21 Sep Cloud computing basics and benefits
As work-from-home continues to be the new norm for many people, we examine why cloud computing has become more important for companies.
This report is part of the “New normal, new opportunities” series, in which we examine secular trends in a post-COVID-19 world. The series will cover a range of themes that are emerging as a result of social distancing, the work-from-home imperative, health care developments, corporate implications, and broader societal change. We believe identifying these trends and understanding their investment implications will be critical to navigating the road ahead. Additional reports will be released over the next few weeks.
The pandemic has provided a unique glimpse into a world where society has become hyper-reliant on digital infrastructure to communicate, transfer value, and conduct commerce. Though trends in both individual and corporate digital transformations were firmly in place prior to COVID-19, the pandemic has forced companies to cross the digital threshold with far more urgency. This report explores how COVID-19 has elevated the importance of cloud computing, bringing it to the forefront of corporate agendas, as companies seek out its increased agility benefits and efficiency gains, both of which have become pre-requisites to compete effectively in an accelerated digital world.
What is cloud computing and its benefits?
Cloud computing is perhaps one of the more esoteric terms in technology, but at its core it is essentially a remote network of computers that allows a company to easily store, manage, access, and process data using an internet connection. Cost savings and scalability are the primary advantages of using cloud as companies can avoid the investments required to build and maintain an on-premise network as well as the considerable delays associated with increasing data capacity in response to higher computing demands. In addition, the emergence of the work-from-home movement will require cloud infrastructure to support a workforce that no longer shares the same physical location. What we think is often under-appreciated is the strategic value cloud brings to the corporate table—the availability of big data and machine learning capabilities within a holistic cloud offering has given companies the power to organize and interpret its proprietary information more effectively, which in turn has translated into higher levels of consumer satisfaction and profitability, in our view. In short, embracing the cloud creates a more efficient and agile, higher-value enterprise while liberating important resources that can be redeployed towards other business investments.
Cloud deployments accelerating, but penetration remains low
In the wake of COVID-19, management teams across the globe were thrust into a posture of extreme enterprise optimization that accelerated the imperative to digitize business infrastructure including essential cloud deployments. This phenomenon is perhaps best exemplified by way of a statement made by Satya Nadella, CEO of Microsoft Corporation, in April 2020: “We’ve seen two years’ worth of digital transformation in two months…from remote teamwork and learning to sales and customer service, to critical cloud infrastructure and security”.
Despite the business community’s recent feverish pace of cloud expenditures, its representation in terms of overall global IT spending remains minimal. In 2019, according to International Data Corporation (IDC), worldwide public cloud services and infrastructure spending stood at $229 billion, representing less than five percent of global information and communication technology (ICT) spend of approximately $5 trillion. Moving forward, IDC expects worldwide public cloud services and infrastructure spending to more than double to $500 billion by 2023, this against broader global ICT spend IDC expects to grow to $5.8 trillion over the same time frame, a cloud penetration rate just shy of nine percent. In our view, though the cloud penetration percentage has likely inched higher recently, there remains a considerable upside for cloud infrastructure players to capture a growing proportion of total global ICT spend over time.
It is important to understand that cloud is a scale game, so it should come as no surprise that the early players, who aggressively built out their platforms, have become so dominant. Ultimately, in our view, the cloud thematic remains a sizeable and durable secular opportunity that should support a healthy cadence of growth for the dominant cloud infrastructure players over the longer term.
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News Source: https://www.standard.co.uk/