Cloud industry and market introduction
Market overview and growth predictions
Worldwide Public Cloud Services End-User Spending Forecast for 2022 is $482B (Gartner, August 2021). Of that $121B is Infrastructure as a service specifically and is expected to grow around 30% per year for the next 4-5 years. Currently, the market is dominated by big public clouds like AWS, Google, and Azure. About 20% of the market is served by smaller cloud providers.
The common belief is that smaller providers are losing the market but in practice that segment is also growing at least 20% per year. With the growing popularity of multi- and hybrid cloud deployments to avoid lock-in and high prices of large public clouds, it is predicted that regional and local providers will have a big role to play in the future of infrastructure.
As stated in Gartner: “By 2025, 85% of infrastructure strategies will integrate on-premises, colocation, cloud, and edge delivery options, compared with 20% in 2020.”
This development is driven by the growing geopolitical regulatory fragmentation, protectionism, and industry compliance. Companies in the financial and public sectors are looking to reduce critical lock-in and single points of failure with their cloud providers outside of their country.
Considering these developments, the local data centers and cloud service providers are well-positioned to address the needs of the market.
Local providers have a strong advantage over global incumbents in the quality of support as they know the local culture, language, regulations and in many cases the needs of the end-user specifically. That has always been their strength and always will. Historically the weaknesses of local providers have been the limited capabilities of their platforms – that includes general capabilities and features, but also user experience and ease of adoption. These are the topics that Warren specifically addresses with minimal CAPEX to get going.
The next big step for Warren is to deliver fully automated collaboration capabilities to local providers and remove the final obstacle in offering global service to the end-users together while staying completely local and following our “Think Global, Act Local” philosophy.
Managed services
We point out the managed services market segment separately as Warren has a very specific approach in addressing these services. Warren has no plans to build out hundreds of services as you can find on many big public clouds. By managed services, in this context, we mean Managed Databases, Managed Kubernetes, and other special-purpose services.
We see already that many of these services are better built and served by independent companies. Therefore, we partner with these companies and focus on making it easy for them to serve the Warren install base and its global end-users. This gives more options for end-users, more services for local providers and Warren can focus all its resources on the core infrastructure offering. We start with a limited number of service providers to build out the marketplace and over time open it up for everyone. From the financial point of view, the global Managed Services market size is expected to grow at a Compound Annual Growth Rate (CAGR) of 7.9% and reach USD 354.8 billion by 2026 from USD 242.9 billion in 2021. Major factors that are expected to drive the growth of the managed services market include lack of skilled IT professionals, rise in demand for secure IT infrastructure during the COVID-19 pandemic, cost and risk reduction, and requirements for regulatory compliance and security.
Market from the end-users perspective
From the end-user perspective, the question of choosing the right cloud for their business starts by choosing between global public clouds (AWS, GCP, Azure, DigitalOcean) and local providers.
Present local providers’ Pros and Cons
Pros | Cons |
|---|---|
Lower prices (in addition to lower prices for computing and storage in general, the key saving point is that local providers give almost unlimited free local bandwidth to the users). | Outdated platform features/user experience - as a local provider it is increasingly difficult to keep up with global public providers as the level of investment into the platform is on a completely different scale. |
Support - local providers have on-demand personal support in the local language and culturally in the same headspace. Quite often they personally know the client and their needs — that is a level of service that SME clients will never get from the global public providers. | Lack of convenience and developer tools - local providers do have some capability in this area, but it is strongly lacking compared to the hyperscalers. Also, they cannot offer some of the services well enough (like managed databases), as it is not financially feasible on a small scale. |
Data sovereignty - end-user data is kept within the country. Therefore this solution is good for government and financial institutions that are sensitive to the topic. | No global presence - International clients would like to have the same user experience and platform globally for easy and cost-effective cloud management. |
Better latency as they serve the final end-user basically at their doorstep. | |
Payment options (this aspect depends on the country) - as an example in the EU post-payment with credit cards and invoices are mostly used, but in Indonesia, prepayment and several specific payment methods are used (like top-up your account in a local retailer, etc). |
How Warren addresses the Cons (while keeping all the Pros):
- Instead of local providers building their in-house solutions (as it has been in the past) we pool this budget together and build one solution for all. To keep it up-to-date we package it as a managed service so everyone has the latest version. This enables us to attract the best talent for the job and will result in a much better end-user experience and service quality.
- To offer a wide range of convenience and developer tools, we are enabling a managed services marketplace on top of all providers using the Warren platform. This will make it financially feasible to offer managed databases and other services as the developers can build it once and it works across all providers. Important to note, that this will turn managed service developers into advocates for the ecosystem as a whole.
- The Warren platform has been built to connect local providers into a network from the beginning to enable end-users to consume underlying infrastructure from all providers as if it were one large provider.
The bigger picture - a vision for the future
The large public clouds have grown too big and are for quite some time been considered an oligopoly. With their strong lock-in effect and cumulative control over the most important aspect of our future – digital infrastructure – their dominance has become problematic for many. That includes countries, telecoms, smaller hosting providers, and regular end-users. Even the UN has sustainable development goals (SDGs) that touch this aspect – “Reduce inequality within and among countries“ (10). With Warren’s approach the revenues, profits, jobs, and data are kept within the countries it is generated.
From our perspective moving toward the distributed/decentralized cloud is inevitable. This fluctuating tendency has always been on the cards throughout the history of computing. Starting with the centralized mainframe in the 60s, moving towards decentralized desktops in the 80s, and back to centralized with the rise of cloud in the 2000s. It’s now time for the pendulum to swing back to a decentralized/distributed solution going forward.
Looking at the market from a futuristic perspective it’s easy to think that blockchain and decentralized apps (dApps) will take over the world now. In practice, that big of a change rarely happens as some companies still use apps and databases that were built in the 80s, so before we reach the state where our phones and laptops are the backbone of the internet we still have a long way to go. While we still need traditional data centers, the decentralization part has to happen above that level. By doing this we will remove the single point of failure, distribute control across many providers and countries, get lower prices (regulated by the market competition), and better support for the end-users. All without rewriting every application in the world and still complying with local laws.