As cloud computing technology is gradually gaining confidence among businesses and financial institutions, industry experts expect the number of private clouds to drop, mainly as a result of more regulation and the dominance of large, established public players.
Findings have shown that more companies globally are shifting toward hybrid and public clouds, and they are gradually gravitating away from private clouds in light of rising cybersecurity investments.
The 2017 RightScale Inc. "State of the Cloud Report" said private cloud adoption fell to 72% in 2017, from 77% in 2016. The report also found that security concerns, once a major barrier to cloud adoption overall, dropped to 25% in 2017, from 29% in 2016.
According to Temenos Group AG's chief revenue officer, Jean-Mi Hilsenkopf, high levels of fear, which had prompted many of the Swiss software company's institutional clients to opt for cloud infrastructure over a decade ago, are eroding due to clearer regulation.
"With the maturity of regulation coupled with sophisticated levels of security, the number of private clouds will go down globally," Hilsenkopf said at the Temenos Community Forum 2018 in Dublin.
The EU's incoming General Data Protection Regulation, or GDPR, set to come into effect May 25, and China's cybersecurity law, passed in June 2017, aim to address some of the concerns around how data is stored in the cloud.
Meanwhile, governments in the business hubs of Hong Kong and Singapore have stepped up their focus on cloud computing, providing guidelines on cloud adoption. The 2018 Cloud Readiness Index by the Asia Cloud Computing Association ranked Singapore and Hong Kong as the top two cloud markets in the region.
Much growth in the cloud space has been outside the financial services sector.
Cyrus Taheri, partnership development director, global financial services, ecosystem and ventures at Accenture Technology Solutions AB, said public cloud adoption outside the banking industry has been "aggressive" in comparison to those within that sector, where the cloud still presents "a risk due to its complexity."
With the rise of large public cloud players such as Amazon Web Services Inc. and Microsoft Corp.., early private cloud users are growing increasingly confident with the public cloud, Taheri said.
"Public cloud providers like Amazon and Microsoft are more educated, spending more on cybersecurity and ensuring clients that their clouds are safer than businesses who are unable to spend as much as on the maintenance or upkeep of their private clouds," he said.
Taheri also acknowledged the inroads made by Chinese tech giants Alibaba Group Holding Ltd. and Tencent Cloud Computing (Beijing) Co. Ltd., in the cloud space, stating that the acceleration of their cloud businesses will simply promote public cloud technology.
Earlier this year, Tencent Cloud added five new data centers in Mumbai, Frankfurt, Seoul, Moscow and Silicon Valley in a bid to expand its cloud business. According to its latest financial earnings released earlier this month, cloud service revenues more than doubled year over year while the number of staff dedicated to its cloud and online game business grew by 17%.
Taheri pointed to a hybrid cloud strategy for companies that are not willing to take the leap. Hybrid cloud involves a combination of using internal data centers and public cloud servers, as a stepping stone toward going exclusively public cloud.
Leigh Nicholas, an independent cloud software vendor director at Oracle Corp., echoed these sentiments. He said the hybrid model is on the rise because businesses are able to "drip-feed selected applications" on to the public cloud and keep their core systems in-house.
There is a gradual decline in private cloud technology, but it is not happening as quickly as analysts are predicting.
"As businesses start to unravel the mess from their old systems and cherry-pick what they have for the public cloud, you will see private cloud usage fall, and most likely this will cause demand for hybrid clouds to increase," Nicholas concluded.
