Generative AI set to boost appeal of cloud computing to tech investors
▶ Analysts predict jump in novel uses in sectors such as personalised health care, self-driving cars and cyber security
The rapid evolution of generative artificial intelligence has sparked a surge in the global cloud industry, which is poised to draw substantial investments from technology funds in the coming months, industry analysts have said.
Due to its flexibility and efficiency, analysts expect a jump in novel applications of cloud technology in personalised health care, climate modelling and prediction, immersive virtual experiences, self-driving vehicles, cyber security and AI-driven creative collaborations.
“It [cloud] has now become an even bigger deal as tech companies will clearly need more plasticity in terms of handling and expanding their data offerings, both internally and to their customers,” says Thomas Monteiro, a senior analyst at Investing.com.
“Big funds that are heavily investing in tech this year need to make sure they are betting on companies that offer competitive cloud advantages ... regardless of whether these will bring profits or not … they need to show their clients they are not missing the boat.”
In the cloud industry, businesses are charged solely for the specific services or resources they use during a given time frame.
Shifting their operations to a specialised cloud system provided by dominant industry players such as Oracle, Amazon Web Services or SAP is cheaper for businesses, compared with establishing their own infrastructure of servers, hardware and security networks, experts say.
This transition significantly reduces the cost of ownership.
“Cloud has become an imperative now ... it is making the adoption of emerging technologies such as gen AI, intelligent automation and various other next-gen technologies easy,” says Harish Dunakhe, senior research director for software and cloud at International Data Corporation.
“Businesses are also demanding various functionalities that are exclusively available on cloud. This is because, their customers – millennials and Gen Z – are pushing them to deliver more value at less price and in less time.”
Globally, the cloud computing market is booming and is expected to jump by 20 per cent annually to $677.95 billion this year as businesses expedite the pace of their digital transformation, according to researcher Fortune Business Insights. It is set to top $2.43 trillion by 2030.
“The benefits of the cloud are numerous and tangible, which is why businesses are increasingly embracing it … it is enabling the delivery of cutting-edge technologies like AI and machine learning, as well as user-friendly software solutions such as collaboration tools,” says Jad Haddad, head of digital at Oliver Wyman in India, the Middle East and Africa.
“Moreover, as organisations prioritise security, the cloud offers robust cyber security measures to address the growing concerns in this area.”
However, organisations must ensure their applications are cloud-ready before they make the shift to thwart any slowdown or disruption of services.
“Increasing network speed and more democratic access to cloud storage have expedited the cloud migration ... the next technology era – whether you call it metaverse or spatial computing – will be fully dependent on cloud infrastructure to survive,” says Rolf Illenberger, founder and managing director of software development company VRdirect.
Despite the widespread use of cloud computing, analysts see more scope for growth.
“While many organisations have started to seize the technical advantages of cloud in some applications, far fewer have unlocked the full potential of cloud in support of business transformation,” says Arun Chandrasekaran, vice president at Gartner.
“Organisations are also discovering that harnessing cloud’s strengths at scale requires a more comprehensive [and] business-aligned cloud strategy ... CIOs [chief information officers] need to master three critical cloud-enabling disciplines – strategise and innovate, mobilise and migrate, and govern and secure.”
Competition in the industry is also intensifying as companies are unveiling new AI-driven cloud solutions to attract more customers.
Amazon-owned AWS, which launched faster chips and new generative AI capabilities last month to boost its cloud offerings, had a 32 per cent market share as of the second quarter of this year (down from 34 per cent a year ago), according to Statista. It was followed by Microsoft Azure (22 per cent), Google Cloud (11 per cent) and Alibaba Cloud (4 per cent).
Meanwhile, a cohort of startups, including Databricks, Snowflake, and HashiCorp, is also significantly shaking up the cloud market.
“Top cloud companies have significantly extended their leadership and built strong moats. At the same time, there are start-ups that have scaled [up] and have been successful ... as CIOs increasingly seek multi-cloud offerings and deployments,” Mr Chandrasekaran says.
Mr Dunakhe says the startups do not pose a threat to established technology players but, instead, present a “winwin-win situation”.
“Cloud start-ups would trigger the consumption of cloud infrastructure and create more opportunities for cloud-based development platforms.”
However, lack of capital could pose a potential hurdle.
“Companies with more cash on hand, more investors betting on them and a better innovation culture are more likely to succeed as they will keep on having the upper hand in hiring talent and expanding offerings towards the next innovation,” Mr Monteiro says.
Mr Illenberger said Microsoft and AWS “own the cloud market”, with the services they provide having become the backbone of computing world.
“Start-ups using their infrastructure will only strengthen their dominant market position,” he said.
The cloud computing market is booming and is expected to jump by 20 per cent annually to $678 billion this year