23 Oct A Weather Forecast for Cloud Computing
Cloud computing is behaving a bit like Lord Ronald in Stephen Leacock’s ‘Gertrude the Governess” – madly off in all directions. Here’s my weather forecast for cloud computing in oil and gas.
Much thanks to Dave Brassor, one of my business partners and friend. Dave is a guru in the world of cloud computing, and this post is based on his insights into the market. .
What is cloud computing?
Cloud computing is one of those exponential technologies that typify what we mean when we say “digital”. As chips (for computing and memory) and bandwidth (for networks) have fallen to near zero in cost while dramatically improving their capacity, companies like Amazon, Microsoft and Google have built huge data centres that house racks and racks of computers, acres of data storage units, huge power supplies, and redundant telecommunications access. This shareable computer horsepower is available to rent on a variety of commercial models (long term, short term) and needs (data storage, compute cycles, video streaming, analytics and more).
One. It will be increasingly cloudy
So far, there’s no clear market winner in the race to establish complete market dominance by a single provider from among the large players – Oracle, Google, IBM Bluemix, Microsoft Azure, Amazon Web Services and Alibaba Cloud. Amazon has a commanding market share lead of 45%, but a battle for market share is solidly underway. All clouds are growing rapidly as more companies buy in.
Not all clouds are the same – different kinds of compute loads tend to favour one cloud offering over the others, so companies will in all likelihood have a multi-cloud strategy.
In fact, 62% of cloudistas (cloud adopters) find themselves with contracts from more than one cloud outfit. That makes a lot of sense if your goal is to avoid locking into a single vendor, and to use the best cloud for the job.
There’s already a lot of wasted spend in cloud – as much as 45% of all cloud spend fails to deliver a return or is poorly used. The majority of mature cloud consumers (64%) have cost optimization targets for their cloud spend.
A few oil and gas companies have made the leap to the cloud with a migration strategy, but it’s still very early days. Digital technology is still not viewed as a business differentiator, as one would see with banks and retailers. Oil and gas underspends on digital by a factor of 4 as compared with the early adopters.
Two. Expect some isolated cloudiness
There are two principal kinds of cloud computing environments. Public clouds (cloud computing that is shared by many companies) appeal to smaller customers who lack scale or perhaps have a higher risk tolerance. Private clouds are those that are specific to a single company, which works when companies have the scale.
Over 65% of companies will put in place a hybrid environment that features some private cloud services and some applications on public cloud. Having a little of both probably offers a bit better cost management, and more options for disaster recovery.
Hybrid environments are tougher to manage. How do you integrate business applications across the public-private divide? There are fewer tools to help, and cloud vendors are certainly not incentivized to help solve problems specific to hybrid environments.
Oil and gas outfits will be prime candidates for hybrid cloud environments, which are well suited to businesses that feature lots of contractors for services – private cloud for the “inside the fence” business and public cloud for “outside the fence” integration with suppliers.
Three. It’s raining mobile and web apps
It’s the existing web applications (those accessible by web browser) and the existing mobile apps that are migrating to the cloud first. Technically, the migration is swiftest for these kinds of solutions because they share important heritage elements (in design and in technologies) with solutions built for the cloud.
Collaboration solutions that enable business integration with suppliers “outside the fence” are another attractive migration category. One of my favorite is the collaboration potential between upstream oil and gas companies, and their suppliers.
Read more about the Uber-isation of field services.
Other popular use cases include the world of the Internet of Things (IoT), and Machine2Machine (M2M) interaction. This also makes sense to me – as new devices (sensors or machines) become smarter by having their own analytic abilities and connectivity, it’s far faster to set them up wirelessly via an internet connection to the cloud rather than a wired connection to an in house data center.
Oil and gas will eventually turn to cloud computing just to cope with the massive amounts of data and analysis that will come from having lots of connected plant and equipment. In the not-to-distant future, artificial intelligence systems in the form of autonomous haulers, diggers, trucks, drill rigs and drones will feed off that data.
Four. Clouds are threatening
The ongoing waves of cyber criminal activity (ransom ware attacks, identity theft) underscore two of the bigger worries about cloud computing – namely security and privacy. Cloud environments have not been 100% resistant to the pressures from determined foes, but it is a certainty that the big cloud companies outspend virtually every other company in minding the security shop.
Slowly these concerns are disappearing as cloud computing builds up ever greater resilience. Indeed, in a world with just 6 major cloud computing companies, a solution to a cyber attack in one can be far more quickly replicated to the other 5, than to the millions of data centers in private hands. It’s not too far a stretch for capital markets to punish those companies still clinging to the notion that their 6 internal IT security professionals can withstand all the dangers from the web.
In the long run, cloud computing companies will offer the best overall security over their environments as a competitive and differentiating imperative.
Five. Cloudiness will intensify
Cloud services are bordering on free. Costs are now so low that virtually anyone with even modest purchasing authority (that is, $2k/month) can contract for mission critical business services via a cloud provider. The low price point encourages managers to go cloud (hotel bills get more oversight), so it’s not uncommon to discover that large companies have 200+ cloud contracts for services that they didn’t know about.
Low prices for cloud do create business risk. For example, it is illegal in many jurisdictions for some kinds of data (private data on residents, or subsurface data) to be stored on technology outside the province. Cloud environments by the big players were not designed to meet these narrow requirements. They are designed for fast response times, redundancy and scalability. Therefore, it’s not unusual for a large company to find itself in violation of the law because somewhere deep in the organization someone contracted a cheap cloud service without doing enough research.
This is giving rise to the role of Cloud Wrangler, a senior IT leader whose role is to bring these cloud deployments into one responsibility center, to advise on good candidate applications for cloud and to broker appropriate cloud services for specific needs.
The challenge is that the Cloud Wrangler is often the Chief Technology Officer or CTO, or Director of IT Infrastructure, and their views of safe cloud activity may not square with a business used to purchasing cloud using a credit card.
As cloud computing strengthens and begins to appeal to the geophysical side of oil and gas, expect to see the Cloud Wrangler role appear on IT management teams in upstream oil and gas.
Six. Cloud scientists will be in short supply
The biggest worry for companies contemplating cloud is the significant skills shortage already apparent in the cloud world. Companies need new skills in contracting for cloud services, architecting cloud solutions and managing cloud environments, and these skills are in short supply.
Companies already report that it’s hard to find quality architecture and design skills for any one cloud environment (they’re all growing at breakneck speed). The shortage compounds in a multi-cloud setting – now companies need to find expertise in more than one environment.
Retaining cloud skills in a hot market is its own problem. IT also faces an aging workforce on its legacy platforms. Culture wars may well flare up. One organization has already contacted me to share their story of how the legacy IT team feels cast aside by their own organization in favor of the new technology kids. CIOs will need to think about how to re-skill their team.
Oil and gas may well struggle against other sectors in attracting cloud talent. Low commodity prices, wage pressures, cutbacks of IT budgets mean there’s less cash for compensation. Cloud talent will likely find richer rewards in retailing, transportation and financial services.
Bottom line: cloud computing is a thing, a multi-cloud hybrid environment is the most likely structure, companies will want someone in control of their cloud, and skills will continue to be scarce.
This post draws on a recent presentation from Dave Brassor, one of my business partners and friend. Dave is a guru in the world of cloud computing.