With so much public cloud growth, is Private cloud and SaaS at risk?

Written by
Etienne Gadient

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With so much public cloud growth, is Private cloud and SaaS at risk?

Written by
Etienne Gadient

With so much public cloud growth, is Private cloud and SaaS at risk?

Written by
Etienne Gadient

With so much public cloud growth, is Private cloud and SaaS dead? 

Googling current trends on the topic of cloud yields a plethora of discussion & articles referring to Amazon, Azure, and Google Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) offerings as "The Cloud".  So, is the public cloud the only form of cloud that matters anymore? 

According to Synergy Research, by dollars, Hybrid, Public & Private IaaS/PaaS  significantly outweighs Software as a Service (SaaS) spending overall.  With all of the growth in SaaS, Why is that?  

The Effect of SAAS on Public Cloud Adoption

Over the last several years, SaaS providers are shifting from Do it yourself (DIY) data centers to public cloud infrastructure to keep pace with growth.  This is due to the way that investors value SaaS companies.  According to Bessemer Partners "10 laws of cloud", for every 10% of additional growth, it can increase a cloud company's valuation by 1x.  Which means that agility is much more valuable to a growing SaaS company than unit cost…so the public cloud's ability to scale rapidly on demand is a much better investment into than focusing on saving money in your own data center. 

So SaaS is investing in the public cloud, but is that the end of our SaaS story?  Not Exactly…Once a SaaS is out of a hyper- adoption/growth phase, public cloud suddenly becomes more expensive than alternatives.  Consider DropBox, which is looking to in-source much of their public cloud deployed infrastructure to their own private cloud…to reduce cost.

So Public Cloud is More Expensive…for now

While Moore's law predicts that eventually public cloud will be cheaper than private cloud or DIY IT, it is not currently the case, from our experience.  So why are so many people adopting the public cloud? 

In our blog post, "Why speed and agility are more important than unit cost in cloud", we explored several of the business trends driving companies to value speed over the individual unit costs of deploying to cloud.  And yet, while public cloud adoption is growing rapidly, the vast majority of enterprise workloads remain part of traditional enterprise. 

So Why Aren't We Just Moving Everything to the Cloud?

When we look at the underlying cause, a typical line of reasoning is that IT hasn't had enough time to move those workloads…except, from our experience, that isn't the correct answer.   In the end, not every workload values speed and agility, in fact, in our consulting experience, the majority of applications do not have a significant rate of change that would merit the additional costs for public cloud investment, nor would they benefit directly from the platform capabilities offered. 

If we agree that traditional IT workloads  are more expensive in the public cloud than private cloud or traditional IT, then it is easy to conclude that IT needing to support rapid deployment of new software development services is a force driving public cloud adoption.   As a result, applications migrating to public cloud should be refactored/optimized for public cloud platforms that support the agility to be competitive.  This is not a universal statement, for smaller environments, the inefficiency of unit cost may still be less expensive than running their own data center/Colo and all of the supporting requirements.  But in larger scale, the majority of applications are cheaper in private cloud than the public cloud. 

The Complexity of Refactoring

Many organizations look at the sheer volume of work to refactor applications and reel. However, there is a variety of ways to approach the problem that may change your perspective.  Consider a perspective on cloud refactoring from the team that brought you Heroku who posited that "cloud enabling applications" were based on 12 factors.   When taken from this perspective, refactoring applications is not a trivial endeavor, but becomes manageable against a set of practical guidelines.   

Private Cloud IaaS and PaaS

With the majority of IT applications not needing rapid development, there must be another option for rapid deployment of Commercial Off the Shelf (COTS) or traditional IT workloads to support the rest of the enterprise in a more cost effective manner.  For those workloads, private cloud offers a compromise that many organizations are betting on.

While individual deployments and deployment costs vary, it is generally accepted that private cloud is cheaper to operate on a unit cost basis than public cloud while the public cloud enables newer capabilities faster thru platform services to enable rapid development.   And that is where a "marketplace" or "portfolio" paradigm of looking at cloud is key to the success of the modern enterprise.  For organizations supporting over 500-1000 workloads, a hybrid cloud can yield the best of both worlds having to manage costs while enabling rapid development on a subset of their applications.

For larger organizations, leveraging a private cloud ecosystem, such as OpenStack/OpenShift, along with container technology,  represents an important way to maintain vendor independence and workload portability between private and public cloud.   This will be imperative to being competitive from a cost and capability perspective, not to mention avoiding vendor lock in. 

But the Future is Hybrid…

And the data supports it.  According to the Rightscale in their 2015 "state of the cloud" report, 5% of clients are using public cloud only, 30% are using private cloud only, and 58% are using a combination of both as a hybrid cloud.  And this represents not a trend from the past, but one set to dominate the future…

…but only if you can build your private cloud close enough to your public cloud to move workloads seamlessly between them while preserving application and service workflows.

Today's IT organization must support their digital business requirements and their corresponding financial constraints as part of their reality. This rock and a hard place perspective drives a combination of hope and pragmatism that when properly executed can drive a best of both worlds approach to manage the predictability of known unit cost for private cloud along with the rapid release functionality and the scalability of public cloud. 

Note:  Future posts will discuss the necessities of building a private cloud, using OpenStack/OpenShift and why a private cloud market becomes an important ecosystem that requires workflow integration of "tool-chains".  While another will discuss network and transport considerations in building a hybrid data center and why you still may just buy a colocation presence after all…


Special thanks: Bessemer Partners, IDC, Synergy Research, Louis Columbus @ Forbes, & RightScale for supporting statistics.

Source: IDC 50th Anniversary, Transformation Everywhere. 

Source:  Synergy Research Q2 2016 Market share and revenue growthSource:  Bessemer Ventures, the ten laws of cloud

Source: Forbes, 3 Reasons Why An OpenStack Private Cloud May Cost You Less Than Amazon Web Services (AWS)

Source: RightScale, state of the cloud 2015