Looking at the Cloud in 2021: Growth and Changes

As 2021 gets underway, Forrester predicts that the cloud market is poised to achieve new heights in the new year. The IT market research firm predicts that the global public cloud infrastructure market will grow 35% to $120 billion in 2021 and that Alibaba Cloud will take the No. 3 revenue spot globally, after Amazon Web Services (AWS) and Microsoft Azure.

Public cloud revenue will return to hypergrowth as the cloud powers the pandemic recovery, said Dave Bartoletti, a Forrester vice president and principal analyst focusing on infrastructure and operations. He noted that all cloud providers are experiencing tremendous growth that will likely continue well into 2021. "COVID proved the value of cloud and, indeed, we could not have sent home millions of workers and kept our economy running without cloud providers," Bartoletti observed. "There’s no way corporate data centers could have met the instant demand generated by COVID."

Adopter challenges

While cloud providers are set to prosper in 2021, adopters will likely face some significant issues in the months ahead. "The biggest challenge facing cloud adopters in 2021 will be how to accelerate new app development in the cloud while simultaneously accelerating on-prem systems migrations to cloud during a pandemic recovery period where both budgets and staffing levels are uncertain," Bartoletti stated.

A key issue many cloud customers will find themselves addressing in 2021 will be how to quickly adapt to changing consumer demands with new and improved customer-facing apps. "Cloud is the way to do it quickly and at scale, but many companies entered 2020 in the midst of cloud migrations or just starting to leverage the full power of cloud," Bartoletti said. It will take time for such enterprises to get their software development projects back on track.

Enterprises pondering their cloud choices beyond their national borders are increasingly facing tighter regulations and more limited cloud options. In China, for example, foreign cloud providers must partner with local providers to sell cloud services within the country. The US government, meanwhile, has placed restrictions on Huawei and Huawei cloud affiliates, as well as other Chinese cloud providers, including, Alibaba, Tencent, and Baidu. In Europe, the idea of a sovereign cloud -- GAIA-X -- is gaining momentum, Forrester noted.

Transformation engine

On the bright side, Forrester forecasts that cloud native technology will continue to drive enterprise digital transformation strategies. By the end of 2021, 60% of companies will leverage containers on public cloud platforms, and 25% of developers will leverage serverless, the firm predicts.

Dave Bartoletti, Forrester

Meanwhile, cloud-native technologies, such as containers, Kubernetes, and serverless, are helping enterprises build, migrate, and modernize customer-facing apps more easily, at scale, and from the data center to the cloud to the edge, the research noted. Pre-pandemic, according to Forrester, 19% of developers regularly used serverless functions and 22% regularly used containers to build and run application software on public clouds. Approximately one-quarter of developers currently don't use containers. Pandemic recovery will dramatically accelerate this consumption, Forrester predicts.

More choices

As the cloud market grows, matures and expands in new directions, choices will continue to multiply and fragment. The major cloud providers will shift focus to industry-specific cloud platforms and solutions for retail, healthcare, media, government, and more, Bartoletti said. "IBM, Microsoft, AWS, and Google are all doubling down on industry-specific solutions," he noted. “We're moving away from 'what’s everyone doing in cloud?' to 'what are companies just like mine doing in cloud?'" Bartoletti forecast a cloud market increasingly powered by solution-driven selling, rather than services-driven selling.

Cloud providers are also moving into promising emerging markets, such as Edge cloud and edge computing. All of the major hyperscaler cloud providers are expanding their early IoT-focused edge services to support broader use cases at the edge beyond IoT, Bartoletti said. He also observed that such services will be enabled by container and Kubernetes platforms as well as services being developed for edge hardware in many different environments.

Vendors are now paying more attention to on-premises cloud customers, tackling the challenge of how to bring cloud services into customer data centers where security and data residency are important. "All the major hyperscaler cloud providers are aggressively building out both on-prem cloud services delivery models and new multi-cloud management tools to provide cross-cloud visibility, operations management, security and policy enforcement, and governance," Bartoletti explained.

Stable costs

The good news is that cloud costs aren't significantly rising and are likely to remain relatively stable in 2021. "There’s really not much cost pressure today on cloud services," Bartoletti said. While unit costs aren't falling, enterprises are rapidly getting better at tracking, optimizing, and reducing their cloud spend. "They are using more and more cloud -- the trick now is to manage use it effectively as it grows," he concluded.

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