The Beginning of Digital Transition, Cloud Migration - 1 Growing Market

FEB 24, 2023 Eunju Hong

During the spread of COVID-19, companies changed their way of working to "untact" (no contact), and many are rushing for digital transition to secure differentiated value for their businesses. New digital technologies that require a lot of infrastructure, such as application operations, automation, artificial intelligence (AI), contact centers, or chatbots are introduced in the process. However, there is one thing that needs to be done before introducing those new technologies. It is to prepare a cloud environment. A new infrastructure, cloud, is needed to utilize the features of those new technologies. Recently, companies are putting high values on storing big data and getting insight out of that data to secure business competitiveness. But in the existing infrastructure environment, it’s not easy to store large amounts of data, and it’s very hard to analyze data through AI or machine learning/deep learning. The cloud is what makes those possible, and it’s the reason why companies are interested in the cloud and are trying to introduce it quickly. ^[1]

The survey for the participants of Computerworld Webinar shows that a lot of companies are currently considering building cloud environments: “What is your biggest concern over the current IT system operation?” For this question, 62% of the respondents said building a cloud environment. ^[2] Next, Pathway, a cloud migration company, conducted a survey on the cloud, and 65% of the respondents said their top priority is cloud migration. ^[3]

The Biggest Concern Over the Current IT System Operation (Source: Computerworld^[2])

The growing need for the cloud is bringing attention to cloud migration, which migrates the existing computing environment to the cloud.

Cloud migration (what)?

To utilize the cloud, “cloud migration,” which migrates existing data and applications to the new infrastructure environment, is required. The objects of migration include various physical infrastructure of the company and all resources operated therein. That is, it’s a process of moving digital assets, such as data, workload, IT resource, and applications, to the cloud infrastructure. Generally, tools and data are moved from the legacy infrastructure or on-premises data center to the cloud. However, it could also mean cloud-to-cloud migration, and this is what is becoming more and more important. Migration may include all or part of the assets. ^[4][5]

Cloud migration (why)?

They transition to the cloud environment to overcome the limits and burdens of using existing infrastructure, pursue digital innovation, and provide new services to the customers. Basically, you can secure better computing capacity without owning/managing hardware, a step above the legacy IT infrastructure. Cloud migration resolves risks of △old IT infrastructure, △possible damage of sensitive data, △high cost to maintain legacy systems (server update, patch, enlarging capacity, etc.). ^[5]

Mostly, cloud migration is about efficiency, and the organization that successfully migrates can expect improved expandability, cost reduction, and enhanced security as well. Here are seven advantages of cloud migration.^[4]

1. Elasticity and expandability

Cloud data can be immediately processed with computers, and memory or data storage can be added or removed based on the needs or demand of an organization. The elasticity brings expandability. When the server lacks resources due to an increase in users, existing self-hosting hardware denies the request. But the cloud processes loads without errors through infinite resources and auto-scaling.

2. Cost reduction and efficiency

You pay for the cloud you actually use. The existing IT environment takes months to expand and requires hardware with high initial cost and skilled IT employees who can execute them. If you use the cloud, the cloud provider immediately performs all the work. The existing IT infrastructure requires enough resources that can handle the maximum demand, whereas the cloud infrastructure can be expanded or reduced. However, you need appropriate plans and executions for efficiency when buying a cloud infrastructure.

3. From CapEx to OpEx

For cloud migration, you need to change the expense system for computing operations to fit the cloud. You don’t pay a fixed cost like for on-premises system; the cloud charges you for as much as you use. Normally, it starts by paying for yearly usage, then changes to the monthly pricing. You need to understand the cloud payment system. Payment for on-premises systems is closely related to CAPEX (capital expenditure), but as for the cloud, you only pay for how much you use, so it’s more like OPEX (operating expenditure). The computing fee is not fixed, and if you use analysis systems like big data, the cost increases accordingly. ^[1]

4. Agility and flexibility

The market changes as quickly as the technologies. Cloud allows quick development, test, and execution of the business applications, providing agility to respond quickly to the changing requests. Small companies can access the same powerful tools large companies use to instantly respond to new requirements or tasks.

5. Performance, stability, and elasticity

Cloud providers operate world-class facility networks equipped with cutting-edge technologies worldwide. They provide low network latency, data backup, and disaster recovery.

6. Security and compliance

Cloud providers are large companies that rely on large companies. So, they lead security/compliance including the latest updates and trends that can protect sensitive data in the cloud safely. Public cloud providers provide upgraded policies, technologies, and controls. They consider compliances to all industrial regulations. Also, if you store your data in the cloud, instead of hard drives, you can keep it from being damaged when the device is stolen or lost.

7. Reduced and simplified IT maintenance

Employees maintain/manage computer hardware and software. When you use a public cloud, the service provider manages it, so the company can focus on business accomplishments.

The results of the survey by Computerworld say the same. Companies introduce the cloud to build infrastructure quickly and conveniently: “Why introduce and migrate to the cloud? (multiple choices)” The answers were:Quick and convenient infrastructure establishment (61.3%), cost efficiency (45.1%), rapid introduction of the latest technology (31.7%), enhanced security, and the will of executives (21.1%). ^[2]

Cloud migration (market)?

The market for cloud migration will expand with the challenges of business operation, needs for business agility, and increased adoption of automation solutions. Cloud migration and usage-based models enable quick and easy distribution of applications in terms of business continuity, and they satisfy the low preferences of various organizations all around the world to CAPEX and OPEX. [6] It still needs to figure out cloud compatibility of enterprise applications, cloud interoperability, dependency on suppliers, etc., though. However, the survey results from Simform show that the expense for global cloud services expanded from 125 billion dollars in 2020 to 160 billion dollars in 2021. ^[7]

Increasing Cloud Expenditure Compared to the Total IT Budget (Source: Simform^[7])

According to the market prospect of Mordor Intelligence, cloud migration service market is expected to grow from 119.13 billion dollars in 2020 to 448.34 billion dollars in 2026 with the CAGR of 28.9%. Introduction of cloud computing has been increasing with expanded investments from small-and-medium-sized companies for the last 10 years, and many organizations are already migrating to the cloud platforms all around the world. For the last few years, introduction of cloud has become an important consideration for IT cost reduction strategy. ^[8]

Cloud Migration Market Snapshot (Source: Mordor Intelligence^[8])

Growth of hybrid cloud migration^[8]

The growth of cloud and industrialized services and reduction of traditional data center outsourcing (DCO) means transition to hybrid infrastructure services on a large scale. Sudden increase in expenditures for co-location, hosting, infrastructure utility service, etc. while existing DCO market is shrinking, is leading migration to cloud laaS. Migration to PaaS and SaaS has become very important in the last few years, and as the companies pursue DevOps features and automation, they’re playing key roles in realizing the technological and operational advantages of the cloud.

Migration to hybrid clouds has grown significantly over the last few years. Hybrid clouds enable companies to expand their computing resources without requiring huge capital to handle short-term demand increase. Cloud providers offer features that can expand infrastructure and allow businesses to expand quickly in locations all over the world. The RightScale 2019 State of the Cloud Report says that 84% of the companies have multi cloud strategies, among which 58% are utilizing a hybrid approach. The global pandemic caused massive limitations to businesses operated by internal IT system, and the considerable number of them has chosen to rapidly migrate to the cloud. Microsoft mentioned that the demand for the cloud service has increased by more than 775% after the pandemic.

Cloud Migration Market: Hybrid Cloud (Source: Allied Market Research^[6])

Banking, financial services and insurance (BFSI), focus on the medical industry

Cloud migration is expanding in many industries including medical, bank/finance, IT/communications, research/education, and travel/tour, and large companies as well as small-and-medium-sized companies are accommodating it to improve business accomplishments and fulfill customer expectations. Especially, cloud services in BFSI, the medical industry, and life science are expanding significantly. ^[6]

Bank/finance organizations are accelerating cloud migration for flexibility, agility, new technology, and integration with the fintech ecosystem. Cloud helps reducing infrastructure cost, and many cloud providers provide laaS or PaaS solutions for service operation of BFSI sectors. Finance businesses expect that the cloud would help pursuing overall modernization initiatives including AI, blockchain, and customer response/operation application supported by the software container. Bank of America announced that they’re allocating more from their 3-billion-dollar budget for computing infrastructure to the public cloud, as security technology is rapidly developing, and HSBC chose a cloud-first approach for data analysis and machine learning (ML). ^[8]

North American/European market leads while the Asian/Middle Eastern market grows

The needs for business agility are leading cloud migration in North America and Europe. Demands for cloud migration is increasing along with the rapidly growing number of data centers in Asia-Pacific and LAMEA regions. The Asia-Pacific region is expected to mark the biggest market growth. ^[6] North America is leading cloud migration with the biggest share. In addition, it has a strong basis of cloud migration suppliers, which expedites growth.

According to the survey by IBM in 2019, 95% of the North American companies had migrated important applications and IT infrastructure to the cloud, and more than 80% said that they would seek cloud migration of part of their applications. Also, up-to-date industrial environments in North American region led to extensive integration of AI, which enlarges the demand for cloud migration. BYOD is also an important driver of market growth. Cloud migration enabled the best travel service provider in North America to reduce 20% on hardware expense, while men’s outfit company, Brooks Brothers, increased their productivity by 50% from cloud migration. ^[8]

Cloud Migration Market - Growth Rate by Region (Source: Mordor Intelligence^[8])

Growing application migration

Most companies are planning to migrate applications to the cloud with their attentions on Microservices and SRE. O’Reilly Media surveyed 1,283 software engineers, technology managers, and decision makers around the world, and according to the results, 21% of the organizations are hosting all applications in the cloud. Also, 49% of the organizations are still executing the applications on-premises, but migrating to hybrid clouds (39%) or multi-clouds (54%). As cloud-based application developments/operations are increasing, MicroService Architecture (MSA), which helps building applications that can be easily updated or extended, is rapidly entering the market. In addition, site reliability engineering (SRE), a software engineering approach for IT operations, is emerging as well, and SRE teams manage systems, resolve issues, and automate operations through software. 35% of the respondents have already adopted SRE while 47% of them are planning to implement SRE in the future. ^[10]

Epilogue

Accelerated digital transition has led to the expansion of the cloud. Accordingly, cloud migration service market in and out of the country has grown significantly. Cloud migration positions companies in a way they can flourish after the pandemic, increases elasticity of the company, guarantees business continuity, and helps provide new services. Also, it comes with advantages, including collaboration, automation, and agility. ^[9] However, it’s not easy to build and execute the optimal cloud migration strategy for each company. Companies are putting their efforts in migrating main enterprise applications to the public cloud, but some go through difficulties in the cloud migration, or get only limited success. ^[11] Furthermore, there’s no single cloud migration strategy for every company. They need to choose a cloud migration strategy that is appropriate for their business models and goals.

☞ In chapter 2, we’ll learn how to increase possibilities for successful cloud migration that is suitable for the companies and their businesses. It includes examples of on-premises to cloud migrations, cloud to cloud migrations, and what to consider for every step of the way for companies to examine cloud migration strategies.

I hope this find you helpful in successful cloud migration.

References
[1] http://www.itdaily.kr/news/articleView.html?idxno=202067
[2] https://www.comworld.co.kr/news/articleView.html?idxno=50164
[3] https://www.prnewswire.com/news-releases/next-pathway-research-65-of-companies-report-cloud-migration-is-a-top-priority-301214424.html
[4] https://acloudguru.com/blog/business/what-is-cloud-migration
[5] https://www.citrix.com/ko-kr/solutions/vdi-and-daas/cloud-migration/what-is-cloud-migration.html
[6] https://www.alliedmarketresearch.com/cloud-migration-services-market
[7] https://www.simform.com/blog/cloud-migration-challenges/
[8] https://www.mordorintelligence.com/industry-reports/cloud-migration-services-market
[9] https://www2.deloitte.com/xe/en/insights/industry/technology/technology-media-and-telecom-predictions/2021/cloud-migration-trends-and-forecast.html
[10] https://www.informationweek.com/cloud/study-cloud-migration-gaining-momentum
[11] https://newrelic.com/blog/best-practices/cloud-migration-checklist

▶ The content is protected by the copyright law and the copyright belongs to the author.
▶ The content is prohibited to copy or quote without the author's permission.

The Beginning of Digital Transition, Cloud Migration

Eunju Hong

Strategic Marketing Team at Samsung SDS

Had been in charge of digital transformation in samsungsds.com, solution page planning/operation, based on her work experiences in IT trend analysis, process innovation, and consulting business strategy, and is now in charge of content planning and marketing through trend/solution analysis for each main business sector of SDS.