Public Cloud as key enabler for innovation



  • Already today, 19 percent of German companies are in active public cloud operation, 55 percent are preparing their deployment at full speed
  • Over two-thirds of companies plan to spend at least 10 to 20 percent of their annual infrastructure budget on public cloud issues by 2020
  • The public cloud market leaders AWS and Microsoft Azure share the majority of the current public cloud budget in German companies with 60 percent
  • 79 percent of companies make use of the services and know-how of external partners both in consulting and in operations

Nordcloud and the external IT research company Crisp Research have conducted a recent study to examine the strategies and mindset for public clouds in the German midmarket and to analyze the demands on managed public cloud providers. German companies are increasingly focusing on the public cloud and are dependent on the external expertise of IT service and consulting providers.

The study, which surveyed a total of 160 IT, digitization and business decision-makers, shows that the majority of German companies are already involved with the public cloud today. 19 percent are already actively using the public cloud in the form of Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), while a full 55 percent are in the implementation or active preparation phase. Half of the companies prefer a phased relocation of their application and infrastructure portfolios, 33 percent design the cloud migration “all in”, i.e. the entire application portfolio is planned as a large-scale transformation project.


Trend towards dual and multi vendor strategy

Since the functional scope, complexity and speed of innovation of public cloud platforms are now very high, more than half (53 percent) of the companies surveyed specifically rely on two strategic cloud providers. In addition, a total of 18 percent stated that they used more than two providers. As reasons for a dual or multi vendor strategy, 34 percent cited the minimization of the risk of a vendor lock-in as the reason, 41 percent also estimated the possibility of global coverage of the data center locations as enablers for international rollouts of their new digital services.


Investment in the public cloud on the rise

In addition, more than two-thirds (72 percent) of respondents said they would invest at least 10 to 20 percent of their infrastructure budget for IaaS and PaaS in the public cloud by 2020. Around a quarter (26 percent) even plan to shift between 20 and 50 percent of their infrastructure budget to public clouds. On average, 27 percent of the cloud budget is allocated to pure cloud operation. At 60 percent, the public cloud majors AWS and Microsoft Azure share the majority of the current public cloud budget for IaaS and PaaS in companies, although providers such as Google Cloud Platform, IBM and Alibaba also play an important role in German-speaking countries.


Managed Public Cloud Providers in Demand as Experts

Since both the transformation into the public cloud and the operation of these systems are in part highly complex, the vast majority of the companies surveyed (79 percent) rely on the support of external service providers. 52 percent said they worked with one, 19 percent with two managed public cloud providers. The external expertise is used in almost all areas, from the cloud strategy (64 percent), monitoring and management (54 percent) and the development of the API strategy (51 percent) to the development of DevOps operating concepts (51 percent). Managed Public Cloud Providers thus have a high strategic relevance.

“In order to remain competitive in times of digital transformation, companies should increasingly rely on cloud computing technologies,” comments Uli Baur, Country Manager Nordcloud DACH. “Our study results make it clear that more and more German companies are aware of this necessary step and are therefore already preparing the implementation and planning to use more resources for cloud operation and all associated processes in the future. Through partners like Nordcloud, the numerous changes can also be mastered by companies that themselves lack the necessary specialist staff and know-how.”

Download the Nordcloud study in German here

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    “SAAS over PAAS over IAAS over my own data centre” – some thoughts



    This is a headline from a quote which came from my friend, a C-level executive in one of the biggest corporations in Finland. You might wonder why, as a representative of a company that doesn’t particularly preach cloud*, and doesn’t provide a full set of services for managing key SaaS components like ERPs or CRMs, I would bring up the topic.

    Naturally, I want to talk about the role of custom-built software running on PaaS. I agree that when SaaS does the trick, you should choose it over a custom PaaS-application.

    Let’s start with the easy part: Why is PaaS superior to IaaS?

    There are a number of reasons:

    • Capacity is dirt cheap
    • Labour is expensive
    • Capacity is getting cheaper rapidly
    • Labour costs are increasing.

    You should focus on saving labour, and this is fundamentally what using PaaS means. Your software development projects will ultimately end up costing less. Finding the cheapest possible capacity should save you a couple of hundred euros/pounds/dollars per month. On the other hand, finding the most efficient development platform saves you months in development costs and crucially, in time to market.

    You might find this irrelevant if you want to use SaaS for everything, but unfortunately, you can’t. There might be a service for each of your needs, but how are you going to win overall in the marketplace?

    Every company today runs their business processes digitally. When you use SaaS, you’re essentially using the process the vendor has defined, which in a lot of cases are world-class. Using these processes ensures you’re competitive, but by definition, they are not unique and you can’t build competitive advantage with them. When you look at your strategy and understand how are you going to be different from your competitors, you’ll understand when and where you’re going to need PaaS.

    For me, this makes PaaS somewhat superior to SaaS. The things we develop run at the core of our customers’ strategy. We make a real impact. Ultimately, a partner such as Nordcloud will help you win.

    There’s enough market demand with the believers to spend time on educating the non-believers (!)

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      Transforming enterprises through cloud infrastructure



      AWS provided the Enterprise Summit audience with a real treat. Lydia Leong, Gartner VP and Distinguished Analyst, shared her views of the cloud infrastructure market and implications to enterprise IT. Her valuable insights are solidly backed with 15 years at Gartner and 22 years of industry experience.

      Two messages in her presentation resonated with me in particular. Her first main theme was the concept of a bi-modal strategy for enterprises’ approach to cloud infrastructure as a service. The second message was how the IaaS market is likely to develop.

      A Bi-Modal Strategy

      The foundation of the bi-modal strategy is that enterprise IT has two very different drivers.

      • Mode 1 or Traditional:  Focuses on costs, efficiency, security and reliability in IT operations.
      • Mode 2 or Agile: Typically business line funded and focuses on taking calculated risks in developing new applications and new business rapidly.

      Each mode reflects different expectations and perceptions of the cloud. The recommendation for enterprises is to establish a strategy that embraces both Modes, rather than trying to find “The One Solution” that really fits no-one.

      For enterprises there needs to be a transformation process. Small cloud islands – meaning new applications or separate businesses – are used to gain insights and experience on what the required organisational structures, processes and tools are. An enterprise would then create a Cloud Center of Excellence, acting as a broker to the rest of the organisation, providing cross-functional leadership and clear policies, whilst also advising on best practises and vendor management.

      Small cloud islands should be grown to new areas through replacement and extension. The target of the transformation is to eventually establish a new IT core based on agile methods. This will support the organisation and processes as well as cloud native platforms and tools. Ms. Leong stressed that the process is truly a transformation, not a gimmick – “You can’t sprinkle a bit of agile to Mode 1 to get Mode 2.”

      The Power of Scale in IaaS

      But what about the IaaS market itself? There is a very rapid evolution of the major cloud providers. Leading cloud IaaS providers are innovating like there is no tomorrow, delivering new functionalities, services and management capabilities. The distinction between IaaS and PaaS is becoming increasingly blurred. The leading cloud IaaS providers are also driving public cloud price erosion at an estimated 20% year-on-year, even if the massive price cuts have not been in the headlines. The cost reductions are delivered in a similar fashion to car or computer manufacturers, and even if the spend remains largely the same, the buyer gets so much more for their money.

      “He who dares, wins” seems to apply also to the cloud IaaS market. Ms. Leong reflected on the Gartner Cloud IaaS Magic Quadrant participants and their positioning. She estimated that 95% of the public and private cloud infrastructure market is currently captured by AWS and Microsoft Azure. Apologies, I have to repeat that – 95%! More than 50% of the companies on the Quadrant are planning to get out of the business. The market is just too competitive for the runners-up.

      The leaders are reaping economies of scale in three ways:

      1. They squeeze more efficiency from infrastructure operations.
      2. They are able to invest more in software development.
      3. They are able to build a wider and deeper ecosystem around themselves.

      Ms. Leong expects niche cloud IaaS providers to remain, but largely to serve the needs driven by data sovereignty or other legislative and regulative requirements.

      There is also the possibility of any given enterprise developing, maintaining and operating their own Do-it-Yourself cloud IaaS. From what I understood, Lydia Leong would not place her bets on that alternative as a viable and sensible option. I have to say I agree with her.

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      Let’s discuss how we can help with your cloud journey. Our experts are standing by to talk about your migration, modernisation, development and skills challenges.