As we prepared to depart for our Christmas holidays a year ago, it was obvious that 2020 would be a strong year for cloud computing as organisations migrated ever more  processing workloads, applications and storage to cloud platforms.

But no one could have predicted the surge in cloud adoption that the pandemic would fuel this year. 2020 turned out to be the cloud’s prime time moment and the momentum generated will define aspects of the industry for years to come.

Umbrellar Connect looks back at some of the big developments in an unpredictable and tumultuous year that saw the virtues of the cloud come ot the fore.

1. Cloud adoption skyrocketed

Despite the maturity of cloud computing platforms, many companies went into 2020 with swathes of their businesses still operating on their own infrastructure or in hybrid on-premises and cloud environments. IT managers blamed a host of factors for dragging the chain on cloud migration, from security concerns to a desire to have full control to optimise their infrastructure and application environments.

Then the pandemic gripped the globe and the scalability, flexibility and cost-effectiveness of cloud platforms became obvious for all to see. Existing cloud users ramped up their workloads as they increased capacity to support customers and their employees who switched to remote working.

The uptick is reflected in the financial results this year for AWS, Microsoft and Google Cloud, all of which have seen healthy double digit growth in their cloud revenues. AWS saw its revenue jump 29 per cent to US$11.6 billion in the third quarter alone. 

It is reflected in the emergence of smaller cloud infrastructure players such as Cloudflare, which has seen its share price jump nearly 400 per cent this year. According to Synergy Research Group, revenues for companies in the “cloud ecosystem” totalled US$187 billion in the first half of the year, up 20 per cent on the same period in 2019. 

The bottom line is that most cloud-related businesses have experienced incredible growth this year, a trend picked to continue as organisations opt to use the sharp shock of covid to accelerate their cloud migration and begin to harness the tools available to them on cloud platforms.

2. Microsoft’s local data centre play

The news generated barely a ripple internationally, but Microsoft’s announcement in May, during the height of the Covid-19 uncertainty, of an Azure data centre region for New Zealand supported by a $100 million-plus investment in local data centre infrastructure was huge for Aotearoa.

Microsoft becomes the first of the big three public cloud providers to invest in data centres locally which is a vote of confidence in the local market’s digital preparedness and economic growth potential. 

As Microsoft general manager Vanessa Sorenson, pointed out at the time: “The Fletcher School’s Digital Evolution Index characterises New Zealand as a ‘standout nation’ demonstrating to the world what the future might look like. 

“I’m confident this investment will help accelerate our digital evolution,” she added. 

While the move will satisfy some companies and government departments keen to keep their data hosted locally while at the same time leveraging Microsoft’s cloud platform, the move is more fundamental than that. A player like Microsoft only creates an Azure region when it sees sufficient scale and business maturity. It represents an investment in infrastructure that will support innovation and digital transformation efforts throughout the country. Even Microsoft’s competitors welcomed the news.

3. Tech giants step back from facial recognition

Facial recognition – it’s a legitimate feature of many cloud computing platforms with useful features ranging from automatic identity verification to efforts to personalise customer services. But several large cloud providers dialled back their efforts around facial recognition technology in 2020 as hostility towards its use for law enforcement purposes boiled over against the background of Black Lives Matter riots in the US.

The concerns – which even came from employees within Big Tech companies developing facial recognition tech, was around potential bias in systems deployed by agencies, particularly in the US. Numerous studies have demonstrated that facial recognition systems can have trouble identifying faces with dark skin tones. 

In June, IBM said it would no longer develop or commercial facial recognition technology, such were the seriousness of the issues surrounding its misuse. AWS put a one year ban on sales of its Rekognition image and video analysis tool to police departments and Microsoft also decided to give law enforcement agencies a wide berth when it came to facial recognition until regulations “grounded in human rights” were enacted. Facial recognition app developers with applications in mind far removed from law enforcement or surveillance stayed under the radar, keen to avoid the controversy.

Locally, the extent of our police force’s development of facial recognition capability became clear due to the persistent investigative work of RNZ reporter Phil Pennington. While no scandals or evidence of bias were uncovered, his reports did show that Police has been building its capability in facial recognition far beyond what had previously been publicly divulged. In September, Police responded to the media coverage by issuing a new policy governing its approach to dealing with emergent technology and signed up to the Government’s AI Charter.

4. Salesforce scoops up Slack

It is one of the biggest tech acquisitions of the year and one which was no doubt driven by the huge uptick in use of collaboration tools and cloud-based productivity applications that Covid-19 generated. 

Salesforce’s US$27.7 billion deal to buy messaging and collaboration platform Slack brings together two of the most successful cloud-based application providers in the enterprise and will help Salesforce take on the might of Microsoft’s rival Dynamics software suite and Teams collaboration tool.

“This is a match made in heaven,” Salesforce co-founder and CEO Marc Benioff said of the purchase.

“Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world,” he added.

Microsoft had Slack in its sights as an acquisition target at one stage, but decided to double down on its Teams platform rather than buy yet another messaging app. That move seems to have paid off, with Teams growing massively in 2020 as Microsoft’s corporate users increasingly used it while working from home to stay in touch with colleagues and collaborate on documents.

5. Videoconferencing well and truly goes mainstream

The huge uptake of Teams and rivals such as Zoom, Google Meet and Cisco’s Webex, saw video conferencing become one of the biggest consumers of cloud computing capacity this year. Videoconferencing software as a service (SaaS) providers had to scramble to expand cloud capacity as they saw new subscribers join in their millions. Moves to drop usage caps to assist education providers and home users attempting to keep in touch with loved ones during lockdown added to the strain.

Zoom this month extended a cloud deal with AWS to accommodate its expanded business footprint. That followed a deal earlier in the year with Oracle to host its core video conferencing software.

“Over the past year, Zoom has grown on AWS to accommodate an increase from 10 million daily meeting participants in December 2019 to more than 300 million a day regularly since April 2020,” Zoom and AWS said in a joint statement.

Microsoft has the advantage of also hosting Teams on its Azure platform. It too had to ramp up massively to accommodate increased usage, which grew from 13 million daily active users in July 2019, to 75 million users in April.

With high-definition, multi-user and real-time video calls representing one of the more resource-intensive cloud computing applications, the ability for cloud platforms to quickly scale up computing capacity and accommodate agile application development came into its own in 2020.

6. IBM goes all-in on the cloud

Big Blue revealed in October that it will spin off its managed IT infrastructure business into a new publicly-listed entity so it can focus entirely on the cloud and the data and AI tools it offers customers as cloud services.

“IBM is laser-focused on the US$1 trillion hybrid-cloud opportunity,” said IBM’s recently appointed CEO, Arvind Krishna, who previously led the company’s cloud computing division.

IBM has endured a decade of quarterly revenue declines as traditional IT projects move to the cloud and to IBM’s competitors. But the company’s focus on providing hybrid-cloud services has seen it win a small share of the cloud market, but a footprint in a number of multinational companies.

The question is whether IBM has left its cloud play too late. It trails AWS and Microsoft as cloud providers and is seen as more of a niche player with expertise in hybrid cloud solutions – serving those organisations that have infrastructure and applications spread across on-premises equipment as well as cloud platforms.

Still, last year’s US$34 billion acquisition by of Red Hat by IBM has given the company leadership in cloud software, particularly around Kubernetes and cloud-container management. It has an opportunity to leverage that capability while growing cloud services to rival AWS and Microsoft.

7. The greening of the cloud

Google claimed a milestone in September when it announced that it had become carbon neutral across its entire business all the way back to the company’s founding in 1998. Google does so by buying renewable energy where possible to directly power its global network of data centres, but also by purchasing carbon offsets to balance out its emissions where it still requires fossil fuel-generated electricity.

Google has a target of switching to completely renewable energy use for its campuses and data centres, 24/7 around the world by 2030.

“This is far more challenging than the traditional approach of matching energy usage with renewable energy, but we’re working to get this done by 2030,” the chief executive of Alphabet/Google, Sundar Pichai, wrote in a blog post.

Google essentially aims to have hydropower, solar, wind and other renewable sources directly powering all of its operations, all of the time, by the end of the decade. That would be an impressive achievement, given the tardiness of some governments and regional authorities to replace fossil fuels with renewables. Microsoft and AWS also ramped up their efforts to run their increasingly hungry data centre operations on renewable energy.

Debate locally over the future of the Tiwai Point aluminium smelter again turned to the potential use of electricity generation capacity freed up with the closure of the plant to be used to power locally-based data centres.

8. The rise of China’s cloud giant

Alibaba is better known to Kiwi users as the creator of massive e-commerce websites that represent the Chinese equivalent of Amazon.com. But the company has been quietly and steadily growing its cloud computing business and accelerated its growth in 2020.

It joined other cloud providers in experiencing the Covid bump, to the extent that analyst group Forrester now predicts that Alibaba will displace Google Cloud in 2021 as the world’s third-largest public cloud infrastructure provider.

Alibaba grew its cloud computing revenue 59 per cent in the quarter ending September 30. Much of the growth came from its home market, where Chinese companies responded to Covid-19 by accelerating their digitisation efforts. 

Alibaba has been building out its international infrastructure. It has a network node in Australia to support customers in the region. However, tensions with the US over trade and national security interests has seen most large US corporates shy away from Alibaba Cloud in favour of the US cloud giants. The company’s ability to grow in the key US and European markets could continue to be limited by the geopolitics that have hamstrung telecoms equipment maker Huawei’s efforts to do business in those regions.

9. Multicloud options open up

It was the year where multi-cloud services and platforms became part of the fabric of the cloud environment as the industry put into practice its efforts to allow businesses to make services spread across multiple cloud vendors interoperable.

Multi-cloud environments offer the ultimate flexibility for businesses, which can pick and choose the cloud-based tools available from each vendor while spreading their workloads and applications across different infrastructure providers based on cost, customer service and proximity to local data centres. Avoiding vendor lock-in is the key priority for businesses pursuing a multi-cloud strategy.

But implementing and managing services and applications across multiple cloud environments can be complex and difficult for smaller organisations to support. That’s why the cloud players, recognising the fact that many customers don’t want to go all-in on one provider, are making it easier to juggle multiple cloud environments.

In April, Google Cloud made available Anthos on rival AWS. The multi-cloud platform lets users build and manage applications across hosting environments, from on-premises servers to Google Cloud and rivals such as AWS and Microsoft Azure.

Microsoft and Oracle last year teamed up to allow customers to migrate and run their enterprise application workloads across Microsoft Azure and Oracle Cloud.

A survey of US IT leaders by research group Tech Republic found that 81 per cent of respondents currently use or plan to use multi-cloud environments in the next 12 months, up from around 66 per cent in 2019. That’s a reflection of the increasingly complex and rapidly changing needs that emerged in 2020 as the pandemic drove cloud uptake everywhere.

10. Security gets Sassy

With hundreds of millions of people shifting to remote work this year, organisations big and small had to rethink their security policies and infrastructure to keep their employees, data and applications safe as people logged on to work from home.

Many organisations resorted to virtual private networks and deployed the tyle of multi-factor authentication systems available in popular productivity suites such as Microsoft 365. But a more fundamental security approach saw rapid adoption this year as companies sought a more sustainable approach to security – SASE.

Pronounced as ‘Sassy’ and the brainchild of analysts at Gartner, Secure Access Service Edge, shifts security to the cloud, creating a software-defined wide area network for an organisation and based on zero-trust technologies. 

“We are seeing multiple incumbent vendors from the networking and network security markets developing new cloud-based offerings and/or enhancing existing cloud delivery,” wrote Gartner analyst Andrew Lerner in a blog post that preceded Covid-19’s arrival. The push to deliver organisation-wide security from the cloud has only increased, though Lerner has some advice for those looking to a cloud-based solution to manage their increasingly complicated security requirements.

We recommend short-term SASE contracts of one to two years maximum as licensing models are in flux,” Lerner writes. 

“Favor SASE vendors that offer the simplicity of identity-/entity-based subscription licensing (not based on bandwidth) across all offerings.”

Further reading
6 curly questions to ask now – Your digital innovation strategy
Why Microsoft’s data centre will mean big things for New Zealand’s future in the cloud
Turning a rapid, complex cloud adoption into a streamlined multi-cloud environment
Can Microsoft’s approach to regulation restore trust in facial recognition tech?
Post-Covid, more companies will ditch their servers