Learn about the driving forces behind the phenomenal growth in Cloud Computing
Cloud computing is a term used with increasing frequency in the past few years, as its popularity in business continues to grow. Essentially, it is technology that allows a business to store its servers and data off site in secure data centres which can then be accessed by users through the internet. This adaptation has spread across most industries and accountancy is no exception.
Industry analysts IDC stated that public IT cloud services revenue reached approximately $100 billion in 2016, with a prediction that the market will grow to over $200 billion in 2020 — almost seven times the rate of overall IT market growth[1]. Clearly, investment in cloud is displacing investment in on premise IT at an aggressive rate. In a follow-up survey[2] this trend was reconfirmed: 78% of companies were already using public or private cloud, and their usage is increasing; 62% expect that by 2019, more than half of their IT capabilities will be delivered through some form of cloud service. What are the driving forces behind the phenomenal growth? In general terms, the cloud is allowing companies to improve customer experience, increase productivity, lower cost, and aid in revenue generation by allowing a quicker time to market. Specifically, there are a number of key cross-industry global trends that are driving cloud adaptation.
Digitisation
Demand for anytime, anywhere access to information is disrupting all areas of business, including accountancy firms. Customers want, and have come to expect, a digital interface with enterprises, and disruption is taking place in all geographies. Significant opportunities exist for companies to take advantage of connected devices enabled by the ‘Internet of Things’ to capture vast amounts of information, enter new markets, transform existing products, and introduce new business and delivery models. However, the evolution of the digital enterprise also presents significant challenges for Enterprise IT to deliver solutions that can meet the timelines, capacity, and security requirements that comes with this demand.
Application Programming Interfaces (APIs)
APIs allow IT systems to be broken into discrete components/ domains to then connect to other IT systems. This provides the platform to create new digital offerings by composing solutions on top of one or many APIs. These solutions can be internal or external. Enterprises with well-thought-out digital strategies recognise the need to be part of the digital ecosystem, where they share capability with others, thereby allowing the ecosystem to deliver new customer offerings on their behalf. A good example of API adoption is the recent Payment Services Directive 2 (PSD2)3 which mandates banks to allow regulated third-party providers (TPP) to access to a customer’s bank accounts (with their digital consent). If you as a customer have multiple bank accounts, a TPP can provide a single digital dashboard across all banks by using each bank’s API on your behalf. As APIs are automatically sharing potentially huge amounts of information, the ability to handle unpredictable load is critical. Furthermore, this exposes a new cyber-attack target that must be protected. These are areas where cloud service providers differentiate through the confidence of their solution instils.
Data Growth
As we continue to digitise, the volume of data and interaction grows exponentially. A new generation of data producers is being born. More than 83 million babies are being born each year, and it is expected they will create on average 500MB of data every day of their lives. Furthermore, it is estimated that nearly 4 Exabytes[4] of new information were created last year (just 1 Exabyte is equivalent to 25 billion DVDs), and the current projection is that the growth in data will double every two years. This growth of worldwide data is reflected within enterprise, and causing capacity constraints on enterprise data centres. Moving to the cloud provides the ability to flexibly add new storage, but also new computers to process the exponential increase in data volumes.
Artificial Intelligence and Cognitive Computing
The growth in Artificial Intelligence (AI) has been coined as the 4th Industrial Revolution. AI is an overarching category within computing with a number of sub-domains: Natural Language Processing, Perception, Motion and Manipulation and Machine Learning (ML). While all of these sub-domains are growing rapidly, ML is by far the largest area of investment for AI.
ML is a field of computer science that gives computers the ability to learn without being explicitly programmed. ML is inherently tied to the Big Data and cloud explosion of recent years, as most of the algorithms work on the basis of using large amounts of data, in a high-performance computer platform to simulate human learning capabilities. Technology powerhouses including Google, Amazon, and Microsoft have made high compute computing available through the availability of hardware with Graphical Processing Units (GPUs); these are ideally suited to the execution of ML algorithms on large data sets. Previously this would have otherwise required significant capital expenditure and would be a niche market like weather forecasting. Furthermore, these providers have open-sourced their machine learning platforms and provided those as packaged cloud services thereby making these capabilities far more attainable to enterprises. The open-sourcing of platforms such as TensorFlow[5] is driving demand for cloud as the only realistic platform for execution. If you think the above applies to your business, it makes sense to start with the following steps before blindly jumping into the cloud:
- Conduct an Application Portfolio Assessment: Evaluate the value and cost of existing IT assets and use this as a vehicle to get out of the data centre business. Your digital agenda can only move as quickly as its slowest part, so use the opportunity to replace outdated processes, and migrate strategic applications to a suitable cloud service.
- Replace physical packaged software with the vendor’s cloud service: Salesforce led the market as a software as a service (SaaS) provider for many years but all major enterprise software providers (e.g. Microsoft, IBM, Oracle and SAP) have embraced the cloud with SaaS alternatives to on-premises. Migrating, companies will also benefit from the vendors’ latest functionality, and simplify future migrations as this is the responsibility of the vendor.
- Ensure appropriate governance is in place: Cloud service providers continue to improve their security tools but it is incumbent on the migrating business to ensure the appropriate risk management, security and controls are in place. That is, you remain accountable for your data, so ensure you work with your legal and audit teams to ensure moving data and applications to the cloud meets or exceeds your own standards.
- Prepare for the shift from CapEx to OpEx: Traditional on-premises IT systems typically have a capital expenditure for hardware, software, and implementation. Cloud implementations do not incur capital expenditure for hardware and software, rather the cost is based on usage or ‘consumption’. At a macro level, this shift in expenditure type might look like the company is reducing its investment in IT, while operationally it is more costly to run. This can cause red flags, requiring a communication strategy on why this change is happening.
The benefits of switching to a cloud platform are potentially very strong but as with all major business decision, time must be taken to weigh up the different options and carefully select the best fit for the company’s needs.
