Cloud computing is growing fast, and the competition for market share is making cloud services cheaper and convenient. With the global cloud computing market expected to exceed $176 billion in 2015, cloud providers are responding to the growth by building more data centers and increasing spending on the capacity of their cloud computing businesses. The e-commerce giant, Amazon is a leader in cloud computing, together with Microsoft and Google. Amazon invested $9 billion in 2014 to increase the size of its cloud computing business, Amazon Web Services (AWS). AWS revenues are expected to grow by more than 50% every year, having earned $5 billion in 2014.
The market research firm, Gartner, expects global spending on cloud services to hit the $240 mark in 2017. The competition battle among providers has led to a fall in cloud computing costs and increased uptake of the service by businesses. The price-based competition among cloud providers has led to a risky rapid expansion: More data centers enable cloud providers to enjoy economies of scale but they risk making losses and reducing their profit margins. Citigroup bank estimates that cloud computing prices have fallen by 25% within the last three years, and expects them to decline further in the coming years. The falling price of cloud computing and its increasing convenience is affecting how IT is run within companies.
Lower IT Costs and More Sales
Cloud computing reduces IT costs (hardware, software and IT personnel) for businesses. Cloud computing uses remote servers to store and process data, and business are making huge savings by storing and processing data in the cloud. With cloud services, businesses do not need to buy many servers and hire many server maintenance engineers. In addition, businesses are increasingly changing the way they store customer and employee data such as mailing lists and customer accounts by utilizing cloud-based customer relationship management (CRM) software for data integration and aggregation to increase sales and improve customer experience.
Increased Employee Productivity
Cheaper cloud computing increases productivity of IT employees. The increased data processing capability and access to data from anywhere through the internet not only saves time and energy but increases employee output. Cheaper cloud services are fueling the development of cloud-based apps that earn revenue and boost employee productivity. Companies are developing, testing and running apps and softwares in the cloud. The cloud-based app, TripIt Travel Planner, increases sales by simplifying customer engagement. The Boomerang app lets employees set up email reminders, and create email sending and receiving schedules.
Better Data Security and Reliability
The cheaper cloud computing is a source of cost saving for banks. The fall in cloud prices coupled with increased reliability and security of cloud services is making businesses that have traditionally been concerned about data security and server reliability to move their computing operations into the cloud. Public cloud providers are ensuring data security by providing data encryption for data in storage and in transition.
Change in Business Model
The move to cloud computing is affecting software companies too. Businesses that move to cloud computing purchase less hardware and software. Software firms – such as Adobe, SAP and Oracle, have had to change their business model that used to bring them revenue through license fees. They are now getting revenue from subscription payments.
The biggest change in business operations will perhaps come from server hardware manufacturers such as NEC, HP, Intel and Dell. To reduce the huge cost of buying a lot of servers, cloud providers are designing their servers and then turning to cheaper server manufacturers to have them built. These new servers mostly run on open-source software, further putting pressure of paid-software firms. These IT changes due to the increase in cloud computing are forcing major server manufacturers to change their “modus operandi”: In addition to its core computer hardware business, IBM is now offering cloud services through SoftLayer, the cloud provider it acquired in 2013. We can expect more changes in the way IT is run in companies as cloud computing, print services and storage continue to be the fastest growing sector of IT infrastructure services.