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Fasten your seat belts: how the cloud industry will change

During the crisis, specialists from various fields have to adapt to new conditions. Today we’ll talk about the cloud - how IaaS-, PaaS- and SaaS providers keep punch.


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Forecasts and Reality


Forecasts of economists for 2020 were rather restrained. Experts of the International Monetary Fund (IMF) noted that global economic growth in 2020 will be 3.6%. This could be 0.3% higher than a year earlier. In the USA, where the unemployment rate reached its lowest level in 70 years, they also saw no reason for pessimism. In turn, the Ministry of Finance talked about accelerating GDP growth by 2%, and the Ministry of Labor - about reducing unemployment.

Everything looked even better in the cloud industry. Only in 2017, the global revenue of IaaS solution providers grewas much as 45%. A similar picture was observed in Russia as well - in 2018, the volume of the domestic cloud services market, including public and private clouds, exceeded $ 804 million (24% more than in 2017). Experts expected growth to continue this year, but today you can only laugh at last year’s economic forecasts.

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The virus, which appeared on the news radar earlier this year, quickly spread outside Southeast Asia. The tourism industry took the first blow, followed by everything related to mass events, and then other areas.

Record high employment gave way to record high unemployment - in a few months they lost their jobs more36 million Americans , 60% of British businesses either shut down or report losses. In turn, for the first time in 40 years, the Chinese economy risks falling into negative territory, and the Bank of Russia estimated the fall in GDP in 2020 at 4-6%.

The future of many industries and industries is in limbo. But what about the cloud? Is it possible to say that in this area, despite the circumstances, steady growth continues? And are there pitfalls here?

Cloud vs. a crisis


One of the global crises that the cloud industry has found occurred in 2008. At that time, providers quickly strengthened their position. IaaS-, PaaS- and SaaS-suppliers managed to attract customers by reducing the costs of companies that preferred to pay only for used capacities (pay as you go model). And this story repeats itself.

IDC analysts say the global economic crisis, triggered by an epidemiological disaster, has accelerated cloud growth. According to them, despite the overall reduction in business costs, budgets allocated to pay for SaaS solutions are only growing. According to MarketsandMarkets, a similar picture can be observed in the IaaS and PaaS sectors.

This is due to the fact that the virtual infrastructure is not tied to the fall of a particular industry - cloud computing is used by companies from various fields: from retailers and travel agencies to IT corporations and industrial enterprises. Even if the former fall under the most severe influence of the crisis, the latter more and more often pass into the cloud.

IaaS, PaaS, and SaaS product developers are moving towards customers and realize that they are in difficulty. They offer new functionality that simplifies distance work and study. So providers hope to attract a new audience - those who before the crisis doubted the expediency of migration. And they are trying to help customers transfer their activities to the online, plus - to adapt to the changing requirements of regulators.

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Finally, providers are trying to be at the forefront of the fight against epidemiological difficulties - their computing power helps analyze medical data - a number of Western IaaS providers work with the World Health Organization and research centers. They also run funds to develop tools that diagnose the disease.

Experts note that the crisis plays into the hands of the cloud industry, and providers will emerge victorious from this whole situation, and the difficulties they experience with increasing load will only help strengthen the Internet itself (improve the quality of services provided, expand the network infrastructure). But we must not forget about the reverse side of the coin and possible risks.

Unpredictable consequences


While large players can adapt to the conditions of increased workloads, startups and small businesses lose their competitiveness. Large providers attract more customers, they have more powerful financial and infrastructure resources, but small businesses may not survive such turbulence. There is a chance that the virus will “ clear ” the playing field of the cloud industry and strengthen the position of large corporations and monopolists of this market.

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It is hard to say how events will develop, but you can try to assess the resilience of the cloud market to the crisis byfive criteriathat Investopedia offers.

Experts say that it’s possible to survive the difficulties if:

  • You sell essential goods or services;
  • Work with companies that are not subject to economic downturn;
  • Engage in the repair or maintenance of critical systems;
  • Perform mandatory functions (ensure the safety of citizens);
  • Provide any specialized services.

The second and fifth paragraph, the cloud easily closes due to its business model. Providers offer a service that helps reduce costs, which is very important in a crisis. Clients from IaaS, PaaS and SaaS suppliers are companies from a wide range of areas. Among them, with a high degree of probability are firms that the crisis has not affected or has affected to a lesser extent. But with the rest of the criteria, everything is not so clear.


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Kevin Xu, founder of Interconnected, pointed out that cloud providers are difficult to categorize as essential service providers (first point).

In addition, not all of them are engaged in the maintenance of critical systems (the third item from the list), although almost all offline infrastructure of large cities is tied to the cloud. Without such systems, it is difficult to imagine the work of transport, video surveillance and other government services. And, apparently, our state relies on just such a path of development of this sphere - just last year, the Ministry of Communications approved a project to develop a unified cloud platform. To do this, it attracts providers who will receive large-scale state. tasks (paragraph 4).

It turns out that the cloud industry confidently passes only on three of the five criteria (and that, if you take not all cloud providers at all, but only the largest ones). Would that be enough?

Constant adaptation


Experts say that the planet’s economy will not return to its previous level for a long time, and many companies (mostly small businesses) will be forced to close. In Russia, the picture looks no less depressing - experts from the VEB.RF Research Institute note that the country's economy may fall by 18% in the second quarter of 2020 . And they expect a reduction in GDP for the year.

The cloud services model itself is quite resistant to such phenomena - it proved this back in 2008. Then a number of Western providers reported that their revenues grew by more than 40%, and after the crisis, the market continued to grow. But as our analysis of the situation shows, this time everything may turn out differently if the industry is not flexible.

The speed of adaptation to today's conditions is becoming a key aspect of the survival of any business. We at Aktion help managers and professionals from different fields learn how to do it effectively [for example, subscribing to Aktion 360 gives you the opportunity not only to get access to specialized journals, judicial practice and help systems, but also to consult with experts on any issues related to doing business - taking into account all the latest legislative changes and new requirements].


PS How to establish work in ever-changing conditions: Aktion courses .

PPS Our corporate reference and education system in the cloud.

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