All posts by Jamie Davies

app, Content & Applications, Content Platform, News & Analysis, Video Streaming

YouTube targets small biz and moves up download rankings

Curved video wallApp Annie has released its monthly Index which shows the popularity of dating app Tinder is once again on the rise, YouTube is climbing the content ranks and online video platform iQIYI is fast catching category leaders, reports Telecoms.com.

The App Annie Index highlights the top-performing games and apps for the iOS App Store and Google Play, states online video platform iQIYI has re-entered the top 10 for revenues over June, and has continued to demonstrate strong growth. Last month it announced it had surpassed 20 million paid subscribers to its streaming service, demonstrating Chinese customers are willing to pay for premium content. This news comes only six months after it reached the 10 million mark, and represents a 765% annual increase in the number of paid subscribers.

Although there has been news of restrictions in Chinese press in recent weeks, the attractiveness of iQIYI to consumers might partly be down to relationships which are in place with international organizations. iQIYI often broadcasts popular international shows and currently has content agreements in place with numerous brands including Universal Pictures and Fox. The team would also appear to have international expansion in mind, as it launched a revamp to its iQiyi Taiwan product, as well as capitalizing on the popularity of virtual reality, as it announced its own VR apps and a partner incentive program during its iQIYI World Conference in May.

Virtual reality could represent a significant opportunity in China, though it does in all technologically advanced nations, as the country’s Ministry of Industry and Information Technology believes it could be worth in the region of 55 billion yuan by 2020, approximately $8 billion. Deloitte Global also predicts the VR segment will become a billion dollar industry in 2016, estimating sales of 2.5 million VR headsets and 10 million games worldwide.

From a content perspective, the Index highlights the recent focus on video content is not limited to Facebook and Twitter, as YouTube re-enters the top 10 for content platforms. Facebook still remains top of the rankings for worldwide downloads, though it would appear efforts YouTube has been putting into revamping its content platform in recent months have been paying off, as the US leads the charge with a wave of new downloads across the month.

One of the new initiatives launched by the YouTube team was Director Onsite, a project which helps small business owners create content for advertising on the platform. For those who commit to $150 of advertising spend, a YouTube approved film director will visit the business and shoot a short promotional video to be used on the platform. The initiative is one of numerous activities from the wider Google business, which seems keen on attracting more small and medium sized business to continue the growth of advertising revenues.

“With respect to consumers, we continue to invest in innovative opportunities that create great experiences and improve their lives,” said Alphabet CFO Ruth Porat, during the company’s quarterly earnings call. “And we’re empowering small businesses globally by providing greater reach to customers, not just in their towns, but across countries and around the world.”

Tinder also saw a slight increase across the month, confirming its place as the highest revenues for the dating app segment. In June, it was the most-used app in the Lifestyle category on iPhone in the 13–24 year old demographic in the US, with only one other dating app featuring in the top five. While Tinder is one of the more recognized brands for millennials, it would be worth noting its target audience is limited to those aged 18 and above, and for the most part are single, while the vast majority of other apps in the rankings have much wider demographics.

AWS, Financial Results, IaaS, News & Analysis

AWS posts 60% boost as it creeps towards $10bn revenues

amazon awsAWS has continued its promising progress towards breaking the $10 billion barrier, after reporting revenues of $5.4 billion for the first six months of 2016, a boost of 60% from the same period last year, reports Telecoms.com.

Speaking during its Q1 earnings call in April, Amazon CFO Brian Olsavsky highlighted there was a very realistic chance the AWS business would exceed $10 billion in annual revenues, becoming the first cloud infrastructure company to do so. After another quarter of healthy growth, revenues were up 58% to roughly $2.9 billion, the team are well on track to exceed the ambitious target. Progress has been healthy over the last few quarters, but the team are looking to push the accelerator harder.

“We actually see nine availability zones in four regions coming out in the next – in the coming year,” said Olsavsky. “The impact on short-term is pretty much indistinguishable from the growth that we’re seeing in our expansion of our base customers in our existing regions, so we don’t see a large step-up from the addition of new regions relative to the large and rapid growth in the business itself.”

With new data centres popping up all over the world to meet the demand of the burgeoning cloud computing sector, AWS is keeping trend, opening up in Mumbai last month, as planning nine new availability zones within the next 12 months. The impact of these new assets are unlikely to be felt during the next quarter, though long-term there the current cloud leader could reinforce its position at the top of the leader board.

“Again, we like our position, our industry leading position in the cloud space, and we’re working on things that would incent more and more customers to accelerate their cloud conversion,” said Olsavsky. “The lower prices and services that we offer, and as I said, we’ll work on things that will make it easier and easier for customers to work with us with their hybrid data centers or transfer their volume to us.”

One area of growth which could have a more short-term impact is the new FedRAMP High compliance certification, which will allow government agencies the ability to use the AWS Cloud for highly sensitive applications and workloads like patient records, financial data, and law enforcement data. Government contracts represent lucrative wins in the technology sector, which could underpin the company’s surge towards $10 billion. The accreditation also creates a useful precedent for the business if/and the team look to expand its footprint with government organizations in the international markets.

AI, fibre, Financial Results, Google, News & Analysis

Google grows (again) but ‘Other Bets’ cost the giant $1bn

GoogleGoogle has reported its Q2 numbers, continuing a strong run of performances within the technology industry, though efforts to diversify its overall business are not paying off just yet, reports Telecoms.com.

The Alphabet brand was announced last year, with aim of allowing the team to invest in other projects more freely, without being impeded by the advertising business. It would appear the management team are not afraid to throw R&D money at its innovation team as it searches for another billion-dollar business, as the ‘Other Bets’ segment, which includes Google Fibre and the autonomous cars projects, accounted for an operating loss of $859 million. Revenues did grow to $185 million, up 150% on the same quarter in 2015, though this number was made almost insignificant by the $19 billion generated in the advertising business.

The technology industry on the whole has been providing strong numbers over the last couple of weeks, though there has been a question as to whether two advertising giants can co-exist. With Facebook reporting significant growth yesterday, advertising revenues across the period increased 63% year-on-year to $6.2 billion, these numbers were dwarfed by Google, perhaps demonstrating there is potential for both organizations to share advertising revenues, which are decreasing in value, and grow healthily.

With regard to the dwindling value of advertising revenues, Google would appear to be combatting this with volume. CFO Ruth Porat highlighted the mobile search capabilities were the primary driver behind the year-on-year growth, though the desktop and tablet search did also grow.

Numbers such as these will grab headlines, meaning it can be easy to forget about the Google cloud business, one of the top priorities for the Alphabet business moving forward.

On the same day which AWS reported revenues of $2.9 billion for the quarter, Google’s cloud business also demonstrated solid growth. Although the numbers are not specific, the ‘Other’ revenues segment which includes the cloud business, and other services such as Google play, accounting for $2.1 billion through the three month period, an increase of 33% on Q2 2015.

“Many tremendous digital experiences are being built in the cloud today, and businesses are working to take advantage of the cloud as part of their digital transformation,” said Google CEO Sundar Pichai. “We’ve been integrating our cloud and apps products to create more unified solutions for companies large and small, and these efforts are paying off.”

Following on from Pichai’s previous comments on the role of artificial intelligence on the Google cloud platform, and the wider Google business, its importance has been reiterated once again. Machine learning is being prioritized as the differentiator for Google in a competitive technology market, and only last week the team introduced two cloud machine learning APIs for speech and natural language to help enterprise customers convert audio to text and easily understand the structure and sentiment of the text in a variety of languages.

In terms of footprint, the team are not done growing yet. At the end of last month, Google and friends completed work on a new trans-Pacific submarine cable system, which will help the team launch a new Google Cloud Platform East Asia region in Tokyo. Back in March, the team confirmed it would be investing heavily in expansion of its cloud footprint with 12 new data centres around the world by the end of 2017.

AWS has previously stated it intends to break the $10 billion barrier in cloud revenues during 2016, though Google may not be that far behind. With its history of not being afraid to invest, and the growth numbers which have been witnessed over the last few quarters, Google could be set to accelerate.

Artificial intelligence, Facebook, Financial Results, mobile advertising, News & Analysis

Facebook puts Twitter into crosshair

FacebookFacebook has reported healthy growth in advertising revenues over the last quarter, and also outlined its ambitions to take on Twitter and traditional search engine, reports Telecoms.com.

Speaking on the company’s quarterly earnings call, CEO Mark Zuckerberg highlighted his intentions to expand the boundaries of Facebook, mounting a challenge to conversation platform Twitter, building search capabilities for businesses on the social network, as well as directing notable investment into video capabilities. Advertising revenues across the period increased 63% year-on-year to $6.2 billion, with mobile accounting for 84%, though the team are seemingly not satisfied as it prepares to venture into new markets.

“We have a saying at Facebook that our journey is only 1% done,” said Zuckerberg. “And while I’m happy with our progress, we have a lot more work to do to grow our community and connect the whole world. That means making big investments and taking risks, focusing not just on what Facebook is but on what it can be.”

While Twitter was not mentioned specifically during the call, Zuckerberg outlined his intentions to make Facebook the platform where users search for and express their views on current affairs. Most users would currently search for and post updates to their immediate circle of contacts, though this is an aspect which Zuckerberg wants to change. When looking at keyword searches, the team claim there are now 2 billion searches per day of its 2.5 trillion posts, growing 33% over the last nine months. The challenges towards Twitter was not implicitly mentioned by the Facebook chief, though the team are seemingly on a mission to create a conversation platform which extends beyond an users immediate circle, a space which has been dominated by Twitter in recent years.

Another area of potential growth for Facebook is commercial search. According to Zuckerberg, over a third of small and medium businesses in the states do not have a website, though Facebook could provide an alternative. Setting up and managing a website can be challenging, as well as for those who are less technically able, the team are promoting the use of the platform to create company pages and build the online presence of these organizations through Facebook. Although this is a long-term ambition, and the team are not in a stage where notable revenues are realistic, it would appear to be a move to provide an alternative to traditional search engines.

“This is why Facebook pages are the mobile solutions for many of the 60 million businesses using our products each month in the U.S. and around the world,” said Zuckerberg. “We’ve made it easy for business owners to manage their Facebook page from their mobile device. Over 85% of active business pages use mobile, and 40% of active advertisers have created a Facebook ad on their mobile device.

“So when we talk about our strategy (commercial search), I often talk about how when we develop new products we think about it in three phases. First, building a consumer use case; then, second, making it so that people can organically interact with businesses; and then third, on top of that, once there’s a large volume of people interacting with businesses. Give businesses tools to reach more people and pay, and that’s ultimately the business opportunity.

“I’d say, we’re around the second phase of that in search now.”

Artificial intelligence is another area which ties into the commercial capabilities of search, as once AI is perfected by the team, it does offer the opportunity to dramatically increase the relevance of ads put in front of the consumer. While most adverts are placed on historical data and previous customer behaviour, the potential of AI is intuition, the ability to make human decisions on what a potential customer would be interested it. This quarter, Facebook announced the development of DeepText, a deep learning based engine that can understand the context of several thousand posts per second across 20 different languages. It’s the beginning of the move towards AI, but a promising start.

As with other social media brands, video has been outlined as a priority for the team, building on the theme of consumer trends towards mobile. Most recently Facebook has been focused on the implementation of live video, though Zuckerberg highlighted the team will continue to invest in video platforms, to capitalize on the growing role of video in social media.

“We’re also working on new tools to help people express themselves and understand what’s going on with the people they care about. Ten years ago, most of what we shared and consumed online was text. Now its photos, and soon most of it will be video. We see a world that is video first with video at the heart of all of our apps and service.”

The shift towards mobile is fast changing the way customers consume and interact with media, most notably video. Before the phenomena of video can be capitalized on, the right capabilities need to be in place, and firstly this means investment.

All-in-all, most people would comment this has been a successful quarter for the social media giant. Total revenues are up to $6.4 billion, a 59% increase, daily active users standing at 1.13 billion on average for June 2016, an increase of 17% year-over-year, and monthly active users at 1.71 billion as of June 30, 2016, an increase of 15% year-over-year. Facebook has arguably been the most successful company at capitalizing on its captured audience, and should it effectively build capabilities in the conversation and search segments, it will be a worrying sign for Twitter and more traditional search engines.

apps, Financial Results, Mobile, News & Analysis, Niantic Labs, Nintendo

Nintendo shares slump before Tokyo regulators step in to stop decline

Pokemon GO 2Nintendo has released a statement in which the company outlined the limited impact Pokémon Go will have on its annual revenues. Following the news, around $6.7 billion was wiped from the company’s market capitalization.

While Pokémon Go has proved to be one of the most successful product launches in recent years, as its release broke numerous records in markets around the world. EE stated it saw 350,000 downloads in the UK even before the app was officially released as users found another means to download it, such as accessing the US app store via a VPN. The success of the app is not under question, though Nintendo has not altered its annual revenue forecasts due to the limited role it has in the app itself.

“Taking the current situation into consideration, the Company is not modifying the consolidated financial forecast for now,” the statement read. “The Company will make a timely disclosure when the Company needs to modify its financial forecasts.”

Niantic Labs is an American company spun out of Google, who license the rights to the game from The Pokémon Company, who in fact own the Pokémon franchise. Nintendo itself owns roughly 32% of the voting rights to The Pokémon Company and therefore only entitled to a modest slice of the revenues from the game itself. Analysts at investment firm Macquarie Group estimate Nintendo will only be entitled to roughly 13% of the revenue generated by the Pokémon Go app.

Although many organizations would have done due diligence surrounding the game, the relationship between Niantic Labs, The Pokémon Company and Nintendo, as well as the potential for profit, it would appear the news caught certain individuals off-guard, as a substantial proportion was wiped off Nintendo’s market capitalization.

The announcement was made following the close of the markets on Friday, though this has led to a busy morning following the weekend. 18%, or $6.7 billion, was wiped off the market capitalization of Nintendo, though this could have potentially been worse, as regulations in the Tokyo market prevented a larger drop, as the maximum single day move allowed by the market is 18%. How much the shares would have shrunk if trading had continued will remain unknown, though Nintendo is still showing a net gain of 15% since the launch of Pokémon Go two weeks ago.

“The Pokémon Company is the Company’s affiliated company, accounted for by using the equity method. Because of this accounting scheme, the income reflected on the Company’s consolidated business results is limited.”

While this would appear to have come as a shock to certain investors in the Nintendo business, there is still potential for growth and long-term wins. In-app purchasing in the Japanese market will likely grow over future weeks, and the game has not been launched in two of the worlds other prominent app markets, Korea and China. There could be some big wins in these two markets, though it would be worth noting both have restrictions on the Google Maps product, potentially offering challenges for the way the app operates, and its overall success.

Should the app launch in China and/or Korea, the story is likely to roll on for some time, though how large the ripples will be following Nintendo’s revelation will likely be seen sooner. The success of the Pokémon Go is not under question, though Nintendo’s brief taste of fame following the surge in share price over the last two weeks would appear to be coming to an end.

5G, Financial Results, Huawei, IoT, News & Analysis, Smartphone

Smartphones help Huawei to 40% revenue growth over H1

Huawei MWC 2016

Huawei has released financials for the first half of 2016 demonstrating a 40% revenue boost to $37 billion, partly owing to a healthy performance in the consumer business unit.

Although operating margin for the period has declined from 18% to 12%, the company posted stronger revenue growth for the period, slightly offsetting the decline. During the first six months of 2015 revenues grew 30%.

“We achieved steady growth across all three of our business groups, thanks to a well-balanced global presence and an unwavering focus on our pipe strategy,” said Sabrina Meng, Huawei’s CFO. “We are confident that Huawei will maintain its current momentum, and round out the full year in a positive financial position backed by sound ongoing operations.”

The decrease in the operating margin reflects the progress of the larger smartphone industry, as well as the competition which is increasing worldwide. Huawei currently sits in third place in global market share of the smartphone market, though it has been investing heavily to penetrate western markets in recent months. Samsung and Apple are currently defending their position as the top two, though Huawei’s efforts to chance the mid-range market are seemingly paying off.

Set against a backdrop of declining smartphone shipments, Huawei has held onto its strong position in the Chinese market, increasing its shipments from 11.2 million to 16.6 million in Q1 2016, compared to the same period in 2015. The move increased its market share from 10.2% to 15.8% taking it to the top of the Chinese leader board, while Apple lost ground dropping from 12.3% to 11%.

While this may be seen as unsurprising in some quarters of the industry, success in the international markets is becoming more apparent. According to research from Gartner, sales of smartphones to end users totalled 349 million units in the first quarter of 2016, a 3.9 percent increase over the same period in 2015. Samsung accounted for roughly 23% of the market, whereas Apple was just under 15%. Huawei increased its share 5.4% to 8.3%, taking it to third in the global market share tables. The company is expected to continue to ramp up its R&D focus over foreseeable future.

Although the company did not detail the enterprise business units figures though that is likely to be outlined in the coming weeks. The enterprise business, which includes cloud computing, storage, and SDN products, Safe City and Electric Power IoT solutions, did announce healthy growth of 44% to $4.5 billion during its annual Global Analyst Summit in April.

In the carrier business, the role of 5G and IoT was reaffirmed, and the team will be focusing on four areas within the telco industry, business, operations, architecture, and networks. While the carrier business has been demonstrating strong growth throughout the world, it has struggled in the US after its technology was effectively banned over concerns it would be used by Chinese authorities to spy on the US. While Huawei has continually denied the allegations, it has struggled to rebound and reassert itself in the market.

Elsewhere in the industry, competitor Ericsson has been experiencing slightly different fortunes after CEO Hans Vestberg resigned following another difficult quarter for the company. Last week, the company reported an 11% annual decline in net sales with pressure continuing to build against Vestberg.

Apple, Internet of Things, IoT, News & Analysis, smart watch, Wearables

Smart Watch market enters into decline for first time

Research firm IDC says shipments of the Apple Watch have dropped by 55% resulting in the first year-on-year quarterly shipment decline for the smart watch sector, reports Telecoms.com.

Preliminary data from IDC’s Worldwide Quarterly Wearable Device Tracker estimates vendors shipped 3.5 million units, down from 5.1 million in the same period 2015. Apple, which dominates the smart watch market share, saw its shipments decrease from 3.6 million in Q2 2015 to 1.6 million this year. While it is a substantial drop, it does also demonstrate Apple’s strangle hold on the market. All other vendors in the top five increased shipments, however Apple still controls 47% market share.

“Consumers have held off on smart watch purchases since early 2016 in anticipation of a hardware refresh, and improvements in WatchOS are not expected until later this year, effectively stalling existing Apple Watch sales,” said Jitesh Ubrani, Senior Research Analyst for IDC Mobile Device Trackers. “Apple still maintains a significant lead in the market and unfortunately a decline for Apple leads to a decline in the entire market. Every vendor faces similar challenges related to fashion and functionality, and though we expect improvements next year, growth in the remainder of 2016 will likely be muted.”

A recent report from Ericsson indicating the wearables market is not performing in-line with consumer expectations, as general consensus is the technology is not advanced enough to date. A common cause of dissatisfaction is customers feel tethered to their smartphone, as the wearable device does not have standalone features. Respondents of the survey also highlighted the price was a barrier to entry, though this may be down to the fact smart watches cannot currently be used as a standalone device. Currently, it is an add-on.

“What will bear close observation is how the smart watch market evolves from here,” said Llamas. “Continued platform development, cellular connectivity, and an increasing number of applications all point to a smartwatch market that will be constantly changing. These will appeal to a broader market, ultimately leading to a growing market.”

This is not the first warning sign for the smart watch subsector, as Strategy Analytics recently released a forecast which estimated shipments would decline by 12% over the course of 2016. There has been a growing consensus shipments of the Apple Watch may have peaked following a blockbuster launch in Q2 last year, though the research from IDC could imply the decline is moving faster than previously anticipated. IDC also stated it does not expect the market return to growth in 2017.

Although smart watches have not penetrated the mainstream market currently, what could give the devices a lift is the entry of traditional watch brands. Casio, Fossil, and Tag Heuer have launched their own models, though the brand credibility associated with these brands could give the segment a much needed boost.

Top Five Smartwatch Vendors, Shipments, Market Share and Year-Over-Year Growth, 2Q 2016 (Units in Millions)
Vendor 2Q16 Unit 

Shipments

 2Q16 Market

Share

 2Q15 Unit

Shipments

 2Q15 Market

Share

 Year-Over-

Year Growth
  1. Apple
 1.6 47% 3.6 72% -55%
  1. Samsung
 0.6 16% 0.4 7% 51%
  1. Lenovo
 0.3 9% 0.2 3% 75%
  1. LG Electronics
 0.3 8% 0.2 4% 26%
  1. Garmin
 0.1 4% 0.1 2% 25%
Others 0.6 16% 0.6 11% -1%
Total 3.5 100% 5.1 100% -32%
Source: IDC Worldwide Quarterly Wearable Device Tracker, July 21, 2016
cyber security, data centre, Financial Results, Intel, IoT, News & Analysis, Personal Computing

Intel grows despite the PC continuing its slow decline

IntelIntel has reported 3% growth, including a 5% boost in its data centre business, though the client computing unit continues its slow decline, reports Telecoms.com.

The company’s efforts to redefine itself are seemingly beginning to pay dividends as a 3% year-on-year decline to $7.3 billion in the client computing business unit was offset by healthy performances elsewhere in the organization. The data centre unit brought in $4 billion in revenues, up 5%, whereas IoT accounted for $572 million, an increase in 2%, and the security portfolio grew 10% to $554 million for the quarter. The Programmable Solutions group also saw a 30% boost to $465 million. Overall quarterly earnings grew 3% to $13.5 billion.

“Our top line results for the quarter came in right in line with outlook, and profitability this quarter exceeded our expectations,” said Brian Krzanich, Intel CEO. “Year-over-year growth this quarter was 3% overall, as we transform Intel into a company that powers the cloud and billions of smart connected devices. We continue to focus on growth in line with this transformation, as evidenced by results in the data centre, IoT, and Programmable Solutions business this quarter.”

Looking forward, the team is forecasting Q3 will bring in revenues of roughly $14.9 billion, which would represent 3% year-on-year growth. Client computing is expected to continue its decline in the high single digits, while double-digit growth is anticipated in the data centre business, funded by cloud players in the second half of the year. CFO Stacy Smith believes growth in the IoT, data centre and memory businesses will counteract any negative impact of client computing.

While the data centre business continues to demonstrate growth for Intel, overnight trading saw share price decline by 3% following the earnings announcement. Investors were anticipating higher growth levels for the data centre group, as Intel forecasted double digit growth previously.

Intel’s efforts to redefine the focus and perception of the business has been ongoing for some time, as the personal computing market segment, Intel’s traditional cash cow, has continued to erode. Back in April, Krzanich outlined the company’s future focus on the company blog, which is split into five sections; cloud technology, IoT, memory and programmable solutions, 5G and developing new technologies under the concept of Moore’s law.

“Our strategy itself is about transforming Intel from a PC company to a company that powers the cloud and billions of smart, connected computing devices,” said Krzanich in the blog entry. “But what does that future look like? I want to outline how I see the future unfolding and how Intel will continue to lead and win as we power the next generation of technologies.

“There is a clear virtuous cycle here – the cloud and data centre, the Internet of Things, memory and FPGA’s are all bound together by connectivity and enhanced by the economics of Moore’s Law. This virtuous cycle fuels our business, and we are aligning every segment of our business to it.”

While the IoT business only grew 2% year-on-year, it would be worth noting this is off the back of a healthy Q1 which saw the unit grow 22%. Krzanich linked the Q2 performance, which was below the teams expectations, to an inventory burn following a strong performance in the first quarter. The team now anticipate double-digit growth through the remainder of 2016.

This was also the second consecutive quarter in which the security portfolio was listed as a separate business unit, previously being incorporated into the software and services unit. The group itself has demonstrated healthy growth over the course of 2016, but has been the topic of speculation surrounding a sale.

Only last month the team were rumoured to be considering a sale of its security business, which was created following the $7.6 billion acquisition of antivirus specialists McAfee in 2010. Although security is one of the larger sections of the Intel business, it was not specifically mentioned as a focus point for the future business strategy during Krzanich’s blog entry in April. While the prospective sale has not been confirmed by the Intel team, separating the unit in the financials could indicate it is attempting to provide a greater level of transparency for potential buyers.

Business Transformation, Enterprise IT, Gartner, News & Analysis, skills gap

Cloud computing will impact $1 trillion of IT spending decisions – Gartner

Growing Money - Chart In RiseAnalyst firm Gartner has predicted more than $1 trillion in IT spending will be directly or indirectly impacted by the transition to cloud computing by 2020.

As IT spend steadily shifts from traditional IT offerings through to the cloud, a process which the Gartner team has coined the ‘cloud shift’, the rate in which enterprise organizations transition through to cloud is expected to gradually increase year-on-year. The aggregate amount of cloud shift in 2016 is estimated to reach $111 billion, though this will increase to $216 billion in 2020. The Gartner team believe cloud computing will be one of the most disruptive forces of IT spending since the early days of the digital age.

“Cloud-first strategies are the foundation for staying relevant in a fast-paced world,” said Ed Anderson, Research VP at Gartner. “The market for cloud services has grown to such an extent that it is now a notable percentage of total IT spending, helping to create a new generation of start-ups and “born in the cloud” providers.”

In terms of the specific segments, IaaS is the largest market accounting for $294 billion, though demonstrates one of the lowest levels of cloud shift through 2016, only representing a cloud shift rate of 17%. Business Process Outsourcing, or BPaaS, will represent the biggest cloud shift rate at 43%, though the expected market value through 2016 will be $119 billion.

Gartner Cloud Shift 1

Cloud Shift Summary by Market Segment

While the potential of cloud computing has been exhaustively discussed over recent years, one of the growing debates in the industry has been centred on the skills gap. Cloud requires not only new skills within the organization, but also a different approach in problem solving as well as a new business culture, should be benefits be realized. This challenge is currently being addressed by numerous organizations throughout the world.

“There is no doubt that cloud delivers unmatched business benefits in terms of usability, choice and agility,” said Angelo Di Ventura, Director at Trustmarque. “At the same time it requires wholly new skills and capabilities, and a complete IT transformation to maximise the value that businesses can gain from it – cloud can cause considerable disruption if left unchecked.

“The transition from an internet-enabled business to a digital business running in the cloud represents a huge jump for the majority of IT departments, whose existing infrastructure is designed for ‘business as usual’ operations. Ultimately, there is no one-size-fits-all model when it comes to making cloud work for a business.”

 

AI, Artificial Intelliegence, Azure, Cortana, Financial Results, Microsoft, News & Analysis, Public Cloud

Microsoft continues cloud transformation with 100% Azure growth

Microsoft1Microsoft has reported 5% growth to $22.6 billion as the Intelligent Cloud business unit led the charge, with the Azure public cloud offering more than doubling in revenues and compute usage, reports Telecoms.com.

The Intelligent Cloud unit, which includes server products and cloud services, Azure and enterprise mobility offerings grew 7% to $6.7 billion, while the Productivity and Business Processes, which includes Office commercial and consumer product lines as well as the Dynamics suite, grew 5% to $7 billion. Despite revenues in More Personal Computing declining 4% to $8.9 billion, Xbox Live monthly active users grew 33% year-over-year to 49 million and search advertising revenue grew 16% over the period.

“We delivered $22.6 billion in revenue this quarter, an increase of 5% for the quarter in constant currency,” said Satya Nadella, CEO at Microsoft. “This past year was pivotal in both our own transformation and in partnering with our customers who are navigating their own digital transformations. The Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead.”

Cloud computing has once again brought Microsoft to the forefront of the technology industry following a challenging couple of years. It would appear the transition from software to cloud computing brand is being successfully navigated, though there were a few missed steps along the way, most notably the team’s foray into mobile. Microsoft is moving towards the position of ‘mega-vendor’, infiltrating almost all aspects of an organization (cloud, hardware, social, databases etc.), to make it an indispensable factor of a CIOs roster.

The Intelligent Cloud unit continues as the focal point of the company’s growth strategy, as Nadella claims nearly 60% of the Fortune 500 companies use at least three of the company’s cloud offerings, generating more than $12 billion in Commercial Cloud annualized revenue run rate.

“Companies looking to digitally transform need a trusted cloud partner and turn to Microsoft,” said Nadella. “As a result, Azure revenue and usage again grew by more than 100% this quarter. We see customers choose Microsoft for three reasons. They want a cloud provider that offers solutions that reflect the realities of today’s world and their enterprise-grade needs. They want higher level services to drive digital transformation, and they want a cloud open to developers of all types.”

AI has previously been positioned as one of the cornerstones of growth for the company, and this was reinforced during the earnings call, as Nadella noted the component of the Intelligent Cloud business unit. The Cortana Intelligence Suite, formerly known as Cortana Analytics Suite, is built on the company’s on-going research into big data, machine learning, perception, analytics and intelligent bots. The offering allows developers to build apps and bots which interact with customers in a personalized way, but also react to real-world developments in real-time.

“Just yesterday, we announced Boeing will use Azure, our IoT suite, and Cortana Intelligence to drive digital transformation in commercial aviation, with connected airline systems optimization, predictive maintenance, and much more,” said Nadella. “This builds on great momentum in IoT. This is great progress, but our ambitions are set even higher. Our Intelligent Cloud also enables cognitive services. Cortana Intelligence Suite offers machine learning capabilities and advanced predictive analytics.

“Central to our Intelligent Cloud ambition is providing developers with the tools and capabilities they need to build apps and services for the platforms and devices of their choice. The new Azure Container service as well as .NET Core 1.0 for open source and our ongoing work with companies such as Red Hat, Docker, and Mesosphere reflects significant progress on this front. We continue to see traction from open source, with nearly a third of customer virtual machines on Azure running Linux.”

The company exceeded analyst expectations for the quarter, which was reflected in pre-market trading which saw shares in the giant growing 4%. In terms of outlook for the next quarter, most business units are expected to be down a fraction on the Q2 reported figures, unsurprising considering the summer period. Intelligent Cloud is expected to bring between $6.1-6.3 million, Productivity and Business Processes $6.4-6.6 billion, and More Personal Computing $8.7-9 billion.