Gigaom Talk at ITEXPO Explores the Future of Cloud Services

By Paula Bernier, Executive Editor, TMC

Ashar Baig, a research director at the well-respected analysis firm Gigaom Research, today at ITEXPO (News - Alert) offered his perspective on the future (and the recent past) of cloud services.

Cloud is mainstream today, noted Baig, driven forward by users’ desire for lower cost solutions, better scalability, and business agility – in that order. Concerns about compliancy, security, vendor lock in, and other factors are sometimes, but obviously not always, cloud inhibitors, however.

Given the significant interest in and demand for cloud services, there’s been a rush by service providers – existing and new – to roll out cloud offerings. In fact, Baig said, of the around 20,000 service providers in North America, about 20 percent of them offer cloud services.

But Baig predicts that there will be a lot of fallout on this front, because a lot of these companies are regional in nature and provide just one or two products. Many of these one trick pony cloud providers, he suggested, will either go out of business or be acquired by larger service providers, such as the tier 1 telcos.

The future is not particularly bright for the cloud service broker space either, he said. These are the middlemen that provide branded services from the likes of Carbonite, Salesforce, and others. But because they often don’t bring any extra value to the table, he said, their churn can be high and their days may be numbered unless they find a way to bring special, sticky services or capabilities into the mix. (This advice applies to pretty much all the cloud players actually, he said.)

The pricing of cloud services is also decreasing, he said, noting that AWS, Google, and Microsoft (News - Alert) recently lowered their prices 50 to 60 percent. Because cloud service costs have gone about as low as they can go, he added, differentiation will center on things like delivering the lowest latency or the most available service.

The good news is that the growth in data, compliance and security requirements, and the economic downturn that resulted in lower employee headcounts, all favor cloud services, he said. That helps explain why the number of cloud offerings in the market place continues to multiply.

Going forward, Baig said, we’ll also see security in the cloud improve tremendously; the introduction of higher value services (such as BC/DR offerings as opposed to just backup, as just one example); and more specialization that addresses the needs of specific verticals.