The Six Five team discusses the 2024 Watch List in Cloud.
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Transcript:
Patrick Moorhead: About cloud. I’m going to call my own number on this. And I think some things to keep an eye on, and you got a little bit of taste of it with the Isovalent piece is hybrid multi-cloud fabrics. And the public cloud is going to grow and the hybrid cloud is going to grow. But what I find really interesting is if I look at the ARR numbers and the percentage of growth in the hybrid cloud, it’s actually outpacing the average growth of the public cloud. Nobody wants to talk about that. And oh, by the way, I don’t get sucked into this repatriating workloads conversation because net-net more workloads are going to the public cloud than coming back. Okay, so I’m not going to get caught up in all of that. But we’re entering kind of this phase two of this hybrid multi-cloud, where no enterprises want to get version 1.0 of a hybrid multi-cloud fabric.
But we’re now getting into rev two and rev three of all of these. And whether it’s hybrid multi-cloud fabrics like Cloudera for data, whether networking and security with VMware and Cisco, and even backup and storage companies and data protection, right? All over the place. I think you’re going to see just some massive growth, maybe 100% increase in sales for these hybrid multi-cloud fabrics. And I’m pretty excited about this. I also think in cloud, so AI is going to lift all boats there. Okay, and then the only question is do enterprises have enough money to do the standard non AI? And I think that’s still a TBD, but one of the biggest things that cloud companies are trying to wrangle is simplicity. This stuff is hard, right? And you’ve seen things like Bedrock, SageMaker, Vertex, solutions like this come out.
I think those are going to, for generative AI, even get simpler. And in fact, Bedrock for example, you don’t have to pick the kind of semiconductor that you want to do the training or the inference. And I think what you’re going to start to see is more simplicity, but also being able to choose your service and parameters around an outcome, right? “Hey, I want the cheapest. I want the highest performance. I want this.” Without actually having to do, I call it bag of parts AI, which requires you to have a research team which limits AI to only the largest institutions that are out there.
So I’m expecting a lot more simplicity to come in. And the first year was really just getting ready for this stuff, but it’s just too hard. And the conferences that I’ve gone to this year, I didn’t get a lot of definitive answers on… In fact, it was more, “We’re working on it.” So I think the working on is going to translate into simple. And I think time motion studies, these cloud companies have to advertise this in terms of, hey, 27 less clicks or 100 less decisions that you need to make to get these medium-sized companies into the boat. So my final comment is I think we’re going to see even more companies doing more definitive silicon for cloud to either lower costs or maximize performance or manage supply chain.
Daniel Newman: Yeah, some very good takes there. I’m going to try to simplify a bit on the cloud. Obviously it’s talking about a lot of Oxygen from IaaS, PaaS, SaaS, you could also go to the implementers. By the way, our new data shows that on a two to one basis, those that are going to implement AI are going to do it with Accenture over any other SI. That’s how big Accenture is, it’s crazy, but-
Patrick Moorhead: Well, that also says complexity.
Daniel Newman: The complexity is substantial. But look, I actually think to some extent it’s going to be a year of… FinOps is going to be really important in cloud this year, is that as companies continue to grow and the growth of cloud will be substantial. I do think we’re going to see it falling into the 20s percentages, 20 percentage CAGR even as we come back. And I think that’s a combination of FinOps creating efficiency of buying and also companies leaning into AI and doing it at different layers of the stack, meaning it’s going to be more distributed. I think AI really… Here’s an interesting thing, but I think AI sees a big gain in SaaS. Meaning companies that democratize it and make it available at the application level are going to be very popular. You’re seeing Oracles and SAPs and companies like that, they’re actually democratizing their best AI features only if you’re running their application in cloud. Which is forcing some companies that have long stayed on-prem, this could be that forcing function that finally moves them to cloud.
But you also see, I’ve made a pick in AI of Salesforce, and the reason I made that pick in AI is because Salesforce is a really easy to consume… We can argue how easy it is to use, but you can say it’s a very easy to consume SaaS based AI. Meaning you want to know something like customer churn, you can run your SaaS, have all your data in there from your CRM and it could give you churn data. You want to know about ERP from your ERP data, something about supply chain, you’ll be able to run Oracle Supply Chain Management tool and you’ll be able to get insights on… This is that practical implementation and utilization of AI. And these companies can bake it in where it’s either more sticky or it adds a nominal amount of cost per seat to be able to use all this AI. So people are going to be using and consuming AI in the cloud through applications for the enterprise. I think that’s going to be a really, really big thing.
So the other thing is I do think that AWS actually picks up IaaS momentum. And I know that’s crazy because they already have IaaS momentum, but here’s the thing is I just think ultimately the open… So this kind of crosses into AI, but the open distributed model approach is actually where people seem to want to land. It’s kind of always the same thing, Pat, it’s like we always talk about hybrid and multi. It’s like nobody really wants to be 100% in on anything because they want to make sure that they stay flexible. And so with AWS kind of leaning all in on this kind of open AI approach, not open AI as an OpenAI, but open AI as a multimodal, which is something you were talking about, people are going to be comfortable leaving their infrastructure there. They’re not going to feel the requirements to change. And they already had such a big lead that I just think you see momentum continue to pile on for cloud adoption there.
I do think there’s a surprise in cloud that’s going to be Oracle, they continue to outpace and outstrip the market for growth. That’s partially because they’re smaller and that’s partially because they’ve found a value equation, that goes back to my FinOps comment. People are wanting to do things in the cloud, but they are looking to find financial efficiency. And Oracle has sort of reversed the model of other cloud providers as where they charge a lot, where they charge less and they’ve been able to increase utilization of IaaS by being somewhat of a efficiency gainer there. And of course, 400,000 companies run Oracle and most of them are running it on-prem. And so the process of moving to cloud just gives a natural momentum to Oracle and its broad offerings in cloud.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
