Worldwide Hosted Private Cloud Services Forecast, : New Models for Delivering Infrastructure Services

Transcription

1 MARKET FORECAST Worldwide Hosted Private Cloud Services Forecast, : New Models for Delivering Infrastructure Services Robert P. Mahowald Chris Morris Satoshi Matsumoto Petr Zajonc Linus Lai Melih Murat David Tapper Mayur Sahni Benjamin McGrath Melanie Posey Mark Schrutt Vladimír Kroa Frank Gens Hamza Naqshbandi David Senf Alejandro Florean Thomas Dyer IDC MARKET FORECAST FIGURE FIGURE 1 Worldwide Hosted Private Cloud Services Revenue Snapshot Source: IDC, 2015 September 2015, IDC #259066e

2 IN THIS EXCERPT The content for this excerpt was taken directly from IDC Market Forecast: Worldwide Hosted Private Cloud Services Forecast, : New Models for Delivering Infrastructure Services (Doc # ). All or parts of the following sections are included in this excerpt: IDC Executive Summary, Advice for Technology Suppliers. Also included is Figure 1, 3, 7, 8 and Table 2. EXECUTIVE SUMMARY Enterprise customers and IT service providers (SPs) continue to look to cloud computing in its various forms as a way to transform the delivery and improve the efficiency and scalability of the services they provide to their customers. Hosted private cloud (HPC) is an operational model for deploying infrastructure via an offsite service delivery model operated by a commercial service provider. The HPC services market encompasses two cloud deployment models: on-demand hosted private cloud (ODHPC, formerly known as virtual private cloud [VPC]), in which virtually isolated single-tenant services are provisioned from a shared resource pool, and dedicated hosted private cloud (DHPC), in which services are run from physically isolated single-tenant deployments. Each model offers customers (and service providers) different choices for resource dedication, tenancy, cost, user access/control of the computing asset, and security (real and perceived). Collectively, these attributes set HPC services apart from public cloud infrastructure as a service (IaaS). Key findings include the following: IDC believes that the hosted private cloud services model will coexist alongside the public cloud infrastructure delivery model and expects that worldwide hosted private cloud revenue will grow from $8.9 billion in 2014 to $40.6 billion in 2019, at a CAGR of 35.4%. Over time, ODHPC will emerge as the predominant operational model as end users embrace the agility and flexibility of on-demand automated provisioning for "private" resources (i.e., resources virtually isolated from other tenants on a shared infrastructure hosting platform). Growth opportunities in ODHPC notwithstanding, service providers (particularly those with roots in the traditional managed hosting and IT outsourcing markets) will continue to favor physical dedicated hosted private cloud "stacks" as part of an on-premise/off-premise hybrid IT value proposition for customers that want to leverage multiple deployment models as part of an aggregated "hybrid IT" asset pool. ODHPC will account for an increasing share of total HPC revenue during the forecast time frame as end users (particularly in line-of-business roles) increasingly seek rapidly provisionable private cloud and bare metal resources with the agility of public cloud combined with the predictable performance and user control of the compute asset and the security/isolation of the dedicated private cloud. DHPC will be positioned alongside ODHPC as an alternative for end users that are transforming their legacy enterprise IT within the framework of existing IT outsourcing or managed hosting contracts and as an element on the cloud spectrum for customers implementing hybrid IT environments. Service providers such as IBM-SoftLayer, Rackspace, HP, Logicalis, and CSC are positioning both proprietary and OpenStack hosted private clouds as off-premise private cloud options IDC #259066e 2

3 ODHPC versus DHPC adoption varies by region, with the former enjoying the most traction currently in the United States, Asia/Pacific (excluding Japan), Japan, and Central and Eastern Europe. Toward the end of the forecast period, however, regional adoption of the two HPC models begins to converge. This IDC study examines the hosted private cloud (HPC) market, which includes dedicated hosted private cloud (DHPC) and on-demand hosted private cloud (ODHPC), providing market sizing for 2014 and a five-year growth forecast for , along with forecast assumptions and market trends for the same period. This study updates Worldwide Hosted Private Cloud Services Forecast: New Models for Delivering Infrastructure Services (IDC #238689, December 2012). "The worldwide market for hosted private cloud, which amounted to $8.9 billion in 2014, will grow at a CAGR of 35.4% to reach $40.6 billion in 2019," says Melanie Posey, research VP for IaaS/Hosting Infrastructure Services. "IDC expects the two HPC models on-demand and dedicated to coexist in the short term but anticipates that the on-demand model will emerge as the predominant operational model as end users embrace the agility and flexibility of automated provisioning for virtually 'private' resources." ADVICE FOR TECHNOLOGY SUPPLIERS Position HPC as part of a diverse IaaS portfolio and hybrid IT/multicloud building block. Success in the rapidly transforming IaaS market requires a range of customer choices for asset tenancy, IT resource dedication, and management/support options. IDC's 2014 CloudView Survey (nearly 3,500 respondents in 17 countries) revealed that offsite private cloud deployment models accounted for 12% of total business IT spending at the end of 2014, increasing to 22.8% by the end of This indicates that security, industry compliance mandates, data sovereignty issues, IT governance concerns, and sunk investment in legacy applications/infrastructure are contributing to enterprises' embrace of private cloud models. However, HPC must not be viewed as an alternative to public cloud. Service providers (and technology vendors) should position HPC solutions alongside public cloud services (their own offerings and those of the hyperscale providers) to support orchestrated/federated hybrid IT environments that serve a variety of workload profiles and a spectrum of service models from self-service to fully managed. Understand how customers will want to view their hybrid cloud topology in 2019 today. The worldwide market for public cloud infrastructure services was $9 billion in 2014, growing to nearly $32 billion in 2019, and IDC believes a variety of factors will dictate that a significant percentage of these services (about 54% in 2019) will be configured and delivered in the construct of ODHPC. Rising demand for additional controls over the standardized infrastructure services, and greater security accorded by ODHPC services, will put into play opposing forces over the forecast period. As customers will want to support increasingly heterogeneous parts of their portfolios, with different risk and security profiles, access requirements, and compute dependencies, they will be making demands of their cloud providers to support these needs with more complex portfolios. At the same time, ODHPC's importance as a market distinct from public cloud IaaS will change and probably diminish over time because providers will add VPN and VLAN access, encrypted endpoints, better asset isolation, and so forth as part of their "base" public cloud IaaS package and focus on traditional value-adds, like support, training, integration, and UI customization, to differentiate and earn more revenue IDC #259066e 3

4 Seek to bundle hosted private cloud services with converged/hyperconverged appliances. Whether via OEM partnership or white label, look to remove the "fourth wall" of customer datacenters by distributing hosted private cloud services as elastic stopgaps for bursting, datacenter migration, replatforming, or other pro tem infrastructure or storage needs. Position on-premises appliances as having capabilities of built-in elasticity to access more cores, more RAM, more I/O speed, and so forth by bundling in virtual ODHPC services on tap. Partner up for trusted network connectivity and high-performance Web infrastructure. IDC surveys show that customers look to cloud service providers as the primary guarantors of Web performance, application acceleration, and secure connectivity. The vast majority of multisite companies use IP VPN or Ethernet services to corporate WANs through the public Internet to their cloud providers, but recent IDC surveys have found diminishing confidence in public traffic to support the levels of security, performance predictability, latency, or end-to-end management needed for critical workloads and datasets that companies want to move into the cloud. As a result, internal networks have become bottlenecks, holding companies back from getting the most out of provider-based cloud services. A growing number of cloud, datacenter, and network service providers are launching initiatives to bridge this gap, typically taking one or more of three approaches: direct connect, cloud exchange, and VPN-cloud interconnect. IDC foresees strong growth for cloud connectivity services in the coming years, as accelerating supply and demand for dedicated cloud links fuel market development. Instead of forcing customers to seek third-party options for secure connectivity and Web infrastructure, partner for this capability and offer it as bundled or white labeled as an additional tier of support. Help IT organizations characterize their investments in cloud as a march toward "cloud maturity." IDC's CloudView Survey (n = 3,463, 17 countries) gathered data to categorize respondents into five levels of cloud maturity: ad hoc, opportunistic, repeatable, managed, and optimized. More than 53% of respondents expect using cloud will provide their firms with increased revenue opportunities over the next two years, and nearly 90% have as a three- to five-year goal to achieve optimized maturity, the highest level of sourcing and management in IDC's Cloud Maturity Model. But only 25% of organizations in our survey have repeatable, managed, or optimized cloud strategies; 32% had no cloud strategy at all; and only about 1% of firms surveyed had achieved a fully optimized cloud strategy. Leverage DHPC as a bridge from IT outsourcing and managed hosting. DHPC is rapidly evolving from fully customized solutions to standardized offerings that service providers can leverage for next-generation IT outsourcing and managed hosting plays. Converged systems "cloud stacks" and reference architectures are becoming increasingly important as enterprises seek out off-premise private (and public) cloud solutions that are compatible with on-premise converged systems "cloud stacks" from VMware, IBM, HP, Cisco, Microsoft, and Fujitsu. Service providers offering DHPC to the enterprise market will need to support the major onpremise private cloud solutions and develop (or acquire) hosted versions of OpenStack private clouds. In addition, technology-agnostic cloud management platforms are required for DHPC success as enterprises look to consolidate their cloud efforts under centralized service delivery processes. However, service providers that seek the broadest possible target markets and range of use cases reach must also develop or procure technology to enable ODHPC. Partner to position a broad range of brand name middleware and infrastructure services. These include container management, IT service management, application acceleration and performance management, endpoint management, network security and performance, test automation, storage management, and analytics, alongside free or low-priced open source alternatives. IDC surveys have found that users strongly favor on-platform management tools for common cloud platform and infrastructure activities to bringing their own, but there is a 2015 IDC #259066e 4

5 demand for premium services from trusted brands such as CA Technologies, BMC, IBM, HP, Cisco, and ServiceNow. Watch Amazon Web Services (AWS). While most providers that also have some variety of public cloud IaaS will levy a nominal premium typically 5 15% of the total environment cost charged on a recurring monthly basis, Amazon Web Services does not charge more for its ODHPC services called AWS Virtual Private Cloud. What customers expect from and are willing to pay for ODHPC services is constantly being challenged by the notion of what AWS is offering and for what price. As AWS has progressively and substantially cut the cost for certain popular instance sizes on EC2 and S3 over the past two years, it has forcefully made the argument that winning providers must have massive scale of operations, low cost, and the ability to quickly build out certain key services (microcomputing, test automation, content delivery networks) that customers want. Thus, AWS, by providing its VPC tier for no extra customer cost, may successfully undermine the proposition that providers can charge more and accelerate the low-touch IaaS price race to the bottom, undercut its competitors, and flex its cloud-scale muscles. The dynamics are still far from clear, but other providers have had to respond quickly, and AWS' range of choices for asset tenancy, resource dedication, and granular price point make the company the most closely watched provider in this and other markets. Seek a granular view of your buying audience. Whereas DHPC resonates primarily with large firms, IDC views ODHPC (like public IaaS) playing across the entire spectrum. While tier 1 outsourcers have focused on DHPC as a natural extension to their business models, ODHPC is being mostly promoted by public IaaS operators, and the infrastructure, tools, contracts, billing, and account management are very similar to their public cloud business. Similar to public cloud IaaS, the primary buyer for ODHPC is director-level IT development and IT operations staff. The majority of IaaS purchases are IT driven, where PaaS and especially SaaS can be driven by business units. IDC believes that starting with IaaS and PaaS development capabilities, most companies with sophisticated IT sourcing and management operations will be driving to centralize the management all cloud-sourced capability, and this is especially true as more and more cloud-based IaaS (both public and virtual private) will be sourced and managed through the construct of the IT provisioning and asset management system in the next few years. The worldwide market for hosted private cloud revenue will reach $40.6 billion in 2019, up from $8.9 billion in 2014, growing at a CAGR of 35.4%. Over time, IDC anticipates that ODHPC will emerge as the predominant operational model for HPC as end users embrace the agility and flexibility of ondemand automated provisioning for private resources. However, IDC also believes that certain service providers (particularly those with roots in the traditional managed hosting and IT outsourcing markets) will continue to leverage physical dedicated hosted private cloud "stacks" as part of an on-premise/offpremise hybrid IT value proposition for customers that want to leverage multiple deployment models as part of an aggregated "hybrid IT" asset pool. Table 2 presents the total worldwide HPC services forecast by region for , with ODHPC and DHPC segmentation for each region. Figures 3 shows the ODHPC services and DHPC services forecasts, respectively, by region for IDC #259066e 5

6 TABLE 2 Worldwide Hosted Private Cloud Services Revenue by Region and Segment, ($M) CAGR (%) United States ODHPC IaaS 2, , , , , , DHPC services 1, , , , , , Total 3, , , , , , Growth (%) NA Canada ODHPC IaaS DHPC services Total , , Growth (%) NA Asia/Pacific (excluding Japan) ODHPC IaaS , , , , , DHPC services , , , , , Total 1, , , , , , Growth (%) NA Japan ODHPC IaaS , , DHPC services , Total , , , , Growth (%) IDC #259066e 6

7 TABLE 2 Worldwide Hosted Private Cloud Services Revenue by Region and Segment, ($M) CAGR (%) Western Europe ODHPC IaaS , , , , DHPC services 1, , , , , , Total 1, , , , , , Growth (%) Central and Eastern Europe ODHPC IaaS DHPC services Total Growth (%) Middle East and Africa ODHPC IaaS DHPC services Total Growth (%) Latin America ODHPC IaaS , , DHPC services , , , Total , , , , Growth (%) Source: IDC, IDC #259066e 7

8 FIGURE 3 Worldwide On-Demand Hosted Private Cloud Services Revenue by Region, Source: IDC, 2015 Figure 7 documents the changes in the ODHPC and DHPC forecasts, respectively. The changes are summarized as follows: ODHPC. The significant reduction in the ODHPC submarket forecast is the result of a substantial reduction in IaaS revenue, given the elimination of "cloud washed" offerings from the IaaS segment of the public cloud IT market (see Worldwide and Regional Public IT Cloud Services Forecast, IDC #251730, October 2014). In the process of shifting to IDC's more detailed tracker vendor modeling process, our analysts reviewed dozens of vendors' branded public IaaS offerings. They concluded that a number of these offerings were inappropriately labeled as "cloud" and were closer to traditional infrastructure hosting. As a result, IaaS revenue notably in the United States, Western Europe, and Asia/Pacific (excluding Japan) was reduced. Having gone through this permanent shift to the tracker methodology, we expect there to be much greater stability going forward. DHPC. The increase in the DHPC submarket forecast results from the greater-than-anticipated impact of factors that favor DHPC over ODHPC outside the United States. These factors 2015 IDC #259066e 8

9 include concerns about security and compliance, data sovereignty issues, and worries about being stranded in public clouds. We have also modified our historical data for as a result of the greater insight obtained by analysts in each of IDC's regions from surveys and service provider/vendor discussions. FIGURE 7 Worldwide Dedicated Hosted Private Cloud Services Revenue, : Comparison of December 2012 and September 2015 Forecasts Source: IDC, 2015 Cloud Services Deployment Models At the highest level, the two types of deployment models for cloud services are public and private (see Figure 8): Public cloud services are shared among unrelated enterprises and/or consumers; open to a largely unrestricted universe of potential users; and designed for a market, not a single enterprise. Private cloud services are shared within a single enterprise or an extended enterprise, with restrictions on access and level of resource dedication, and defined/controlled by the enterprise, beyond the control available in public cloud offerings. In the public cloud world, we define one major model called, not surprisingly, public cloud service. Underneath this big umbrella, there are a growing variety of options available relating to public/private/vpn network connection, geolocation of data, options for dedicated data storage devices, and so forth. IDC considers all these "subspecies" within the public cloud world IDC #259066e 9

10 FIGURE 8 Major Cloud Services Deployment Models Note: Assessments of attributes and models are applied strictly to the resources at the top level of the offering "stack" (i.e., the resources that define the functional category of the offering). Source: IDC, IDC #259066e 10

11 About IDC International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make factbased decisions on technology purchases and business strategy. More than 1,100 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. Global Headquarters 5 Speen Street Framingham, MA USA idc-insights-community.com Copyright Notice This IDC research document was published as part of an IDC continuous intelligence service, providing written research, analyst interactions, telebriefings, and conferences. Visit to learn more about IDC subscription and consulting services. To view a list of IDC offices worldwide, visit Please contact the IDC Hotline at , ext (or ) or sales@idc.com for information on applying the price of this document toward the purchase of an IDC service or for information on additional copies or Web rights. Copyright 2015 IDC. Reproduction is forbidden unless authorized. All rights reserved.