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FEATURE Five vectors of progress in cloud computing How companies are looking to get more value from cloud David Schatsky, Amit Chaudhary, and Amanpreet Arora SIGNALS FOR STRATEGISTS
Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
Most companies have shifted some processes to the cloud, aiming to reduce
IT capital spending and speed service delivery. But cloud can be much
more—including serving as a platform for enterprise digital transformation.
A
LARGE MAJORITY OF enterprises are using • Five industry groups are expected to spend
cloud computing, but IT directors have nearly US$45 billion in industry-specific cloud
committed relatively few resources to the solutions in 2019, up from US$37.5 billion
cloud—perhaps because the connection between in 2018.3
budget and value can be unclear. The five vectors
of progress described here can help drive broader • Since 2018, tech companies have spent more
and deeper adoption of cloud computing and than US$1.5 billion to acquire more than a
enable enterprises to get more value from their dozen startups enabling cloud-
shift to the cloud. native development.4
• The market for serverless computing is forecast
Signals to grow by 33 percent each year and reach
US$7.7 billion by 2021.5
• A Deloitte survey found that 49 percent of com-
panies that have deployed artificial intelligence • AWS, Google, and Microsoft are all offering
(AI) today are using cloud-based services. 1
support for hybrid clouds.6
• Media mentions of “data classification” While three-quarters of enterprises have adopted
increased by 59 percent in 2019 over 2017.2 the cloud to some degree,7 leaders have moved only
2Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
20 percent of business processes to the cloud, that drive IT infrastructure decisions.13 Technology
according to Ovum, a technology market market research firm Tractica forecasts that AI will
researcher.8 This suggests that companies have a account for as much as 50 percent of total public
ways to go in utilizing the cloud as a platform for cloud services revenue by 2025: AI adoption means
enterprise digital transformation, not just as a way that, “essentially, another public cloud services
to lower IT capital expenditure and accelerate ser- market will be added on top of the current
vice delivery. The vectors of progress discussed market.”14
below could drive faster adoption of cloud and help
companies derive additional value from it.
Automated data classification
The adoption of AI Traditional IT environments employ a perimeter-
based approach for security—keeping out bad
Many enterprises are increasing their AI invest- actors—whereas the cloud relies on authentication
ments at a fast pace—indeed, IT market researcher and authorization: identifying who should be able
IDC projects that spending on AI systems will grow to do what with which assets.15 Hence, an outright
at an annual rate of 38 percent in the coming years, lift-and-shift of legacy workloads to a public cloud
exceeding US$79 billion globally in 2022. AI9
can result in unwanted data exposure and regula-
investment is having a major impact on every tory noncompliance. A recent IDC survey suggests
aspect of business, from strategy to IT infrastruc- that security concerns are now the main reason
ture—including the adoption of cloud computing. companies are migrating applications and data
from a public cloud to an on-premise or private
Cloud vendors are stoking demand for AI technol- cloud.16 There are ways to gain finer-grained con-
ogy by offering a growing number of tools and trol over data in the cloud, and automated data
services that make it easier to develop, test, classification is making this job easier.
enhance, and operate AI systems without big
upfront investments. These include hardware opti- Data classification tools categorize workloads and
mized for machine learning, application data to be migrated based on sensitivity and busi-
programming interfaces that automate speech rec- ness impact. This makes it possible to adopt a
ognition and text analysis, productivity-boosting tailored and granular approach to securing the dif-
automated machine learning modeling tools, and ferent assets. Amazon, Google, and Microsoft all
AI development workflow platforms. All this is offer classification capabilities that integrate with
making it easier for enterprises working in AI to their cloud solutions.17 Security providers have also
adopt cloud-based AI services. For instance, partnered with cloud providers to support auto-
Walgreens plans to use Microsoft’s Azure cloud- mated data classification. For example, a leading
based AI platform to develop new health care computer security software firm’s solution for AWS
delivery models,10 while one of the world’s largest automates data classification and the identification
shipbuilders is using AWS to develop and manage of assets that require security audit.18 Globally,
autonomous cargo vessels.11 The American Cancer spending on data classification solutions is growing
Society uses Google’s machine learning cloud ser- at 25 percent annually, according to one
vices for automated tissue image analysis.12 projection.19
The symbiosis between cloud and AI is accelerating Increasingly, these tools use machine learning to
the adoption of both. Indeed, Gartner predicts that more effectively classify content such as personally
through 2023, AI will be one of the top workloads identifiable information or sensitive commercial,
3Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
military, and government data.20 This can expand industry cloud market to expand at accelerating,
the range of data and apps that can be migrated to double-digit rates through 2021. In 2019, five
the cloud with confidence. Automated data classifi- industries alone—health care, finance, manufactur-
cation tools allowed US-based car shopping and ing, public sector, and retail & wholesale—are
information platform, Edmunds, to better discover, expected to spend nearly US$45 billion on industry
classify, and protect its data in the cloud; adminis- clouds, up from US$37.5 billion in 2018.25
trators received actionable information about
potential threats, including threats otherwise diffi- Industry clouds can handle data sources, work-
cult to notice.21 flows, and compliance with standards that are
unique to an industry. And by aggregating the data
All of this can make for a more secure migration of from multiple clients, an industry cloud vendor
legacy systems to the cloud, facilitating the protec- may be able to offer additional benefits such as
tion of assets against theft or loss as well as industry insights or benchmarks. For example, an
compliance with regulatory standards, such as the industry-focused cloud by a US-based network-
Health Insurance Portability and Accountability enabled services provider targeting the health care
Act (HIPAA) or General Data Protection Regulation sector helps manage large volumes of EHR data
(GDPR). This vector of progress is helping to drive with HIPAA compliance and offers health care–
migration to the cloud by lowering the cost of man- specific services such as handling medical billing
aging risk and protecting data assets in the cloud. and care coordination. The company also claims to
enhance workflows with insights drawn from the
collective data of nearly 160,000 providers and 100
Industry clouds million patients.26
Some companies may not want to confront the Industry clouds provide a ready-to-use environ-
challenges of migrating core legacy applications ment with tools and services tailored to a specific
that have been customized over the years to meet sector’s operational requirements, helping to lower
industry-specific requirements. Others may want the barriers to adoption of the cloud there.
to upgrade their systems to support modern oper-
ating models without necessarily building
everything from scratch. Industry clouds can pro- IT operations and software
vide an attractive pathway for such organizations development models
to take advantage of the cloud.
IT organizations are looking to the cloud to reduce
Industry clouds—cloud-based applications tailored costs and increase business agility.27 But traditional
for a specific industry—are becoming increasingly IT operating styles—manual and siloed processes
popular. IDC finds that companies are already to deliver monolithic applications—can limit these
demanding industry-specific solutions and exper- benefits. The growing adoption of new IT operating
tise from their cloud service providers. In
22
models such as DevOps and new application devel-
response, many cloud vendors and SaaS players opment paradigms such as cloud-native
such as AWS, Google, Microsoft, and Salesforce are development is helping organizations wring more
expanding their portfolio of industry-specific offer- value from the cloud.
ings.23 The industry cloud landscape also includes
niche sector-focused players, such as Accela for DevOps fosters collaboration between the software
government, Veeva for life sciences, and Viewpoint development (Dev) and IT operations (Ops) teams.
for construction.24 Overall, IDC expects the It also automates processes,28 such as for testing
4Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
and deploying code, to enhance delivery efficien- update deployment, reducing the time taken to
cies beyond what is achievable with cloud adoption minutes from hours.33
alone. A CA Technologies survey found that cloud
adoption improved software delivery performance As enterprises evolve their IT operations and app
in terms of speed, predictability, quality, cost con- development models to take fuller advantage of the
trol, and customer experience by 53 percent. cloud, they have the opportunity to capture more
Combining DevOps with cloud improved perfor- benefits from it. This vector of progress is creating
mance by 81 percent. This vast potential for a stronger business case for migration to the cloud.
improvement is driving robust DevOps adoption,
with IDC forecasting the market for DevOps tools
to have a five-year CAGR of 15 percent and reach Hybrid cloud
US$8 billion by 2022. 29
Migration to a public cloud can be complex, time-
For some enterprises, IT operating models are consuming, and expensive because it may
evolving further, to “NoOps” and serverless envi- necessitate substantial changes to their legacy
ronments in which cloud providers automate many apps.34 For many companies, not only are their leg-
systems administration tasks and take over infra- acy apps not ready for the cloud now—they may
structure and security management. This can yield never be ready, for reasons including architectural
substantial cost savings and other benefits.30 incompatibility, data ownership, and compliance.35
This fact can dampen enthusiasm for adoption of
Meanwhile, new application development models the cloud. But hybrid cloud architectures provide a
are also helping enterprises get more value from way for enterprises to take advantage of the cloud
the cloud. Cloud-native development that leverages where appropriate while leaving some legacy appli-
containers and microservices, though still nascent, cations in place, on-premise.
is on the rise. In a 2018 survey by platform-as-a-
service provider Cloud Foundry, 20 percent of IT Hybrid clouds are a mix of on-premise, private
decision-makers were focusing primarily on new cloud and third-party public cloud with a degree of
cloud-native development, up 5 percentage points workload portability, integration, orchestration,
from 2017.31 Insights from Deloitte’s Open Source and unified management, such that workloads can
Compass tool reveal that there were more than move between the two environments.36 In a 2018
29,000 microservices-related GitHub contributors Microsoft survey, 67 percent of IT professionals
in 2018, a 45 percent annual increase, confirming and business decision-makers were already using
the progress of cloud-native development. or planning to deploy a hybrid cloud, with
54 percent of users choosing hybrid recently—in
Cloud-native development can unlock even greater the past two years.37 Recent offerings by vendors
savings, and other benefits, from the cloud. 32
such as Google and Microsoft enabling centralized
Containerization reduces applications’ compute management of workloads across the various envi-
footprint to reduce costs, while also making apps ronments will likely further encourage more
modular to support extensibility and rapid devel- organizations to adopt hybrid clouds.38
opment. For instance, a leading education services
provider’s adoption of microservices and contain- With a hybrid cloud, enterprises can gain the ben-
ers for its applications in the cloud reduced the efits of public cloud for scalability, business
number of virtual machine instances by 70 percent, continuity, external collaboration, and access to
resulting in 40 percent cost savings per application. cutting-edge technologies for innovation while
Containers also enabled automation of application retaining the on-premise option for certain legacy
5Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
apps. For instance, Deutsche Bank has adopted a the cloud as a way to blend new and legacy technol-
hybrid cloud infrastructure, with some technolo- ogies best suited to their unique requirements.
gies already in production hosted on-premise,
along with “massive-scale [public] cloud resources.”
This has enabled the bank to run more than Capturing more value from
40 percent of its workload on 5 percent of its total the cloud
infrastructure, reducing the time taken to go from
proof-of-concept to production from months to The evolution of cloud computing has been
weeks.39 Moreover, hybrid cloud can let enterprises remarkable. The journey from the “No Software”
retain data within their enterprise boundary and campaign that Salesforce used in its early days to
simultaneously leverage AI-powered services deliv- today has seen not only a rapidly growing market
ered exclusively through the cloud. 40
and vibrant innovation but a shift in mindset and
practices pointing toward a new IT operating
The improvement and adoption of hybrid cloud model and software development paradigm. The
management platforms is a vector of progress five vectors of progress in cloud computing dis-
likely to encourage more enterprises to embrace cussed here are continuing to propel this evolution.
6Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
Endnotes
1. Jeff Loucks, David Schatsky, and Tom Davenport, State of AI in the enterprise, 2nd edition, Deloitte Insights,
October 22, 2018.
2. Quid analysis.
3. TeleAnalysis, “Top 5 industries to spend $45 bn on industry cloud solutions by 2019,” December 17, 2018.
4. Deloitte analysis of CB Insights data. M&A deals analyzed between January 1, 2018, and July 3, 2019, for
startups associated with cloud-native, Kubernetes, docker, microservice, and containerization. Searched on CB
Insights, July 3, 2019.
5. CB Insights, “Why serverless computing is the fastest-growing cloud services segment,” September 2, 2018.
6. Vendor hybrid cloud offerings: Michael Cooney, “AWS does hybrid cloud with on-prem hardware, VMware
help,” NetworkWorld, November 29, 2018; Anthony Spadafora, “Google Cloud launches new Anthos open
platform,” TechRadar, April 10, 2019; IBM, “IBM unveils new offerings for faster and more secured path to
hybrid cloud,” February 12, 2019; Will Calvert, “Microsoft launches Azure Stack HCI,” Data Center Dynamics,
March 26, 2019.
7. IDG, “Cloud’s coming of age,” September 5, 2018.
8. Panos Mourdoukoutas, “IBM’s big bet on ‘hybrid’ cloud, will it work?,” Forbes, December 1, 2018.
9. IDC, Worldwide semiannual artificial intelligence systems spending guide, March 2019.
10. Meg Bryant, “Walgreens to use Microsoft’s cloud, AI platform,” Healthcare Dive, January 15, 2019.
11. Martyn Wingrove, “Amazon cloud will help shipbuilder develop autonomous shipping,” Riviera, August 13, 2018.
12. Google Cloud, “American Cancer Society: Analyzing breast cancer images faster and better with machine learn-
ing,” accessed July 12, 2019.
13. Katie Costello, “Gartner predicts the future of AI technologies,” Gartner, February 13, 2019.
14. Tractica, “Artificial intelligence market forecasts,” 2019.
15. Frank Simorjay, “Data classification for cloud readiness,” Microsoft, 2014.
16. Mark Haranas, “Businesses moving from public cloud due to security, says IDC survey,” CRN, August 13, 2018.
17. Heidi Shey et al., “Rethinking data discovery and classification strategies,” Forrester, July 10, 2018; Google
Cloud, “Automating the classification of data uploaded to cloud storage,” accessed July 17, 2019; AWS, “Amazon
Macie,” accessed July 12, 2019.
18. Help Net Security, “McAfee Database Security brings enhanced security to Amazon RDS,” June 3, 2019.
19. Research and Markets, “$1.66 bn data classification market—global forecast to 2023: Integration of AI and ML
into data classification presents lucrative opportunities,” PR Newswire, January 16, 2019.
20. Shey et al., “Rethinking data discovery and classification strategies”; Jonathan Bordoli, “AI in content manage-
ment supports tagging, search,” TechTarget, January 2019.
21. AWS, “Edmunds uses Amazon Macie to increase data visibility and security,” accessed July 12, 2019.
22. IDC, “Worldwide spending on industry cloud by retailers and wholesalers forecast to reach $6.1 billion in 2018,
according to IDC,” December 14, 2018.
7Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
23. Mainstream cloud vendors’ recent industry-specific activities: AWS, “Announcing the AWS GovCloud (US-East)
region,” November 12, 2018; Ron Miller, “Google Cloud takes aim at verticals starting with new set of tools
for retailers,” TechCrunch, April 10, 2019; Microsoft, “Microsoft and RIB join forces to create the world’s No. 1
vertical cloud for the construction and real estate industries,” April 20, 2018; Salesforce, “Solutions: Industries,”
accessed July 12, 2019.
24. Niche industry cloud players: Accela; Veeva; Viewpoint—all accessed July 12, 2019.
25. IDC, “Worldwide spending on industry cloud by retailers and wholesalers forecast to reach $6.1 billion in 2018,
according to IDC.”
26. Athenahealth, “The athenahealth network,” accessed July 12, 2019.
27. Caroline Brown, “The state of cloud adoption,” CIO Journal, November 11, 2018.
28. Mike Kavis and Michelle Shuttleworth, “Beyond automation: Transforming IT with DevOps,” CIO Journal,
December 2, 2018.
29. Jim Mercer et al., “Worldwide DevOps software forecast update, 2018–2022,” August 2018.
30. Ken Corless, Kieran Norton, and Mike Kavis, NoOps in a serverless world, Deloitte Insights, January 16, 2019.
31. Cloud Foundry, “Where PaaS, containers and serverless stand in a multi-platform world,” June 2018.
32. Scott Buchholz and Gary Arora, “3 reasons to go cloud-native,” CIO Journal, August 27, 2018.
33. AWS, “Kaplan adopts containers on AWS, cutting costs and deployment times,” accessed July 12, 2019.
34. Kurt Scherer and Bob Black, “Hybrid cloud to the rescue,” CIO Journal, January 16, 2018.
35. Bob Black and Luis Benavides, Factors leading to the rise in hybrid cloud adoption, Deloitte Insights, June 5, 2019.
36. Margaret Rouse, “hybrid cloud,” TechTarget, January 2019.
37. Ellen Ernstberger, “A quick take on the State of Hybrid Cloud survey,” Microsoft Azure, August 28, 2018.
38. Chris Kanaracus, “Expansions to VMware Cloud on AWS continue hybrid cloud push,” TechTarget, March 19,
2019; Anthony Spadafora, “Google Cloud launches new Anthos open platform,” TechRadar, April 10, 2019;
Microsoft, “Red Hat and Microsoft fuel hybrid cloud development with Azure Red Hat OpenShift,” May 7, 2019.
39. Red Hat, “Deutsche Bank activates digital transformation with Red Hat,” May 6, 2019.
40. James Sanders, “Hybrid cloud: A cheat sheet,” TechRepublic, March 29, 2019.
8Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
Acknowledgments
The authors would like to thank Ranjit Bawa, John Tweardy, David Linthicum, Mike Kavis, and Tim
Potter of Deloitte Consulting LLP, and Navya Kumar and Aniket Dongre of Deloitte Services India
Pvt. Ltd.
About the authors
David Schatsky | dschatsky@deloitte.com
David Schatsky is a managing director at Deloitte LLP, based in New York. He analyzes emerging tech-
nology and business trends for Deloitte’s leaders and clients. Before joining Deloitte, Schatsky led two
research and advisory firms. Connect with him on Twitter @dschatsky.
Amit Chaudhary | achaudhary@deloitte.com
Amit Chaudhary is a principal at Deloitte & Touche LLP, based in McLean, Virginia. He leads the Cloud
Engineering Offering for Deloitte, where his focus is on positioning Deloitte as the leader in cloud tech-
nology. Connect with him on LinkedIn at www.linkedin.com/in/amit-chaudhary-8773717/.
Amanpreet Arora | amaarora@deloitte.com
Amanpreet Arora is an assistant manager at Deloitte Services India Pvt. Ltd., based in Mumbai. He
tracks and analyzes emerging technology and business trends, with a primary focus on cloud, for
Deloitte’s leaders and its clients. Connect with him on LinkedIn at
www.linkedin.com/in/amanpreet-arora-49b89220/.
9Five vectors of progress in cloud computing: How companies are looking to get more value from cloud
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David Schatsky
Managing director | US Innovation | Deloitte LLP
+1 646 582 5209 | dschatsky@deloitte.com
David Schatsky is a managing director at Deloitte LLP.
Amit Chaudhary
Principal | Deloitte Consulting LLP
+1 703 251 1000 | achaudhary@deloitte.com
Amit Chaudhary is a principal at Deloitte & Touche LLP, where he leads the Cloud Engineering offering.
10Deloitte Consulting’s Cloud Services combines business acumen, integrated technology services, and a creative, people-first approach to enable enterprise transformation through innovative ap- plications of cloud. Contact the authors for more information or read more about cloud services on Deloitte.com.
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