Enterprises expect growth in their hosting and cloud services to outstrip overall IT spending this year, with spending on hosting and cloud to go up 25% on average compared to 12% for overall IT, according to 451 Research.

The findings, which appear in the company’s latest Voice of the Enterprise report, show that the trend is most pronounced in larger businesses. For organisations with 1,000 to 9,999 employees, spend on hosting and cloud is expected to rise 33% compared to only 7.3% for IT overall. For organisations with more than 10,000 employees (20.3% and 5.8%) a similar pattern occurs.

88% of respondents overall expect their hosting and cloud services budgets to go up in 2017 compared to last year, with only 70% expecting their total IT budget to rise.

“We see the pace of investment in hosting and cloud services exceeding investment in IT overall, meaning hosting and cloud services are becoming a focus of IT investment, via both new projects and the migration of existing workloads,” said Liam Eagle, research manager at 451 Research and report author. “Even some businesses that are reducing IT spending overall are increasing hosting and cloud spending, meaning service providers should not overlook companies looking to reduce IT costs as prospects.”

The research argues various factors are impacting the increased adoption of cloud and hosted services, from new IT initiatives, adding resource capacity due to business growth, and, naturally, migrating workloads from on-prem environments to the cloud.

Azure, cited by almost a quarter (24.8%) of budget allocation, leads Amazon Web Services (20.2%), with respondents expecting to increase their budget on both providers in the coming year. This was referenced in a study last month, where the research firm argued Azure was emerging as the ‘predominant primary infrastructure as a service provider in Europe’. Around half of respondents said they were using a vendor outside of the top 10 providers.

“Significant adoption profile differences among different company sizes in terms of adoption rates and drivers reinforce the idea that company size is not just a category difference, but indicative of markets with totally different hosting and cloud services characteristics,” added Eagle.

“This gives providers a compelling business case for specialisation and is one of the reasons the hosting and cloud services market is served by such a wide variety of vendors and vendor types.”

You can find out more about the report here.

Verizon has announced it is selling its cloud and managed hosting service to IBM, alongside working with the Armonk giant on a ‘number of strategic initiatives involving networking and cloud services’.

“This is a unique cooperation between two tech leaders to support global organisations as they look to fully realise the benefits of their cloud computing investments,” said George Fischer, SVP and group president of Verizon Enterprise Solutions (VES) in a statement.

Last February, Verizon told customers in an email that it was shutting down ‘any virtual servers running on Public Cloud or Reserved Performance Cloud Spaces’ on April 12. The company clarified in a statement to CloudTech that it was ‘discontinuing its cloud service that accepts credit card payments’, however John Dinsdale, a chief analyst at Synergy Research, saw things differently.

“Telcos generally are having to take a back seat on cloud and especially on public cloud services,” he told this publication last year. “They do not have the focus and the data centre footprint to compete effectively with the hyperscale cloud providers, so they are tending to drop back into subsidiary roles as partners or on-ramps to the leading cloud companies.”

How prescient that statement is now. IBM would certainly be classified as one of the hyperscale operators; alongside Amazon Web Services (AWS), Microsoft and Google, the four leading players continue to grow more quickly than the overall market, according to Synergy’s figures.

What’s more, various links between the two companies means this move makes sense. John Considine, general manager at IBM Cloud Infrastructure Services, was previously CTO of Verizon Terremark. The companies have also partnered on various initiatives, including in the creation of Verizon’s cognitive customer experience platform, built using IBM’s cloud and infrastructure as a service offerings.

“Our customers want to improve application performance while streamlining operations and securing information in the cloud,” Fischer added. “VES is now well positioned to provide those solutions through intelligent networking, managed IT services and business communications.”

Verizon said it was notifying affected customers directly, though adding it did not expect any immediate impact to their services. The transaction is expected to close later this year.

Cisco has announced its intent to acquire Viptela, a provider of software-defined wide area network (SD-WAN) technology, for $610 million (£471.9m).

The acquisition will give Cisco more beef in terms of network deployments in an increasingly cloud app-heavy, Internet of Things (IoT)-connected technological landscape. The networking giant aims to combine Viptela’s cloud-first network management, orchestration and overlay technologies with its own routing platforms and services, with Cisco ‘committed to Viptela’s product offering and architecture, as well as existing Cisco Intelligent WAN and Meraki SD-WAN solutions’. The Viptela team will join Cisco’s Enterprise Routing team, within its Networking and Security arm.

“Viptela’s technology is cloud-first, with a focus on simplicity and ease of deployment while simultaneously providing a rich set of capabilities and scale,” said Scott Harrell, senior vice president of product management for the Cisco Enterprise Networking Group in a statement. “With Viptela and Cisco, we will be able to deliver a comprehensive portfolio of comprehensive on-premises, hybrid, and cloud-based SD-WAN solutions.”

Rob Salvagno, head of M&A and venture investment at Cisco, added in a blog post: “With Viptela, Cisco can offer customers more choice in their enterprise branch offices and WAN deployments, with a compelling SD-WAN solution that is easy to deploy and simple to manage.

“Together, Cisco and Viptela will be able to deliver next generation SD-WAN solutions to best serve all size and scale of customer needs, while accelerating Cisco’s transition to a recurring, software-based business model,” Salvagno added.

Several of Viptela’s executives had previously served at Cisco, including current CEO Praveen Akkiraju, who had spent the best part of two decades there. Viptela’s most recent funding round, of $75 million almost one year ago, gave the company a valuation of $875m, according to multiple sources.

A new report from Salesforce sheds further light on the shifting sands of IT; eight out of 10 UK tech leaders say IT is now the primary enabler of customer experience, while three quarters admit IT is currently undergoing the biggest historical shift of its role.

“IT stands at a crossroads of change,” a post from Devon McGinnis, editorial manager of marketing research at Salesforce explains. “Companies are increasingly adopting customer-centric models. Business units like sales, customer service, and marketing – tasked with creating new experiences that meet elevated customer expectations – are changing their views to see IT as a strategic partner.

“IT now has the opportunity to not only improve customer-facing tech, but to transform it,” McGinnis adds.

It’s worth noting here that IT teams generally have modest expectations around their abilities. 61% of the more than 2,200 global respondents said they are moderate performers, compared with 24% who thought they were lower than average and 15% who rated themselves as high performers.

Salesforce argues that with the shifting position of IT the department has turned from a cost centre to a ‘value-based service brokerage’. “The old model of IT as a maintainer of the status quo infrastructure is giving way to a new mindset, in which IT adds innovative capabilities that bring a competitive edge to the business,” the report notes.

This is something which has been covered by this publication for some time – as well as Salesforce adding that the role of CIO is ‘fundamentally changing’ to the role of business leader. More than two thirds (67%) of IT teams polled said improving their collaboration with other lines of business was a high priority, while the 15% of teams who were higher performers were significantly more likely to rate the strength of their partnerships with service, marketing and sales as ‘excellent’.

Cloud computing was assessed by respondents as the most likely technology to ‘reinvent business’ by 2020, with artificial intelligence (AI) and mobile technologies for customers winning the silver and bronze medals respectively. More than four in five (83%) IT leaders polled said they felt more comfortable with their knowledge of cloud security than they did five years ago.

Discussing the UK findings in particular, Adam Spearing, Salesforce area vice president EMEA, noted with interest the position of AI. “The rise of artificial intelligence will also help IT teams to automate more mundane, time consuming tasks and free up time for team members to focus on innovation,” he said.

“While much of IT’s work happens behind the scenes, its efforts are at the forefront of customer interactions. Without IT as the company’s backbone, UK businesses will fall flat on powering crucial customer experience initiatives,” added Spearing.

You can download the full report here (registration required).

Analysis April 27 saw Alphabet, Amazon and Microsoft release its most recent financial results, with cloud at the heart of their success. But this doesn’t quite tell the full story.

Amazon reported net sales for Amazon Web Services (AWS) hit $3.66 billion (£2.83bn), up 42% from a year before, but up only 3.5% from the previous quarter’s $3.54bn.

Amazon’s cloud computing arm secured 12 bullet points of its own in the 32-point strong ‘highlights’ of the quarter, with particular reference to the general availability of Amazon Lex, the technology which powers Alexa, as well as Connect, the company’s cloud-based contact centre service. AWS also said that customers had migrated more than 23,000 databases using its database migration service since it had become available in 2016.

In the quotes from the press materials, the focus was on growth in India more than anything else, while in the conference call Amazon only spoke about AWS when prodded by analysts, not being able to give updated usage figures.

Responding to one question around product growth and innovation, Brian Olsavsky, Amazon chief financial officer, noted, as transcribed by Seeking Alpha: “We break out very clearly our AWS segment revenue and operating income, and you’ll also keep in mind that there’s price decreases that are part of the business, and we’re pretty public when we do those. In general, we’re very happy with that team and the progress they’re making – and we’re deploying more capital as you can see to support the usage growth.”

It’s worth noting that this apparent downturn can be attributed to Amazon being the most explicit of the three companies when disclosing its cloud results. Microsoft’s headline of ‘Microsoft Cloud Strength Highlights Third Quarter Results’ on its earnings press release again doesn’t explain the full picture.

The Redmond firm puts its revenue into four buckets; productivity and business processes, ‘intelligent cloud’, more personal computing, Figures for intelligent cloud went up to $6.76bn for Q117, up 10.9% from this time last year. While the company does not disclose specific figures for Azure, it did add that sales went up 93% in the most recent quarter.

Microsoft CEO Satya Nadella spent part of his time on the conference call specifically discussing the work Microsoft is doing with Maersk. The transport and logistics provider was revealed as a customer at the Digital Difference event in New York earlier this week, with Nadella explaining, as transcribed by Seeking Alpha: “For a company that ships 17 million containers annually, the ability to react quickly can mean the difference of tens of millions of dollars to the bottom line. This is a great example of our three clouds coming together to enable deep digital transformation.”

For Google, it’s even more of an investigation to find out from the press materials, where the word cloud was not mentioned once. Unlike the others, the company steadfastly refuses to disclose its specific cloud revenues, preferring to bundle it in under the nebulous ‘other’ category, alongside hardware and YouTube subscriptions. Revenues from other businesses totalled $3.1 billion in the first quarter of 2017, up 49% from this time last year. Comparatively, Google’s advertising revenues grew 18.8% year on year, at a total of $21.4bn.

Clues as to the extent of Google’s cloud push can be found in other areas. Last month, at Google Next in San Francisco, Diane Greene, Google cloud SVP, ferried a flurry of enterprise-grade customers on and off the stage, from Verizon – ranked 13 on the most recent Fortune 500 – to Colgate-Palmolive (174) and eBay (300). As this publication noted at the time, it made a difference when compared to previous customers the company eulogised over, such as Snapchat and Evernote.

More can be found in the call to analysts last night. “Cloud is one of our most important strategic priorities given the scale of opportunity in a rapidly evolving sector and the fact that the requirements for success align with many of our strengths,” said Ruth Porat, Alphabet chief financial officer, as transcribed by Seeking Alpha. Google CEO Sundar Pichai was even more effusive. “Over the last several months, we have noticed a chance in the types of conversations that Diane and her team are having with customers,” he said.

“Increasingly, we are being asked to partner for mission-critical projects and full migrations, moving data from on-prem data centres to the cloud,” added Pichai. “We are seeing a meaningful shift, and this momentum is resulting in a fast-growing business.”

So what can be ascertained from this rare coming together of three results calls in one day? For Synergy Research it’s clear: despite the relative slowdown, AWS remains in a league of its own.

“At the top end of the cloud provider market we’re now seeing a clear stratification featuring AWS, a group of higher-growth chasers, and a couple of more focused niche players,” said John Dinsdale, Synergy chief analyst and research director. “Beyond those leading companies, the cloud market features a long tail of small to medium sized providers or companies that have only a minor position in the market, typically based on either a specific country or focused application area.

“There are decent growth opportunities for some of these smaller players, but they are unlikely to make much impact in terms of overall worldwide market share,” Dinsdale added.

In a report issued earlier this month, 451 Research put it in similar terms. For the first time, AWS had fallen behind other providers in terms of user satisfaction; Google scored higher in value for money, and IBM and Microsoft besting the company in terms of understanding the customer’s business.

As the most recent graphs from the companies show, AWS continues to rule the roost, but the performance of their nearest competitors – however far away they may seem right now – needs to be acknowledged.

A new report argues the UK’s data centres are between them achieving ‘poor’ levels of cooling utilisation, with two thirds of cooling equipment installed on average not delivering any benefits.

The figures come from EkkoSense, a Nottingham-based provider of data centre risk management software. Naturally, it’s worth noting at this juncture that these figures are manna from heaven for such a company and the services it provides – more of which shortly – but the figures are interesting in themselves.

EkkoSense analysed 128 UK data centre halls, and more than 16,500 racks, and found that on average, the data cooling utilisation level is at 34%. Less than 5% of UK data centre monitoring and evaluation teams say they actively monitor and report temperature on an individual rack by rack basis.

The company adds that it’s not the lack of cooling capacity which is causing the issue – indeed, weather patterns in the UK are more often than not a positive contributor – but a ‘continued poor management of airflow and a failure to actively monitor and report rack temperatures’.

“Our ongoing survey into UK data centre cooling clearly shows that, despite their continued reliance on new and more expensive cooling equipment, data centres aren’t doing enough to reduce the risk to the business that unplanned outages inevitably bring,” said James Kirkwood, EkkoSense head of operations.

One company which focuses particularly on the environmental message with its data centres is Rackspace. The open cloud provider opened a data centre in Crawley in 2015 – an event which this reporter attended – with the green theme in evidence. The data centre has a targeted power usage effectiveness (PUE) of 1.15 – its current level is 1.3, with the industry average being 1.7 – while other environmentally-conscious features include a sloped roof to harvest rainwater and cooling using natural air.

Gary Boyd, senior director DC project engineer at Rackspace, told CloudTech about the process behind the data centre in Crawley. “Businesses can make significant power savings by carefully considering airflow when planning a data centre,” he said. “Our Rackspace data centre in Crawley was the first in the UK to make use of innovative ‘indirect outside air’ cooling technology on a large scale, without mechanical cooling.

“This meant the overhead energy required to operate the data centre was cut by almost 80%,” added Boyd. “The cooling design requires operational discipline, and device management best practice, to ensure the hot and cold aisles are separated through containment, thereby enabling the data centre to operate within the higher temperature range of Ashrae standards [for the design and maintenance of indoor environments].

“It led not only to financial savings, but a positive reputation in the industry, making us attractive to both customers and talent. Hopefully we will see more companies utilising airflow to their advantage in this manner.”

EkkoSense, in a similar vein, offers a data centre optimisation (DCOP) service which uses a three-stage approach to getting the most out of sites. The firm measures, 3D maps and analyses airflow performance across each room, then re-balances the floor to reduce hot and cold spots, alongside utilising EkkoAir, a product which tracks data centre cooling loads in real time.

Microsoft has announced a slew of new customers using its Azure cloud services at its Digital Difference event in New York, including financial services provider UBS and confectioner Hershey.

The customer announcements came alongside the release of a new study, sponsored by Microsoft and put together by Harvard Business Review (HBR), which found less than half of business leaders have a coherent digital strategy despite 80% saying their industry will be positively impacted by digital transformation within three years.

The message from Microsoft was clear: one, digital disruption is happening, through cloud computing, the Internet of Things, machine learning, and much more besides; two, your organisation needs to keep pace; and three, here’s how we’re helping organisations keep pace. As a result, the primary interest here is not the fact Hershey, Maersk, UBS and others are using Azure, but how they are using them.

Hershey, for example, is using Internet of Things (IoT) sensors which feed data into the cloud, which is then analysed via Machine Learning in Azure, in order to gain greater insights and trends. UBS is using Azure to power its risk management platform, which can ultimately save 40% in infrastructure costs, while Maersk – who readers of this publication may also recognise through their blockchain initiatives with IBM – is doing various things, from its supply chain business Damco building solutions on Azure, to building an app store on Microsoft’s cloud.

Other companies announced as being Microsoft shops at Digital Difference were clothing provider Fruit of the Loom, with the company developing predictive models for consumer behaviour through Azure, and automotive insurer GEICO, who is opting for more of a hybrid cloud strategy.

“Companies are choosing Microsoft to empower their digital difference,” said Judson Althoff, EVP of Microsoft’s worldwide commercial business in a statement. “Microsoft has the edge in development in the cloud, IoT, advanced analytics, mixed reality and artificial intelligence. We understand companies’ needs for innovation, speed to market, and the importance of continually transforming and re-evaluating how business is done.”

Elsewhere, the HBR paper argues the models and strategies for digital disruption are still evolving, but once companies go all-in with a ‘major commitment’ to digital as a primary revenue driver, they are more likely to elevate and centralise digital efforts. “Most respondents recognise the opportunities the digital revolution is bringing, with the two biggest prizes being enhanced customer relationships and greater value chain integration,” the report notes. “The highest digital priority, by far, is creating an exceptional, highly relevant customer experience.”

You can read the full report here (pdf).

Chinese Internet firm Tencent has announced expansion plans for its data centres, opening five new facilities across three continents by the end of this year.

The first new data centre in Silicon Valley officially opened its doors earlier this week, with future sites being planned in Frankfurt, Moscow, Mumbai, and Seoul. The company added the facilities will be used to serve ‘online games, online finance, video and other Internet-related industries’.

Tencent aims to take the overall number of its overseas data centres to eight with this expansion. The company already has sites in Hong Kong, Singapore and Toronto, as well as operating more than a dozen data centres in mainland China.

“We want to enhance our overseas cloud capability to meet the rising demand from companies around the world as they look for fast, reliable, secure and cost-effective services during the global expansion and migration to the cloud era,” said Rita Zeng, vice president of Tencent Cloud in a statement. “I am confident that we can meet their needs with our technical capability, global network, as well as experience accumulated in serving the massive user-base in our home market.”

The move is similar in focus to Alibaba, another Chinese vendor with serious cloud aspirations. The eCommerce provider announced in November last year its plans to open new data centres in Germany – also in Frankfurt – the Middle East, Australia, and Japan by the end of the year.  

Last month, Tencent gave another indication as to its focus by announcing its cloud services would be beefed up with GPU accelerators from NVIDIA, with a wider aim to give customers machine learning and natural language processing capabilities by combining a traditional CPU with a graphics processing unit. The vast majority of leading cloud players are NVIDIA customers, including Amazon Web Services (AWS), Microsoft, Google, and IBM.

(c)iStock.com/MarioGuti

More than four in five enterprises globally are facing the dreaded ‘availability gap’ between user demand and what IT can deliver, according to a new report from disaster recovery and backup firm Veeam.

The study, the firm’s sixth annual Veeam Availability Report, polled more than 1,000 senior IT leaders across 24 countries and found that unplanned downtime costs enterprises on average $21.8 million per year, up 25% compared to the past 12 months.

More than two thirds (69%) of respondents globally forged a link between continuous access to services and digital transformation, yet downtime issues, be they cyber-attacks, infrastructure failures or natural disasters, will naturally put a crimp in those plans. Server outages last 85 minutes on average per incident, the research notes.  

When it comes to UK respondents, two thirds (66%) say their digital initiatives are being held back by unplanned downtime, while a similar number (67%) added the initiatives were either ‘critical’ or ‘very important’ to lines of business and the C-suite.

This makes for interesting reading, especially when considering the issues organisations face which can have indirect effects on their revenues. 40% of respondents admitted they had experienced damage to brand integrity. Companies say they can only tolerate 72 minutes of data loss per year with ‘high priority’ applications on average, although the real figure is nearer two hours (127 minutes).

“The results of this survey show that most companies, even large, international enterprises, continue to struggle with fundamental backup/recovery capabilities, which along with affecting productivity and profitability are also hindering strategic initiatives like digital transformation,” said Jsason Buffington, principal analyst for data protection at the Enterprise Strategy Group, which conducted the report.

“In considering the startling availability and protection gaps that are prevalent today, IT is failing to meet the needs of their business units, which should gravely concern IT leaders and those who answer to the board.”

SAP has announced its cloud subscriptions and support hit €905 million (£768.7m) in the first quarter of 2017, up 34% from the previous year, with new cloud bookings up 49% to €215m.

It’s the continuation of a long-running theme for the German software giant, with the company trying to shift its revenue base over from traditional software to cloud for the past few years. Software licenses and support remains strong however, up to €3.42bn from €3.17bn this time last year at an 8% increase. Overall, cloud and software revenue was at €4.32bn and total revenue at €5.28bn, each up 12% from Q116.

Despite this, operating profit was down 17% year on year at €673m, while profit after tax was down 7% to €530m. SAP increased its employee base from 78,230 to 85,751 over the past 12 months.

Discussing the cloud figures, Luka Mucic, SAP chief financial officer said in a statement: “This outstanding achievement further validates our investment decisions to drive further growth. We’re off to a good start to reach our full year targets and we are confident that we will grow our profitability in 2018 and beyond.”

SAP reiterated its 2017 outlook, which argues full year 2017 non-IFRS cloud subscriptions and support revenue will be between €3.8bn and €4bn.

One of the areas SAP has been looking into of late is artificial intelligence, announcing in February the latest offering for S/4HANA, its public cloud, which aimed to provide a roadmap for the ‘next generation of cloud ERP’, as the company put it. S/4HANA was updated with a new architecture of in-memory in combination with contextual analytics, digital assistant capabilities and machine learning, aiming to help customers adopt and adjust business processes based on real-time data and insight.

Bill McDermott, SAP CEO, added: “SAP’s outstanding first quarter results are a decisive follow-on to our record setting 2016. Led by S/4HANA, we are seeing mass customer adoption of our solutions globally.

“Our inspired workforce is firmly committed to staying focused on the success of our customers and shareholders.”

You can read the full financial statement here (pdf).

Picture credit: SAP