In this 3-part ESG Video Series, ESG's Terri McCLure, Dan Conde, and Edwin Yuen talk about their expectations for the Cloud segment in 2017. This is Part 2 of 3.
Edwin: Hi, I'm Edwin Yuen, analyst for systems management, PaaS, and DevOps. I want to ask the other analysts who cover hyper-converged infrastructure and Cloud and networking what their thoughts are on what will unfold in 2017. Joining me today are Terri McClure, who covers Cloud infrastructure and Dan Conde who covers networking. Terri, how do you see the market's expectations of Cloud impacting the on-premises hyper-converged market? Are the experiences that enterprises have with public Cloud helping or hurting the adoption of hyper-converged systems in 2017? Can hyper-converged systems really mirror the benefits of public Cloud?
Terri: Good question, Edwin. I think the market is still in learning mode somewhat when it comes to hyper-converged platforms. We're certainly seeing interest and adoption though. Yes, these systems can deliver many of the benefits typically associated with using the Cloud. You can get a very granular consumption model that scales quickly and easily. The resources, they're elastic in nature and easy to manage because they're software-defined. That said, the Cloud still offers economies of scale, even faster startup and the ability to just pay for what you use. Just look at how fast AWS, Microsoft, and Google are growing. Enterprises really are adopting the Cloud. But, there also continues to be security and compliance concerns. The global regulatory landscape, it's still somewhat unsettled. Every time a security breach is announced, somewhere enterprises get the jitters. On top of that, the Cloud, at larger scales and over time, can actually be more expensive than owning the infrastructure. You rent forever. You never really pay it off. IT organizations, they're looking at the cost factors, the number of cores, VMs, egress fees, storage capacity, and over three to five years, the Cloud does get pretty expensive. While the Cloud can be complementary to on-premises infrastructures and is really ideal for those test and dev or temporary workloads as well as VC and disaster recovery, IT organizations, they're doing the math and seeing how expensive the Cloud can be. Many are looking at how they can build a private Cloud to get Cloud-like agility and elasticity of resources while buying the resources themselves. Converged and hyper-converged solutions, they're going to find a happy home in those IT shops.
Edwin: Dan, in the public Cloud market, we have a clear market leader with AWS and a strong second presence with Microsoft Azure. How do you see the two competitors happening in the market for 2017? Will Amazon continue to grow like they have in the past? Will the two companies together push out other competitors like Oracle just as they did with HP and Cisco? How will the release of Azure Stack impact the balance of the market?
Dan: I think everyone wants to know that. These two firms have good competitive offerings, and in many areas that matter for mainstream customers, they are very, very similar. Amazon is obviously ahead in market share, but Azure has an ace up its sleeve which is Azure Stack for running on-premises copies. We are still waiting for its release but I'm keeping an eye out for its adoption rates. Microsoft is not betting the farm on Azure Stack, but it's certainly a key differentiator. I think it's tough for small, general purpose Cloud providers. Small ones can survive if they can find a special niche.