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The pandemic has been a chance to sell the cloud
Jul 20, 2020

The pandemic has been a chance to sell the cloud

There are a few big companies that stand to benefit. Amazon, Microsoft and Alibaba are the big cloud providers.

As the coronavirus swept around the world, work and education moved to the cloud, with video meetings and online document sharing. Our leisure time relied on cloud servers to stream TV shows and movies.

There are a few big companies that stand to benefit. Amazon, Microsoft and Alibaba are the big cloud providers. Google is a relative upstart, but it’s now rolling out new services for businesses, like better encryption, as fast as it can. I spoke with Owen Rogers, a research director with S&P Global Market Intelligence. The following is an edited transcript of our conversation.

Owen Rogers (Photo courtesy of Rogers)

Owen Rogers: The big benefit of the cloud is this ability to scale. If you’re running your own infrastructure in your own data center, most enterprises had no idea that they needed additional capacity and might not be able to get it because supply chains were disrupted. But with the use of public cloud, it means that you can scale your applications as needs dictate. [During the] coronavirus [pandemic], there are a lot of companies that needed home working and suddenly a lot of applications needed to be accessed from remote locations. And cloud has enabled this because those enterprises and those businesses can scale up their application capacity immediately, without needing to have reserved this capacity in advance.

Jack Stewart: Was there enough cloud capacity to deal with this surge in demand that we’ve seen because of the coronavirus?

Rogers: So far, most cloud providers seem to have handled it really well. I think the majority of cloud providers have had a huge margin of error, so they purchased way more server capability than they ever thought anyone would need, which meant they had a lot of surplus when this need was required. Also, many of them manage their own supply chain, so they were able to keep disruption to a minimum.

Stewart: Does that mean, though, if there’s only a few companies that are offering this service that they control the price, and could that, I guess, go up if we’re relying on it more and more?

Rogers: Generally, cloud is getting cheaper. There are a few blips here and there, but cloud has set a precedent for pricing coming down. Cloud providers won’t necessarily cut pricing because there is a risk in doing so, and they don’t know how the pandemic is going to play out. But they wouldn’t put up pricing because that might work against them.

Stewart: Are cloud service providers competing in what they offer? Because it’s not just simply servers and storage anymore, is it?

Rogers: Some cloud providers are trying to focus on things such as machine learning and artificial intelligence, and others are looking towards things such as [the Internet of Things]. They’re all making sure that they have these huge portfolios. It’s almost like Lego bricks. You can come and use the cloud provider, choose which Lego bricks you want to use and build your application using your best combination of services.

Stewart: It all sounds very flexible. Are there any companies that are not taking advantage of this? Are there barriers or disadvantages to being cloud-based?

Rogers: When the cloud was becoming more exciting, there were a lot of regulated industries who were worried about using the cloud, essentially because the third party has taken a lot of responsibility. Health care, financial services, government were initially a bit reluctant to use cloud. But increasingly, we’re seeing more and more of these companies take advantage of the cloud. They just have to prepare more, and they have to put more measures in place. Once they’ve done that, they’re far more willing to consider the cloud than they used to be.

Stewart: Do you think the pandemic will have an impact on how willing companies are to consider using the cloud? Will it have a long-term effect?

Rogers: I think so. Coronavirus will act as a catalyst for the adoption of cloud. Companies that were already in the cloud have been able to scale up and down. They’ve also been able to scale down if they were struggling. And I think this will persuade them that actually it was a good decision and they should build more applications in the cloud. Companies that haven’t already put stuff into the cloud, they’re probably realizing that they’ve been fairly static and monolithic and they haven’t been able to take advantage or protect themselves against the situation. Those that survive the pandemic are probably going to put more and more in the cloud, just so if something like this happens again, they’re better prepared.

Related links: More insight from Jack Stewart

The Wall Street Journal has more on the opportunities the cloud presents for the businesses providing it. It delves into Google Cloud and compares its 4% market share in 2018 to Amazon Web Services’ 48%, and looks at how it’s trying to close that gap.

The New York Times analyzed internet usage from SimilarWeb and Apptopia, two online data providers, and found that our behavior shifted, sometimes dramatically. They have some great charts showing that traffic to websites for Netflix, Facebook and YouTube all shot up. But at the same time, traffic to those companies’ apps dropped. That’s a flip from the last few years, when the bulk of browsing was increasingly done on phones. But when people were at home, they turned to the bigger screens of their computers. 

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