Cloud solutions have steadily gained traction with their services like storage, network, email and office productivity to the extent that almost 70% of the organizations are exploring or using the cloud service solutions. The cloud business which is expected to touch $118 billion this year is dominated by three main kinds of services: Software-as-a-service (Saas), Platform-as-a-service (Paas) and Infrastructure-as-a-service (Iaas).
According to Scott Swartz, VP, CTO Enterprise and Cloud Billing at Ericsson and founder of MetraTech, the cloud is evolving to make space for smaller players who can build, run and integrate their products and services to meet industry specific requirements.
Big firms like the Amazon Web Services (AWS), Microsoft Azure, and Google have been the major players of the cloud market that has largely been horizontal in nature. A need for industry specific or vertical services especially in niche sectors like healthcare, manufacturing, insurance, finance, etc. is leading to smaller players making waves in the cloud market.
Successful vertical players
The success of companies like Veeva Systems, Guidewire, Opower, Athenahealth have underlined the potential growth of the vertical cloud market through their innovative approach and customer-specific products and services.
What are the risks associated with vertical growth?
As always, with any new trend, there are flip sides along with the advantages.
Higher price: Companies like AWS are able to push down the costs since they cater to a wider berth by offering generic solutions. In comparison, niche players do not have the advantage of volume and hence their services tend to be priced higher.
Being swallowed by the bigger fish: Promising start-ups often run the risk of setting into the oblivion when they lose focus and allow their services to stagnate over a period of time. Also, the bigger players often tend to acquire the innovative start-ups eventually leading to a decline in innovation.
Security issues and risks of lock-in: There could be scenarios where data sovereignty or regulatory issues may prevent a company from moving to a cloud structure. Also, there is a possibility of running into vendor lock-in period that could prove detrimental to the business especially if the company has picked up the wrong cloud in the first place. This, therefore, calls for stringent Service Level Agreements (SLAs).
Point to be noted in this regard: Industries like government, healthcare and finance are ridden with sensitive data and therefore the offerings by niche providers in these industries have been tailored by the respective industry professionals.
What’s the verdict?
No innovation is risk-free or without significant hurdles and therefore the challenges posed by vertical cloud solution comes as no surprise. It’s a noteworthy turn in the journey of the cloud market as businesses are beginning to discover the benefits of customized services as opposed to the generic, all-encompassing ones.