The Cloud-Computing Market Could Be Much, Much Bigger Than We Thought

A billion dollars isn’t what it used to be. Indeed, anyone that hanging around the cloud computing industry for the past couple of years has been barraged by $1 billion strategic commitments from big vendors like IBM and HP. While $1 billion sounds like a big number, it’s not always clear how much of those billions are being spent on hand-waving marketing versus serious cloud engineering. 

Even if we credit these efforts as serious attempts to transform old-school enterprises into new-school cloud vendors—and we should—what’s more interesting is to understand just how much business is actually moving to the cloud.

A startup out of Portland, Oregon, called Cloudability may be able to tell us. And the answer is, “far more than we may have imagined.”

Billions In The Clouds

Cloudability gives companies visibility into how much money they’re spending for cloud computing services like Amazon Web Services (AWS). Last week, Cloudability crossed the $1 billion mark in cloud spending managed by its system. That’s $1 billion in cloud spend in the three years since its founding, $999,000,000 more than the company managed in 2011.

For a still relatively small startup to be notching those kinds of numbers, it suggests that even our most optimistic estimates of cloud computing spend may be low.

Earlier this week I talked with Cloudability’s CEO, Mat Ellis to get his thoughts on the significance of its own $1 billion announcement and why cloud spending is accelerating.

One of the big shifts driving more money being spent on AWS and other cloud services, Ellis points out, is the cloud is becoming an essential part of the “compute supply chain.” In other words, rather than vertically-oriented IT services built and running within the company’s own data centers, companies are shifting more IT services to public cloud services and plugging into published APIs rather than write their own code. 

A shift is taking place away from isolated, departmental deployments to public cloud resources and instead “enterprises-wide spending.” Some of this is driven by a desire to shift spending from capital expenditure to operational expenditure. Some of it is simply driven by increasing comfort with public cloud security and performance. Whatever the reason, enterprises are clearly spending lots of money on cloud computing.

Analyzing And Controlling Cloud Spend

The growing amount of dollars going into enterprise cloud deployment is why a company like Cloudability can exist. As Ellis suggests, while everybody knows cloud is growing, “what they don’t know is the havoc it’s having inside companies as they try to manage their spending.” Developers who report into a line of business are tasked with writing applications. How is of less importance. This ‘bottom-up’ IT phenomenon is “a big reason cloud cost analytics have become mandatory for large buyers of cloud services” because, “if you’re spending lots of money on cloud, you have to manage it actively,” according to Ellis.

Which, of course, is exactly what we saw happen with the growth of the open source movement.

Open source, beloved by developers even as it was initially shunned by company executives, became part of the business fabric of software development without the business leaders ever realizing what happened. Cloud spending has followed this same path. Unlike open source, where lawyers got involved to ensure nobody was giving away critical IP, in cloud computing it’s very become a mater of managing cost.

As Ellis points out, this isn’t about cutting cloud spending, but rather about channeling it:

Cloud analytics really isn’t about cutting costs, like most people think, but rather to see where it’s happening and where it could be best spent. In fact, nearly all of our enterprise customers are using us to help them expand their cloud usage, but in a controlled and efficient way. Once you’ve demonstrated this stuff works and makes you a profit there’s really no stopping it.

Developers, Developers … Developers!

When I asked Ellis what all this means for traditional IT, his response was immediate: “The CIO role is fundamentally changing.” Not changing in a “the CIO is doomed” sort of way, but changing in terms of a fundamental shift in what the chief information officer does.

CIOs, Ellis says, generally understand that the entire way they buy, sell and support IT services is shifting. One of the biggest challenges CIOs have is when and how to really engage with the cloud. I quoted Fidelity Investments’ CIO in recently, “We know about all the latest software development tools. What we don’t know is how to organize ourselves to use them.” This is true of CIOs and public cloud services, too. The spirit is willing; the flesh proves very weak.

But the first step is to understand how their users are spending money, Ellis points out.

As for developers, cloud’s impact on them is huge, too. Ellis suggests that, “They’re now operating in territory beyond the code they write,” with “corporate visibility into their spending that forces new levels of fiduciary responsibility.” But, again, it’s not really a matter of cutting down spending, but instead “analytics tools like ours give them the ability to justify asking for more resources to do more things.”

More resources to do more things. Billions more.

Image courtesy of Shutterstock

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