Will Cloud drive the next wave of tech innovation?

Published November 29, 2022 | 3 min read

What impact will increased usage of cloud technology have on innovation and tech development?

The trend towards Cloud computing is still in its early stages according to panellists at the recent RBC Capital Markets Australian Technology Conference. As adoption increases, we will likely see innovation in everything from artificial intelligence (AI) to automation, as well as a growing industry in secure locally-based data storage.


Cloud take-up gathering pace

Moderator Garry Sherriff, RBC Capital Markets Australia’s Lead Technology Analyst, highlighted a recent consulting report valuing the global public Cloud sector at over US$400 billion and noting that it continued to experience double-digit growth. The same report found that just 17% of tech expenditure currently went towards the Cloud - a figure expected to rise to 50% within the next four to five years.

Alethea Murphy, Service Now’s Regional Director, Public Sector, Education & Growth ANZ, believed this growth was partly the result of businesses now accounting for IT in their business strategy, often viewing it as a ‘growth and productivity enabler’. They were also more ‘digitally mature’, she observed, which made them more comfortable with Cloud migration.

“We’re seeing entirely new business models emerge because of tech,” she told the audience. “Cloud is giving organisations easy access to test new models and try new approaches to business.”

Murphy observed that the Cloud’s importance was also partially linked to global labour shortages, especially as it enabled AI and machine learning - the foundations of automation.


Economic headwinds to be a tailwind for Cloud?

The likelihood of a global recession is growing, and Sherriff sparked debate by asking the panellists whether this posed a risk to the rate of Cloud take up. David Tudehope, CEO of Macquarie Telecom, believed the opposite was likely. 

“I think it will accelerate things the same way that COVID accelerated the move to the Cloud,” he said. “Our only reference point here in Australia is the Global Financial Crisis… Then, we saw Cloud adoption increase. Although, of course, we can’t assume anything.”

Tudehope also observed that enterprises facing budgetary constraints would probably be attracted to Cloud because it allowed them to purchase only those parts of a solution they actually used.

This belief was supported by Rishi Jaluria, RBC Capital Markets U.S. Software Analyst, who noted that Cloud providers were rewriting the rules of how to sell solutions to enterprises. In the process, he said, they had cut out traditional sales teams and instead used the products themselves to sell directly to ICT departments.

“PLG - or product-led growth - is an acronym we’re hearing all the time in Silicon Valley,” he told the audience.

“Increasingly, the business model [of Cloud software providers] is aligned with what people want. We’ve seen this evolution from a traditional perpetual licence to a subscription model.”

“The next evolution you’re seeing is consumption-based pricing, where enterprises don’t pay for a ton of stuff, but only what they’re using.”

Jaluria also noted that more enterprises were ramping up the cost savings that could stem from the cloud by taking up ‘multi-cloud’ solutions.

“A recent RBC Capital Markets survey of CIOs found nearly 90% of enterprises were adopting a multi-cloud strategy,” he explains. “If you go multi-cloud, it can be an automatic 30% saving.”

“You also have a level of risk mitigation because if one provider goes down, you have a backup.”


AI and Cloud inextricably linked

Alphabet Inc CEO, Sundar Pichai, was quoted as saying that AI would be “more important than fire” for humankind, and Jaluria asked his fellow panellists what the implications were for Cloud computing.

Murphy observed that AI was already here and that the average person was likely to interact with AI more than one hundred times a day, potentially without realising it. She also noted that AI was often built into Cloud offerings, creating a level of automation around service delivery and security responses.

As AI became even more ubiquitous, she said, Cloud computing and data centres would become more important too.

Sherriff observed that, as Cloud computing led to an exponential amount of data being created, governments, enterprises and consumers worldwide were paying greater attention to where that data was stored and, therefore, which jurisdiction applied.

Tudehope noted Cloud’s role in cybersecurity and highlighted how it was used in conjunction with AI and machine learning to capture potential events among masses of information. “While attacks get smarter and more sophisticated so does the defence,” he observed.

He also noted that Australia and the surrounding region had been a “bit slow off the mark” on the issue of data sovereignty, especially compared to the United States and the European Union - both of which had rigorous data sovereignty laws. He believed that as our local markets matured, it was likely that there would be growing demand for local data storage. This would lead to the growing importance of ‘data hubs’, particularly Sydney, Singapore and Tokyo.

“The megatrend is unmistakable,” he observed. “The Cloud lives in data centres, and the scale of centres being built by smart operators is growing larger.”


The Cloud becomes sustainable

Data centres have traditionally been among the highest consumers of grid-based electricity. Tudehope noted this was changing and that there was a growing push towards self-sustainability, with many new centres constructed to be supplied by their own renewable power source.

“Data centres have facilitated efficiencies,” he said. “We have enabled people to stop travelling so much and use video calls and to remove the energy-inefficient computer room from the office. There has been a massive change in energy consumption.”

Tudehope concluded that this emphasis on sustainability was another factor favouring Cloud computing.

“Generational change, COVID acceleration, and the success of people already moving to the Cloud - all these things are now in play,” he said.