If you want to challenge the leading cloud infrastructure providers, you are going to need some seriously deep pockets. According to the latest figures from analyst firm Synergy Research, hyperscaler cloud capex spending hit a record $27 billion (£20.1bn) in the most recent quarter.

The top five spenders in the industry remain Google, Apple, Microsoft, Facebook and Amazon, with Alibaba, IBM, JD.com, NTT, and Tencent comprising the top 10.

Google kicked off the quarter by announcing various infrastructure expansion plans, including five new data centre regions and three subsea cables. Two of these regions – in the Netherlands and Montreal – are already open for business, with further plans to expand in Switzerland announced by Google earlier this month. Microsoft’s expansion plans for Azure this quarter include Australia and New Zealand, as well as Europe and the Middle East.

The big five spent on average more than $13 billion per quarter last year – but combined spending for Q1 of this year has seen that figure rise to more than $20bn.

It’s all about speculating to accumulate. The hyperscalers’ most recent financial results, published last month, saw strong growth all round. According to Synergy figures, Amazon continues to retain more than 30% of the market, ahead of Microsoft, IBM, Google and Alibaba.

Other trends come into play here. Earlier this month, Amazon Web Services announced that Verizon was choosing the Seattle firm as its preferred cloud provider, putting to bed once and for all the operator’s cloudy ambitions, which first blossomed with the acquisition of Terremark in 2011, before the service was sold off to IBM last year.

“This helps to explain why so many IT service providers and telcos have stopped trying to compete with the leading cloud providers,” John Dinsdale, a chief analyst and research director at Synergy, explained. “Companies striving for leadership in this market need to consistently find billions of dollars per quarter to cover data centre investments, which is clearly beyond all but a very small number of companies.”

One in four respondents to a survey from IT community Spiceworks say they remain unconvinced by cloud storage security – with Microsoft OneDrive holding firm as the most popular service.

The study, which polled more than 500 respondents from organisations across North America and Europe, found more than half (51%) are currently using OneDrive, compared with 34% for both Google Drive and Dropbox, going down to 13% and 6% for Apple iCloud Drive and Box respectively.

When broken down by company size, OneDrive dominates further. 59% of large businesses are currently using OneDrive, compared with 29% for Google Drive and 25% for Dropbox. For small businesses, these figures come out at 47%, 39%, and 34% respectively.

Yet as security – not surprisingly – remains the most dominant factor, a fair proportion of respondents voiced concern around the security of the most popular cloud storage tools. 97% of those polled cited security as either ‘important’ or ‘extremely important’ in the buying process, ahead of reliability (96%), cost (93%), ease of use (93%) and vendor reputation (89%). However, 25% said their data in the cloud was either ‘not at all’ or ‘somewhat’ secure.

This lack of confidence can be seen in the way organisations want to keep an element of control, according to Spiceworks analyst Peter Tsai. More than half (57%) of those polled only allow employees to use cloud storage or file sharing services, compared with only 19% who are happy for their employees to do what they like. “IT departments clearly want a degree of control over data,” Tsai wrote in a blog post explaining the findings.

That said, instances of shadow IT are decreasing: according to figures from 2016, 78% of IT pros said employees were using Dropbox without company approval. The latest figures put this now at 54% – still the most ‘popular’, ahead of Google Drive (43%), Apple iCloud Drive (27%) and OneDrive (25%).

One trend Tsai has particularly seen over the past two years is around the struggles standalone providers are facing. Two years ago Dropbox was the most popular service; today, it has been usurped by OneDrive, while Google Drive has also toppled Dropbox.

Yet it is not Microsoft and Google against the rest – the battle is well and truly joined between the two behemoths as well. Earlier this month, Google launched Google One, a premium tier cloud storage offering with two goals; to simplify Drive and, perhaps more importantly, to undercut Microsoft. Google is offering 2TB of storage for $9.99 per month – a price that gets only 1TB from Microsoft, Dropbox et al.

Microsoft however, with Office 365 integration, still holds the aces, according to Tsai. “As organisations want to do more with less, it makes financial sense for companies to go with OneDrive if they’re already paying for Office 365,” he wrote.

“Going forward, with this bundling trend also extending to G Suite, it will be difficult for standalone cloud storage services to compete on price,” Tsai added. “Instead, they will have to innovate continuously on features and serve niche markets that aren’t satisfied with cloud storage offerings bundled with popular productivity suites from tech giants Microsoft and Google.”

Bobby Hellard

Clare Hopping

A couple of interesting pieces of news from Rackspace; the company has launched a ‘Kubernetes as a service’ offering, as well as announcing the acquisition of digital agency RelationEdge.

The service, which will become available on Rackspace Private Cloud later this month, with planned support for public clouds later this year, is more affirmation of the rise of the container orchestration tool. At the start of this month, KubeCon and CloudNativeCon saw a truckload of announcements about Kubernetes, from certified courses to vendor support – and the latter is evidently key here.

Rackspace sees the problem thus. The application container software market will grow significantly in the coming years to almost $3 billion by 2020 – citing figures from 451 Research – meaning a gap will appear for those wishing to effectively manage Kubernetes environments on their own.

Like the company already does with public cloud providers, Rackspace wants to ease headaches organisations may have. Through the service, customers will be able to deploy and manage Kubernetes clusters across private and public clouds, as well as managing ‘day 2’ operations – updates, upgrades and patching in other words – and providing enterprise-grade security.

Rackspace also says customers will save up to 50% with its Kubernetes as a service, as opposed to running the environments themselves.

“We’re making the most modern infrastructure consumable by every enterprise,” said Lee James, Rackspace CTO EMEA in a statement. “With Kubernetes as a service, we are providing the industry’s simplest Kubernetes consumption model by delivering it fully configured, tested and validated at enterprise scale with the managed cluster services customers need to effectively run their applications.

“Rackspace’s combination of operational experience and open source expertise, coupled with the security, improved economics and a fully managed Kubernetes offering available on leading public and private cloud technologies, helps companies accelerate their digital transformation,” added James.

The acquisition of RelationEdge plays more into another of Rackspace’s themes: enterprise application management. Industry watchers will recall Rackspace acquiring TriCore last year, in what was virtually incoming CEO Joe Eazor’s first announcement. RelationEdge has expertise as a Salesforce platinum consulting partner – perhaps an odd choice therefore, but Rackspace said the acquisition would ‘expand [the company’s] ability to be a preferred partner for managing a customer’s complete application portfolio through continuous transition to modern technologies, including SaaS applications.’

Bobby Hellard

Strategic investment in business technology is led by CIOs and CTOs that launch new digital transformation initiatives. Those digital growth plans result in the modernization of IT infrastructure. However, an internal IT staff skills shortfall will continue to fuel demand for more savvy and experienced digital business talent.

Worldwide revenues for IT Services and Business Services totaled $502 billion in the second half of 2017 (2H17) — that's an increase of 3.6 percent year-over-year (in constant currency), according to the latest market study by International Data Corporation (IDC).

Digital business services market development

"As customers look to digital transformation initiatives to stay relevant in the new economy, vendors face both opportunities and challenges," said Xiao-Fei Zhang, program director at IDC. "While automation and new cloud delivery models reduce overall price, new digital services will require clients to spend more time and resources to modernize their existing IT environment,"

For the full year 2017, worldwide services revenues came to just shy of the $1 trillion mark. Year-over-year growth was around 4 percent, which slightly outpaced the worldwide GDP growth rate.

The growth in professional services reflects stronger business confidence that's fueled by a brighter economic outlook and a shared sense of urgency for large-scale digital transformation projects.

Looking at different services markets, project-oriented revenues continued to outpace outsourcing and support & training, mainly due to organizations freeing up pent-up discretionary spending from earlier years and feeling the need to digitize their organizations via large scale projects.

Specifically, project-oriented markets grew 4.6 percent year-over-year to $186 billion in 2H17 and 5 percent to $366 billion for the entire year. Most of the above-the-market growth came from business consulting: its revenue grew by almost 7.8 percent in 2H17 and 8.2 percent for the entire year to $115 billion.

In large digital transformation projects, high-touch business consultants continue to extract more value than mere IT resources do. Most major management consulting firms posted strong earnings in 2017.

IT-related project services, namely custom application development (CAD), IT consulting (ITC), and systems integration (SI), still make up the bulk — more than two thirds — of the overall project-oriented market.

While growing slower than business consulting, these three markets showed significant improvement over the previous year: CAD, ITC, and SI combined grew by 3.7 percent year-over-year to $251 billion for the full year 2017.

IDC believes that some 2015 and 2016 projects were pushed out to 2017, which helped to drive up spending during 2H17. This coincides with the strong rebound on the software side, as IT project-related services are largely application driven.

Because large digital business projects not only drive up new services but also pull in traditional services, IDC believes that the actual volume of IT project services grew even faster in 2017 but was offset somewhat by lower pricing.

In outsourcing, revenues grew by 3.3 percent year-over-year to $238 million in 2H17. Application-related managed services revenues (hosted and on-premise application management) outpaced the general market – growing more than 6 percent in 2H17 and 5.8 percent for the entire year.

Enterprise buyers have leveraged automation and cloud delivery to reduce the cost of operating IT applications. For example, infusing artificial intelligence (AI) into application life-cycle activities to drive better predictive maintenance and application portfolio management.

However, in their continuing drive for digital transformation, organizations are increasingly relying on external professional services providers to navigate complex technical environments and supply talent with new skills (hybrid cloud, big data analytics, machine learning, blockchain).

Digital transformation also requires organizations to standardize and modernize their existing IT application assets. Therefore, IDC forecasts application outsourcing markets to continue outpacing other outsourcing markets in the coming years.

Outlook for IT outsourcing service growth

On the infrastructure side, while hosting infrastructure services revenue grew by 4.9 percent in 2H17, positively impacted by cloud adoption, IT Outsourcing (ITO), a larger market, declined by 2 percent. Combined, the two markets were essentially flat.

IDC believes that while overall infrastructure demand remains robust, the ITO market is negatively impacted the most by cloud cannibalization across all regions: cloud, particularly public cloud, reduces price far greater than new demand grows. For example, IDC estimates that, by 2021, almost one third of ITO services revenue will be cloud-related.

Fact: storage performance problems have only gotten more complicated, as applications not only have become largely virtualized, but also have moved to cloud-based infrastructures. Storage performance in virtualized environments isn’t just about IOPS anymore. Instead, you need to guarantee performance for individual VMs, helping applications maintain performance as the number of VMs continues to go up in real time.
In his session at Cloud Expo, Dhiraj Sehgal, Product and Marketing at Tintri, shared success stories from a few folks who have already started using VM-aware storage. By managing storage operations at the VM-level, they’ve been able to solve their most vexing storage problems, and create infrastructures that scale to meet the needs of their applications. Best of all, they’ve got predictable, manageable storage performance – at a level conventional storage can’t match.

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Joe Curtis