A cloud war with more functions

November 9th, 2017 by · Leave a Comment

This article was authored by Jouko Ahvenainen, and was originally posted on telecomasia.net.

Cloud services are often seen only as server capacity, but we are now entering the phase of serverless cloud services (read more here ). We also see services from cloud companies, like Google Apps, Microsoft Office and IBM Watson. In the future cloud companies probably offer more services, not only apps but APIs, too. One area where cloud companies are getting more active is fintech.

We can simplify and divide cloud services into three categories:
1.    Infrastructure as a Service, IaaS, that is pure virtual computing resources,
2.    Platform as a Service, PaaS, that offer a platform where software can be developed and run,
3.    Software as a Service, SaaS, offers an application on servers to users.

We have seen a lot of IaaS offering as AWS, Microsoft Azure and IBM Cloud. We have also a lot of SaaS offerings, starting from Salesforce’s CRM to Microsoft Office and millions of other services from small and big software companies. PaaS business has been smaller, but can be expect that especially PaaS is a growing segment with vertical cloud solutions?

AWS is often seen as the leading cloud company, but if we include all these categories, actually Microsoft is the biggest cloud company. Especially on IaaS we have also seen differences between services in terms of how ‘pure’ server capacity they are, but nowadays most of them offer pure capacity and now they go for serverless Function as a Service.

The emergence of FaaS and serverless actually also means we are coming closer to PaaS models. It means that we have a development environment that offers some back functions and pieces of software code to developers. The interesting question is if we will start to have more of these functions and e.g. service industry vertical functions. For example, we can see especially finance industry specific functions, when FinTech services are really coming to cloud services.

This development probably also brings different back-end services to clouds. It can mean we have back-end functions to easily create finance, IoT and mobile location based services. Then we really have a significant model and business between IaaS and SaaS. We can already see; the cloud companies have realized this opportunity.

FinTech is an interesting segment to observe this development in. Most finance institutions have traditionally had their own servers and infrastructure, and only most recently have they started to use or at least consider cloud services. It means many kinds of cloud models, public cloud components, private clouds, hybrid models and also the building out of their own cloud. Then PSD2 and open APIs to bank services actually could be a kind of SaaS or PaaS model, although the obsolete legacy banking IT doesn’t really offer a basis for that.

Banking IT has been a very important customer to many IT companies, including IBMOracle and finance sector focused solution providers. Now these companies are facing challenges as banks also consider new, more cost effective moderns solutions. New FinTech services definitely don’t use legacy services.

This means that companies like IBM, Oracle, Microsoft and those finance solution providers consider what can they offer in the future and how. One solution is to take a more cloud based approach, but not only offer virtual server capacity, but back-end services too, i.e. a kind of PaaS or FinTech-FaaS for finance services. This can mean a real revolution for finance IT solutions.

But as in with any revolution, it is not clear who will win and who will survive. New players for finance services can also take this market, as it has happened in disruptions in many industries. Of course, companies like AWS and Google are newcomers to the finance industry and can become important. We already have huge Chinese players like Alipay (that processes payments more than anyone else in the world) and Tencent. But then we have totally newcomer startups that offer FinTech platforms and back-ends.

Data and AI are also becoming a critical part of finance services. This means new requirements for applications and platforms. IBM, of course, emphasizes their Watson as a solution, but many customers still feel it would give too much control to IBM with their data, and they really want to have services in their own hands. This also means that it should be more like a PaaS or FaaS model.

We can assume the cloud business grows strongly also in the near future. At the same time, we can start to see more variation in the cloud offerings and also vertical back-end functions that offer special value to use a cloud in a specific industry or solution. This probably also mean mergers and acquisitions in the market. Software companies also want to offer infrastructure and infrastructure companies back-end services. The big game in clouds is just starting.

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