruption of Crowdfunding portals to be registered with the FEC in 2013.

10. Commoditization of video. Currently, users buy phones—e.g., smartphones, deskphones, VoIP phones—but very few people look at a phone’s ability to make voice calls as a differentiator. They look at its fancy features such as screen resolution, useful applications (like Siri), number of buttons, display size, video capabilities, etc.

Given the technological advances and the proliferation of smart phones, it’s only a matter of time until video capabilities themselves are such an inherent part of cell phones that they will no longer be a differentiator. This can also be seen in the desktop phones when looking at vendor product lines like the Cisco 8900 and 9900 series phones.

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