The Public Cloud Will Not Benefit Everyone

01/13/2016 10:47 am EST

Focus: TECHNOLOGY

Michael Berger

President & Founder, Technical420.com

The adoption of public cloud services will not benefit companies focused on infrastructure outsourcing and licensed software maintenance work; here, Michael Berger, of Technical420.com, highlights three companies he expects to be negatively impacted in 2016.

Advancements in technology have changed the way people interact, how companies do business, and certainly how we live. One of these advancements impacts the distribution and consumption methods within the Informational Technology industry. This advancement is the public cloud and the opportunities are massive.

The adoption of public cloud services has had broad implications on all technology sectors. In a public cloud model, data center resources move to a multi-tenanted warehouse typically operated by a third party and accessed over the Internet.

2016 Will Be an Inflection Point for Cloud Adoption

We expect 2016 to be an inflection point for public cloud adoption for enterprises. In 2014, public clouds accounted for 30% of all data center traffic (36% higher than 2012). During 2016, we expect to see this migration continue as more companies realize the benefits of migrating to the cloud.

The drivers of this migration have been primarily related to overarching economics. Migrating over to the cloud allows enterprises to realize an improved ROI, as well as greater business agility and flexibility. Another factor driving this migration is that the product offerings are suitable for everyone—including governments—on account of the security advantages. Advancements in technology continue to improve product offerings and we expect this to be a major catalyst driving the migration.

Public Cloud Adoption Does Not Benefit Everyone

The adoption of the public cloud will not benefit everyone. Cloud companies help drive the adoption of new architectures that push value away from traditional hardware solutions. The adoption of the public cloud will be a headwind for companies focused on infrastructure outsourcing and licensed software maintenance work. Three companies that we expect to be negatively impacted by public cloud adoption include: International Business Machines Corporation (IBM), Hewlett Packard Enterprise Company (HPE) and VMware, Inc. (VMW).

IBM will see its hardware and packaged software businesses negatively impacted as companies continue to move over to the public cloud. The negative impact will be partly offset by growth in IBM’s analytics business, as well as its public and managed cloud business.

HPE has an industry leading position in servers and software businesses. The ongoing shift to the public cloud will impact these businesses due to the adoption of commodity hardware. The downside will be partly offset by solutions that help migrate customers to the hybrid cloud.

VMW faces a couple of challenges when it comes to the public cloud. The company is seeing more of its workloads move to the public cloud. VMW also got on the public cloud bandwagon pretty late with its vCloud Air business. Although this business is growing rapidly, it only represents 3% of total revenue at VMW.

Michael Berger, Founder and President, Technical420.com

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