Introduction
Although the importance of the cloud has already emerged a few years ago, the time of settlement has come a little early due to a global phenomenon. As working from home has become commonplace, businesses that use cloud services such as Google drive, Microsoft Office, Adobe, Zendesk, and Slack are emerging compared to before. Furthermore, a service that AI predicts repetitive tasks and completes them in advance is also provided. Many companies use professional service companies because they cannot guarantee the time, cost, and expertise to build a related system. The cloud market that needs to manage and store all this enormous data will expand further and across industries. This report will analyze the trends of the cloud industry and the internal and external market conditions and discuss the possibility of the cloud industry in the future.
Cloud industry
1) Characteristics of the recent cloud industry
The cloud industry is elastic, and migration is flexible. For example, depending on the user’s needs, it is possible to use the excellent computing power at will or use the service as much as the user wants to use at any time. In addition, data can be accessed and edited from anywhere by connecting to the Internet, and multi-tenancy and resource pooling are possible. Moreover, the cloud provider provides and manages the software and data on behalf of the customer. Because the service provider manages all potential technical issues such as data, middleware, servers, and storage, customers can focus on the business while simplifying maintenance and resources.
2) Characteristics of the recent cloud industry
Current cloud trends can be classified into four categories. The first is an integrated multi-cloud, edge, and on-premise strategy. 5G will be connected, and companies such as AI and ML, blockchain, and IoT will continue to pursue cloud innovation. Companies need a multi-cloud, edge, and on-premise strategy to respond flexibly and agilely to these changes. Second, it adopts a container strategy for packaging, building, and deploying applications based on Docker containers and Kubernetes. It is a little more expensive than infrastructure management, but it is developing to a stage where serverless is preferred because it is easy to manage and operate. (refer to figure 1)
Third, it controls various workloads on the multi-cloud and distributed cloud, that is, IaaS, PaaS, SaaS, and distributed cloud solutions. As the transition to multi-cloud, including on-premise rather than one cloud, it will not be limited to merely performing governance in the cloud. Furthermore, the market is increasing its investment in cloud technology and human resources. Cloud projects involve intricate work integrating on-premise services and cloud platform services. Therefore, it nurtures or recruits related talents to organize complex tasks and design the architecture.
Figure 1
Serverless Architecture
Cloud industry (Internal)
Strengthen
- Anytime access to data
- Concurrent control
- Workload being operated in a balanced manner
- High Return on investment
- Less fear of information change
- Easy to start a business
- Saving expenses due to no maintenance fees
- Expenditure only for what the company uses
- Auto-scaling possible
Weaknesses
- Human error may occur during the operation or coding of a cloud company
- Accessible accounts are limited (there may be additional costs)
- Not inexpensive to use
- High data transmission cost
Opportunity
- Expandable to the global market
- Low barriers to entry for new companies
Threats
- Data security
- Competition between big players (Amazon vs. IBM)
However, cloud services are costly in the long run. Expenditure can be considerable because a cost is calculated using system equipment cost, human resources cost, and technology cost. The more the platform service is used, or the more technology provided by the cloud is used, the higher the cost of using the cloud. As users become more familiar with cloud computing services, their dependence on the cloud will grow. Cloud service is an outsourcing concept, so if there is no infrastructure-related workforce in the company, it has no choice but to rely on it. The most significant risk among these is also security. With the cloud, corporate data, whether more or less, is inevitably stored in the cloud. All cloud providers agree that they do not view customer data from inside or provide it to the outside, but companies are indeed anxious. Many managers are dissatisfied
3. The Five-Forces Model of the Cloud Industry (External)
1) Threat of new entries
The entry barrier is low. Because it is a technology-intensive market, any company can always enter the market if they have compatible talent or technology. Therefore, the level of threat is high. Figure 2 shows the market shares of mega-companies account for a much smaller proportion than the rest. That is why startups are still entering the cloud market even now. Moreover, as government policies are also being adjusted to the market trend, entry is more accessible.
Figure 2
Public Cloud Services, 2019 Market Shares
2) The bargaining power of buyers
Since the range of technology and service is diverse, the buyer’s bargaining power is determined depending on which products are used. So, the power is medium. Some products are specially developed for a specific field of expertise, and their quality is incomparable to competitors. However, in the case of high accessibility such as Google Drive or Slack, the bargaining power of the buyer is bound to increase.
3) The bargaining power of buyers
In a similar context to the bargaining power of buyers, it can vary depending on the brand value and whether or not it is a monopoly. However, in general, its power is low because data migration should be easy, and software or hardware should be manipulated according to buyers’ needs.
4) The threat of substitute products and services
As for substitutes, as shown in Figure 2, there are no companies with high market share yet. In particular, IT companies are rapidly advancing, so they are likely to be quickly engulfed by new technologies. Thus, it would be considered as an innovative technology rather than a substitute. So it is difficult to see it as a substitute, so the threat is analyzed as low.
5) The intensity of rivalry among competitors in an industry
Most large companies often offer similar products among their competitors to increase accessibility. That is why competition is severe. It is not clear to expect a high ROI without efforts to increase security or improve functionality.
While demand continues to grow, the cloud market is attractive because technology is still in its infancy and can be started with relatively little capital compared to other industries to start a business. If any company develops innovative and differentiated technologies through research and development, the possibility of advancing and success is open.
4. Conclusion
Cloud services are growing at a high level. According to market research firm IDC, in particular, the SaaS market is expected to grow from $13 billion 10 years ago to $157 billion this year, more than 10 times. In addition, the universalization of SaaS, regardless of the field, as expected to exceed $200 billion in three years, is a foreseen future. However, it is still inconsistent and inefficient. Fortunately, recognizing the necessity and convenience, the introduction of SaaS-based Human Capital Management (HCM) is increasing this year due to the spread of non-face-to-face business. HCM is a company-wide human resource management process that technically supports ‘employee compensation’ beyond hiring and job management included in HR and further, detailed communication between members of the organization. It simplifies repetitive workflow procedures in areas such as human resources and finance and strengthens the linkage system for each department. Oracle is also using a strategy to expand its influence over enterprise management services in addition to enterprise cloud infrastructure services after turning the company’s direction around the cloud two years ago.
Meanwhile, ‘cloud all-in’ companies that convert enterprise-wide management processes to SaaS are also expected to increase rapidly. COVID-19 has thrown at companies around the world this year is also the acceleration of digitalization. This sudden pandemic gives an alert to companies that relied on office-oriented business processing and analog personnel management. Therefore, in the era of COVID-19, regardless of field, it is expected that companies’ basic strategy will be to prepare for uncertainty by converting physical and human resources to cloud-based.
However, since the market is still in its infancy, a lot of research is needed on how to properly adjust the most vulnerable, the security and data transmission capacity. In particular, articles related to the Canadian cloud show that they are most sensitive to security. However, rather than avoiding it, Canada should be exposed to this field more with global changes. Data should be encrypted and separated according to its sensitivity, and access control or robust authentication procedures can be developed first to reduce the vulnerability in the Canadian market.
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