Cloud computing has reached “peak centralisation”, Microsoft CEO Satya Nadella said at the company’s Ignite user conference last week, with businesses demanding more “sovereignty” over their data. His comments imply an inflexion point in the evolution of the cloud market, which to date has been highly concentrated in a few vendors (including Microsoft) that operate gigantic facilities. Could this spell the end for AWS’s dominance?
Nadella used his keynote at the conference last week to reflect on “how the cloud will change over the next decade and the innovation our changing world will require from the cloud”.
“We will need to foundationally transform how cloud can drive the next level of broad economic growth that everyone can participate in,” Nadella said. “As computing becomes embedded everywhere in our world transforming how we interact with people, places and things, and as physical and digital worlds converge we will require more sovereignty and decentralised control.
“Cloud and edge computing will evolve to meet all of these real-world needs.”
Microsoft cloud strategy: moving out from the centre
“In essence, he’s talking about the build-out of the cloud from a centralised data storage and compute perspective which we’ve seen over the last few years,” explains Nick McQuire, chief of research, enterprise at tech analysis firm CCS Insight. “We’ve seen these big multi-region roll-outs of infrastructure supporting more and more compute consumption and more intensive data workloads. That’s peak centralisation, and that’s the period we’re in now.”
But while infrastructure is provided by a limited number of providers, businesses are increasingly taking a hybrid multi-cloud viewpoint, using multiple public or private clouds and combining those with some on-premise storage or processing. Data from the ‘2020 State of the Cloud Report’ published by Flexera shows that, of the 750 IT professionals polled, 93% use multiple clouds, and 87% of those deploy a hybrid strategy. The most popular combination for those going hybrid is to have multiple public and private clouds, the survey revealed.
These increasingly complex set-ups mean a move to a decentralised system, at least in some sectors, is inevitable, McQuire says. “Though the centralised model will continue to grow, there’s a parallel shift towards requiring more and more compute as and where the client wants it,” he says. “That could be in my factory, on the customer’s premises, or at the edge.”
Microsoft is understandably keen to provide for both customer groups, McQuire adds. “Satya is trying to frame a ‘compute everywhere’ vision, that’s really where his speech is driving to,” he says.
Data sovereignty’s increasing importance
The popularity of hybrid cloud in part reflects the desire among both businesses and governments for greater sovereignty of data. McQuire says geopolitical tensions around the world between the US, China and the European Union has brought this issue into the spotlight. “We’ve got this situation, on the back of the Trump administration particularly, where companies and governments around the world want data residing either in country or, for customers, sometimes in their business environment,” he says. “From a regulatory, control and security perspective that makes sense.”
McQuire explains this is becoming increasingly important for businesses operating in complex regulatory environments, such as financial services. “In Europe, the regulators in certain verticals have been warning about cloud concentration risk, that you can’t have too many eggs in one cloud provider’s basket,” he says.
“A lot of that was ramped up because of Trump and what he could possibly do, and European firms were wanting to make sure they had their risks covered.” He adds that for customers, spreading workloads across different clouds ensures they don’t get “boxed in” by one provider. “You can get pushed into a corner where you lose a bit of control,” he says. “That’s why we’re seeing this talk about greater sovereignty and demand is starting to kick in.”
Azure and AWS: different approaches, same direction of travel
The challenge for Microsoft and other cloud providers is to remain vital to customer plans in an increasingly decentralised world. McQuire says the development of Azure Arc, a control plane that helps customers to manage different Azure services running across multiple environments will be key to Microsoft’s cloud strategy.
At Ignite, MSFT announced some upgrades to Arc, including the general release of Azure Arc-enabled Kubernetes, which allows Arc to connect to any Kubernetes cluster running in a variety of situations. “These could be bare metal servers in a business, which can be connected into the Arc control plane so workloads can be managed alongside those in the Azure cloud or other public clouds,” McQuire explains.
Microsoft is seeking to “own the control environment” across cloud and on-premise applications, McQuire says. “A lot of companies still have investments in data centre and compute infrastructure and want to sweat those assets,” he says. “Microsoft is saying that, if you want to run processing or storage on existing hardware that’s fine, but come through our control environment to do it and we can unify the mix of computation.”
The development of Arc and Microsoft’s willingness to embrace hybrid cloud differs from the approach taken by its main rival, Amazon’s AWS, which had a dominant 32% share of the public cloud market in Q4 2020, compared with Azure’s 20%. “Microsoft is trying to help customers unify their management environment and extend that into hardware companies have already invested in,” McQuire says. “AWS has yet to embrace heterogeneous computer hardware. It’s very much a case of you take AWS-certified hardware and connect that to the AWS cloud.”
That reticence to enable unified management across clouds and hardware platforms presents an opportunity for Microsoft and third-place cloud provider Google. But McQuire expects AWS will follow suit eventually.
“The direction of travel appears to be converging, but the conundrum is whether we’ll see AWS embrace multi-cloud at a management level,” McQuire says. “The challenge with that is Microsoft with Arc, and Google to an extent with [application management platform] Anthos, are a couple of years further down the line, so I think we’re more likely to see AWS trying to compete on hybrid, and making the AWS cloud more distributed in nature.”
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