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Now is the time to democratise the IaaS market

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Cloud computing is ubiquitous; that much we all know. In fact, the proliferation of cloud computing is, perhaps, the single most influential technological advancement of the 21st century, so far-reaching and impactful has its implementation been.

Rewind a decade or so, and it was not yet clear just how disruptive the cloud would be. In 2008, Oracle CEO Larry Ellison famously pointed an accusatory finger at cloud computing, suggesting it was very much a case of emperor’s new clothes. “The computer industry is the only industry that is more fashion-driven than women’s fashion,” he said, referring to the increased discussion of the cloud. “Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”

Ellison was certainly not alone. Throughout the 2010s, commentators, analysts and journalists constantly questioned whether cloud computing would live up to the hype. Today, those questions have been answered – emphatically.

Cloud computing has transformed the world of technology over the past 20 years. It has revolutionised the way organisations store and analyse data, the way they procure and utilise software, and fundamentally how they build their IT systems. Businesses have outsourced their hardware, software and networking needs in their droves.

In shifting IT investment from capital expenditure (capex) – wherein organisations had to purchase upfront and then manage their own IT infrastructure – to operation expenditure (opex – pay-as-you-go), the cloud has played a significant role in enabling startups to access the same compute power and software as multinational enterprises. Put another way, the cloud has always promised to democratise IT by levelling the playing field.

However, the cloud sector itself has fallen foul of its own success. A monopoly has formed within the infrastructure-as-a-service (IaaS) market, with a few tech giants gaining an increasingly strong grip on the cloud. It is an issue that warrants further inspection.

Monopoly forms in the IaaS sector

The worldwide IaaS market grew 37.3% in 2019 to total $44.5 billion, up from $32.4 billion in 2018, according to a report release by Gartner in August last year. Yet, this rapid growth is enjoyed by a select group.

Amazon alone, through its Amazon Web Services (AWS) offering, held a market share of 45% of the IaaS sector, Gartner found. Microsoft, Google and Alibaba combined to hold a further 32%. That over three quarters of the IaaS market is dominated by four tech giants is problematic – indeed, a monopoly like this would be an issue in any consumer or business market.

Anticompetitive practices tend to stifle innovation and harm the end-user. It is not surprising, therefore, that there has been increased discussion about how legislators and regulators are looking closely for evidence of contract pricing, self-preferencing and whether lock-in is hurting customers.

In 2019, a report jointly penned by the Internet Economy think-tank and business consultancy Roland Berger, offered a six-step strategy for governments to prevent the monopolisation of the cloud market. In the US, the House Judiciary Committee and the FCC have already begun investigating AWS’s business practices.

Why things must change

The cloud market, and particularly the IaaS sector, has been monopolised. So, what?

As noted, monopolisation can hinder the customer (greater choice typically empowers the customer). Further, it can hinder innovation. And it is this second point that deserves our attention.

Cloud computing, like all fields of technology, must constantly evolve and look to best serve consumers, businesses and societies. And one of the areas that is rightly under the microscope at present is the environmental impact of cloud technologies.

According to Greenpeace, by 2025 the technology sector could consume 20% of the world’s total electricity – that is 7% more than is currently the case, a rise that is attributed to the expansion of cloud computing and the further development of new technologies, such as artificial intelligence, which require a great deal of computing power.

It is essential, then, that greener cloud solutions are developed. Data centres must run on sustainable energies and become more efficient; emissions must be monitored and scrutinised; and customers must be able to choose cloud providers knowing the footprint of their cloud usage.

At NexGen Cloud, we are proud to be leading the change for greener, more sustainable cloud services. Currently, all of our systems are run on renewable energy, with hydro power being the main source. We have a global approach when it comes to sourcing a supply that is sustainable and ultra-low emission. For example, by hosting data centres in northern Sweden, we are able to take advantage of the naturally colder weather to keep servers cool – this saves us running an energy-consuming air conditioning system.

As we are seeing in almost all areas of society, newer businesses are disrupting the status quo; and tackling environmental issues is often a keen priority. But of course, they are also looking to offer improved services to customers, lower costs and create more choice within the market. This must be embraced.

The cloud sector is booming and has been for some time. But we cannot take this for granted by allowing tech giants to continue tightening their stranglehold on the industry – by facilitating competition and looking to new innovative solutions, the outlook for the entire cloud market would be markedly brighter.

Chris Starkey is the founder and director of NexGen Cloud, which is on a mission to bring cheap affordable cloud computing to all. London-headquartered NexGen Cloud is working with Cudo Ventures to disrupt the cloud compute market. With data centre operations established in Sweden and Iceland the company is able to deliver infrastructure-as-a-service cloud computing that is cheaper and greener than the mainstream providers. NexGen Cloud also provides opportunities for investors to access the cloud sector, giving them the chance to share in the growth of market sector by investing in compute power.