Cloud Computing Outlook 2016

Cloud computing isn’t anything new. As Pivotal’s James Watters put it in a recent Wired article, the cloud has built up a decent track record over the past decade and is now a “social normative” and “a safe bet.”
However, the cloud computing outlook is still for the market to keep growing quickly. The same Wired article also notes that Boston research firm Forrester has pegged cloud computing as a “hyper growth” area, with the market for cloud services set to grow to $191 billion by 2020. Certainly, those are some impressive numbers, and investors will be wondering what to watch for in the cloud space heading into 2016.
Here’s a look at a few trends in cloud computing and the cloud computing outlook for 2016.

Keeping up with strict requirements

In the past, it was difficult for government agencies or companies governed by strict compliance rules to use the cloud. However, as Information Week notes, that trend is set to change in 2016. “Governments are adjusting rhetoric to become more cloud friendly, while cloud providers are offering more services that satisfy regulation/compliance requirements,” the article states. 
To be sure, a deal between Computer Sciences (NYSE:CSC), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and the Federal Aviation Administration (FAA) got plenty of attention earlier this year. It will be interesting to see whether further, similar partnerships develop in 2016.
“Government adoption of cloud computing for mission applications is accelerating rapidly, and we are pleased to help FAA’s transition to the cloud,” said Teresa Carlson, vice president of Worldwide Public Sector, Amazon Web Services, in a statement at the time.

Security still an issue

While it’s certainly becoming safer for organizations to use public cloud services, data security could still be a concern. However, the issue might not come from where you’d expect.
“Through 2020, 95 percent of cloud security failures will be the customer’s fault,” stated Gartner in its top predictions for IT organizations and users. While the firm explained that only a small percentage of security incidents in the cloud reflected vulnerabilities that were the providers fault, it stressed “This does not mean that organizations should assume that using a cloud means that whatever they do within that cloud will necessarily be secure … the secure use of public clouds requires explicit effort on the part of the cloud customer.”
Gartner expects this to translate into continued growth in the market for cloud control tools, which allow enterprises to monitor and manage their use of the public cloud.

Continued growth

Not surprisingly, Forrester isn’t the only firm calling for continued growth in the cloud sector this year. Along with the Internet of Things (IoT), big data and analytics, Deloitte has pegged cloud computing as an area where “significant investments are being made.” In the firms 2016 technology industry outlook, Global Technology, Media, and Telecommunications Industry leader, Paul Sallomi, said that the cloud is helping to transform businesses around the globe, though cloud data and storage businesses “will need to scale to battle continuing margin pressures.”
Meanwhile, Technology Business Research expects the global software as a service (SaaS) market to grow from $49 billion in 2015 to $67 billion by 2018.

Container technology on the rise

According to Gartner, container technology (think Docker) will be key to enabling microservice architectures and agile development in the cloud in 2016.
“Monolithic, linear application designs (e.g., the three-tier architecture) are giving way to a more loosely coupled integrative approach: the apps and services architecture,” the firm states. “… Microservice architecture is an emerging pattern for building distributed applications that support agile delivery and scalable deployment, both on-premises and in the cloud. Containers are emerging as a critical technology for enabling agile development and microservice architectures.”

Platform plays

Deloitte also expects to see “platform plays” in a number of areas, including the cloud, in the near future. “Open platforms are a powerful tool for transformative change,” the report states. “They help to accelerate innovation by enabling developers and companies to explore the art of the possible.”
For investors, that means there could be even more change on the horizon to watch out for when it comes to the cloud computing outlook. Certainly, there will be plenty to look forward to in cloud computing going into 2016.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.