The future of the cloud: hybrid models, hackers and a hell of a lot more money

  • From today’s streaming TV and social media to tomorrow’s self-driving cars and smart cities, the cloud dominates our lives
  • Global cloud services market to hit US$278 billion in 2021
PUBLISHED : Saturday, 03 November, 2018, 9:20pm
UPDATED : Saturday, 03 November, 2018, 9:19pm

Whether you’re watching your favourite show on Netflix or backing up all-important cat photos to Google Drive, the “cloud” has become an essential part of our digital lives.

No, not those large white bodies of water vapour floating through the sky – the tech definition simply refers to having servers in remote data centres handling programs or data that people or businesses can access anywhere from devices of their choosing.

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“You name it, it’s happening in the cloud,” says analyst Rob Enderle from the Enderle Group marketing consultancy. “It’s really where everything is being done now.”

Century-old technology stalwart IBM is making a US$34 billion bet on cloud computing in the form of a mega-deal to buy Red Hat, a pioneering proponent of the open source movement that arose to counter giants like Microsoft whose models were based on keeping their source code secret.

The cloud is everywhere. Developers craft software in the cloud. Self-driving cars and smart cities will rely on computing in the cloud. Web-based email and company payroll systems are in the cloud. Sales teams on the road manage accounts and tap into resources in the cloud.

While businesses in the past used on-site mainframes built by IBM or its rivals, it has become cost effective for firms to rent applications or data storage hosted and maintained in the cloud by providers such as Amazon or Microsoft.

Such arrangements allow businesses to easily access more or less computing power as needed, without having to invest in data centres or system maintenance.

Companies interested in tighter control of some of the data or processes opt for “hybrid clouds”. This simply means that they let online data centres handle some of the computing work while keeping more sensitive aspects on their own machines.

Having lots of computing power available in the cloud is seen as essential for processing data in real time for innovations such as cars safely driving themselves, or cities allocating public services in real time as needs or situations change.

Mobile lifestyles ramp up reliance on cloud computing as people watch YouTube, post on Facebook, tweet, send photos to friends, and work on the go. Smartphones, tablets and laptops can open windows into immense computing power in data centres.

The more people “cut the cord” and let go of traditional cable TV, the more they turn to the cloud. Streaming television services accessible at Netflix, Amazon Prime and YouTube are hosted and powered by online data centres, as are web-based email and social media such as Facebook, Snapchat, Instagram, and Twitter.

But the cloud also comes with concerns about who is controlling and protecting data stored by third parties online.

Cloud-computing platforms are tempting targets for hackers who see gold or power in the massive amounts of information behind data centre walls. Some believe that will lead to a future with businesses preferring more balanced, or hybrid, set-ups with sensitive data kept in-house.

Amazon Web Services (AWS) is considered the leader in cloud computing, with Microsoft’s Azure platform its top rival.

“Amazon made a commitment to cloud computing, and their CEO is now the richest guy in the world,” analyst Enderle says, referring to Jeff Bezos.

Amazon announced new AWS customers including Samsung Heavy Industries last week when it reported earnings for the third quarter of this year.

In the last reported quarter, AWS net sales rose to US$6.7 billion from US$4.6 billion in the same period last year. Operating income jumped to US$2.1 billion from US$1.2 billion in the same year-on-year comparison of quarters.

Microsoft said recently that revenue from its cloud offerings to businesses soared to US$8.5 billion in the recently ended quarter, up 46 per cent from the same period a year earlier.

Alphabet-owned Google’s earnings for the third quarter showed that, while it still made the bulk of its money from online ads, the amount of “other revenue” – which presumably includes cloud services – increased to US$4.6 billion, an increase of a billion dollars from a year ago.

China-based Alibaba is considered a fast-rising contender, according to analysts.

Alibaba says it is on track to overtake Amazon in cloud business

Research firm Gartner forecast that the overall public cloud services market worldwide would grow steadily from US$176 billion this year to US$278 billion in 2021.

While consumers enjoy the benefits of cloud-hosted services, most of the money made by hosts comes from catering to the computing needs of businesses.