Virtualization and Cloud executives share their predictions for 2015. Read them in this VMblog.com series exclusive.
Contributed article by Jim Sherhart, Vice President, Connected Data
2015: The Financially Unsound Cloud Storage Market Won’t Last
In 2014 the cloud grew into a
ubiquitous presence, distrusted by celebrities, joked about in pop culture, a
storage closet for consumers, and now enterprise technology companies are
making this the new battleground to gain market share.
However, enterprise-based IT
organizations know the public storage model stumbles from a cost, privacy and
security standpoint. Meanwhile, they need to provide services that are
convenient and crucial to their business. While hardware still reigns supreme in the
enterprise storage market, the cloud is poised to increase its market share.
Studies reveal 70 percent of enterprises expressed interest in running cloud
storage, from their own datacenter. For any hi-tech vendor paying attention,
owning the enterprise cloud storage market means long-term market share growth
and profitable financial benefits.
In 2015, enterprise IT concerns
over control and privacy will peak, this will further unveil the unstable
financial and business model currently offered by public cloud storage
providers. The following points illustrate the disruption faced by this sector
A Shaky Financial Model
Despite employees enjoying the experience of public cloud services like Dropbox, companies like these are not building a
financial model to stand the test of time. In addition to the preferential tendencies
of IT organizations wanting to purchase and deploy hardware to keep storage
costs down, hi-tech vendors are struggling. The main issue? Figuring out how to
make a profit delivering public cloud storage services as they try to pinpoint a
stable model for generating revenue.
One prime example is Box. In 2014 the company lost
$168M on $124M in revenue, demonstrating the extent to which employees are
taking advantage of the Box experience is not equal to the funds coming in.
Also, Bitcasa dialed back its offering of unlimited cloud storage to
non-existent to weed out the organizations abusing the system by creating
individual storage accounts. Instead of preventing employees from using their
Dropbox or Box accounts to store work files, businesses will demand an
alternative that enables them to embrace cloud storage at a more cost-effective
level, avoiding monthly subscription fees and service contracts.
Private Cloud Storage Improves Privacy
Among business and
IT leaders, many are looking at the private cloud for its safety and ease. An
IDG Connect survey
reported the following results:
percent of business and technology decision-makers prefer private clouds
dedicated to individual companies or departments, compared to hybrid or public
percent of respondents said that providing adequate security remains the
biggest challenge for delivering cloud based services.
percent of the executives said they preferred a private cloud to fulfill key
requirements like ease of use and customer demands.
It's clear that
security is a sticking point for business organizations seeking to leverage the
conveniences of the cloud. Experts noted that the disadvantages of the public
cloud include data traveling over the open Internet to the cloud provider, a
dependence on the responsiveness of the cloud vendor, and relying on the vendor
to stick to the original terms of service.
Technology Business Research estimates the private cloud market will grow
in 2014 to $69B in 2018. Third-party
delivered private cloud solutions (as opposed to self-built), dominate at 70
percent with expectations to increase their share of the global private
market due to demand for hybrid cloud environments, companies prioritizing
security concerns for clients, and the ever growing complexity of the cloud. Plus,
the cost advantages of using some form of the private cloud are undeniable for
growing companies. Moz, a large SEO consulting company, started out with the
public cloud, and later moved to a hybrid environment, claiming to have saved $3.4M
by adopting a private solution.
In the year ahead, CIO's and IT administrators
are expected to take the lead, pushed by their business leaders to meet
employees' demands for the file sharing services of the public cloud. This push
though will lead the enterprise toward solutions in the growing private cloud market
where they are looking for the full package that offers advantages including a
financially viable outlook, more control in the data warehouse, and minimized