Emerging Trends in Cloud-First Applications Will Drive Cloud Consumption in 2023

By Arti Loftus, Special Correspondent  |  December 15, 2022

The debate over migrating business applications and services to the cloud is over, as every major industry analyst firm in the world is predicting massive growth of cloud consumption in 2023. Digital transformation allows enterprises of all sizes to ship data from the edge into the cloud for analysis with all the benefits of centralized operations. Looking ahead, new innovations will abound, including the evolution of artificial intelligence (AI), machine learning (ML), augmented reality, and more. The most basic and essential business applications are delivered as a service now, from the popular Microsoft (News - Alert) Office 365 and the related Teams voice, messaging, and video collaboration platform to the management of distributed IoT implementations.

The more intelligent and available the cloud becomes, fueled by faster broadband that supports real-time applications, the more adoption will happen, as well as more cloud expense. Bottom line? Organizations can’t afford to not move to the cloud.

The dynamic and uncertain environment we experienced over the last few years, including the global pandemic and work-from-home mandates, initially drove companies to speed up their existing digital transformation investments simply to stay alive. That included making the move to cloud-based telco and applications to support secure remote working and to serve and retain customers.

Gartner forecasts that, in 2023, worldwide public cloud spending will grow 20.7% to a total of $591.8 billion, up from $490.3 billion in 2022. There is no other technology than cloud technology that will grow at that rate.

“Moving to the cloud is no longer optional, as it is simply too beneficial, especially in an uncertain economy,” said Scott Chasin, Chief Technology Officer of Pax8, a cloud marketplace designed for MSPs to leverage to serve SMBs and enterprises that are swiftly moving into cloud-first computing, communications, connectivity, and more.

Pax8 is no stranger to massive growth. In November, the Denver-based company announced that it landed a coveted spot on the Deloitte (News - Alert) Technology Fast 500 as number 131 in a list of the 500 fastest-growing technology, media, telecommunications, life sciences, fintech, and energy tech companies in North America.

Now in its 28th year, the Technology Fast 500 program selects winners based on percentage fiscal year revenue growth over a three-year period, and Pax8 grew by 1,122% from 2018 to 2021.

“The MSPs we service are not pumping the brakes at this point,” Chasin said, “in large part because cloud not only delivers value to their SMB and enterprise customers but to their own businesses. The public cloud’s elasticity and scalability reduce the financial risk of innovation while enabling business agility and new applications, and we are seeing, based on the data we collect, that new applications will drive more consumption of cloud-first services, which is why our model works. We continually scout new and advanced cloud-based business applications and add them to our marketplace, making it easy to find, buy, and resell services. Our platform integrates with existing PSA systems simplifying everything from provisioning to billing.”

Chasin said when businesses experience the cloud firsthand, their confidence grows, followed by their awareness that additional cloud applications can make their business even more competitive and secure, deepening their relationships with their customers.

“The importance of Customer Experience, or CX, has never been more prominent,” Chasin said, “and with so many omnichannel customer support platforms now available replacing, in part, the need for contact centers, businesses are able to cut enormous costs. Consider the ability to serve customers with highly intuitive and intelligent bots, which result in more loyalty and more data analytics and insights compared to large, sprawling physical contact centers that keep customers on hold.”

Chasin cites several drivers of cloud consumption in 2023:

  • The continuation of hybrid work;
  • The potential for cloud services to reduce the environmental impact of energy consumption (given the shared model and commitment all hyperscalers are making in the environmental, social and governance, or ESG, space);
  • The technology that makes sovereign clouds possible; and
  • Major advances in software that help MSPs, and their end-customers, better orchestrate to optimize their cloud spend.

“Let’s take sustainability goals as one driver,” Chasin said. “Because cloud service providers aggregate resources across their customers, MSPs can enjoy economies of scale that smaller companies simply cannot, as it is far more efficient to run an application or workload in the cloud versus on-premise, but running an entire data center in the cloud produces less carbon than the equivalent of that data center running on-premises.”

According to an IDC survey, 83% of respondents agree sustainability is the most important criterion in IT buying decisions, and by 2025, IDC (News - Alert) expects 85% of organizations will see a 35% increase in sustainable efficiencies by using software and cloud-based infrastructures.

Chasin remarked, “This is a good thing for MSPs and the organizations they serve and is one of the pillars of corporate social responsibility the Pax8 team cares so much about.”

A McKinsey & Company 2021 survey on AI found that 64% of “high performers” – those seeing the biggest bottom-line impact from AI adoption – run their AI workloads on public or hybrid cloud compared to 44% at other organizations.

“When you step back and think about it, there is no reason to set up private servers and increase on-premise spending when deciding to adopt AI applications,” Chasin said. “Public cloud supports access to more AI capabilities, including natural-language speech, facial-recognition, and automated systems giving access to the ability to deliver super intelligent, even Meta-worthy experiences to customers without having to bank the up-front Capex required in the old world.”

Chasin said that the ability to protect data privacy is another major cloud consumption trend in 2023.

“Regulations are increasing in intensity, for all the right reasons – everyday data breaches are hitting organizations hard, and this has serious implications as the exposure of private and confidential customer data may be exposed. This is driving us toward new ways to protect cloud-based applications and services, including utilizing software to build sovereign clouds, which uphold the data protection standards of local governing bodies and is a must for businesses expanding into new global markets.”

Finally, Chasin reiterated the impact of XaaS – or everything-as-a-service – as a key driver in 2023.

The global XaaS market reached $198 billion in 2021, according to research firm IMARC Group, which expects the market to reach $624 billion by 2027. XaaS is growing even faster than cloud adoption, which Chasin says explains his theory that it will ultimately be cloud-first or cloud-native applications that will have the greatest impact on growth in 2023 and beyond.

According to Forrester’s 2022 Infrastructure Cloud Survey, 40% of firms will take a cloud-native-first strategy in 2023, which Chasin says is the natural evolution of overall IT.

“By running workloads in containers rather than legacy virtual machines, technologies like automated systems, AI, ML, robotic process automation (RPA), and the IoT, when combined with 5G speeds that are 10X faster than traditional networking speeds, will change the game once again,” Chasin explained.

Forrester’s (News - Alert) survey found that containerized applications account for half the total number of applications running in enterprises today, with Kubernetes orchestrating them at scale.

“2023 is lining up to be another ultra-high-growth year for those who understand the power of the cloud,” Chasin said. “We’re hiring and continuing to invest in our people and platform, with confidence that what our industry does together will continue to change the game for organizations of all sizes, as tapping into the cloud and especially cloud-based-applications levels the playing field for our MSP partners, for the vendors we list on our marketplace, and most profoundly for businesses of all sizes which are able to compete on a more level playing field.”
Arti Loftus is an experienced Information Technology specialist with a demonstrated history of working in the research, writing, and editing industry with many published articles under her belt.

Edited by Erik Linask
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