Introduction

Any modern tool of today most likely leverages some cloud technology. Ubiquitous with the capability to scale quickly and serve its customers with what is needed of its platform, the cloud has allowed companies to iterate more rapidly and leverage the latest technologies without spending vast amounts of capital to accomplish what they want to do. Amazon launched this idea Amazon Simple Queue Service in 2004 then with "the cloud" in 2006 with AWS, supporting a single data center location with three availability zones.

Over the next 3-5 years, Google and Microsoft started their competing offering after the huge success of AWS revenue growth. Cloud services grew quickly and sometimes messy but have huge advantages and opportunities for profit, as we see in the following years. AWS consistently posted huge growth numbers in the following years of its launch. Over time, the typical SaaS process takes over, having low-cost offerings to get huge adoption and growth, followed by massive price increases and a gradual decline in service quality.

Eventually, each service works toward a steady profitability pattern after massive growth margins. So, what are the pros and cons of the cloud, what is currently happening with these cloud providers, and what might be the future of the cloud.

The Rise of the Cloud

Amazon Web Services, more commonly known as AWS, has generally been the leader in cloud technologies. From the first major cloud offering of S3 to its many new items in AWS, it has generally been leading in the cloud space, however, Azure and GCP have been giving AWS stiff competition in their capabilities.

While there are several smaller cloud providers from Digital Ocean, OVH, and others, these generally have niche offerings or smaller scaling capabilities; however, they still have powerful offerings when businesses are getting started. Having mainly worked in large B2B markets, Azure and AWS generally tend to be the cloud providers of choice for companies providing service since these providers have been vetted by the business for other vendors or that they use.

Companies - especially startups - appreciate the low capital cost needed to use these cloud providers. Cloud generally has a low-cost or very generous free tier to support these startups with the anticipation that their growth will recoup this free cost. As companies tend to appreciate the turn-key solutions the cloud provides, the cost element is not a conversation, as the growth of the company at almost all costs is paramount.

Pros and Cons

There are several pros for using these cloud providers. Things like automatic database backups, better failover capability, and rapid scaling growth, to name a few. These luxuries require more planning to come by when building your data center. However, running workloads on someone else’s computer has its problems.

Engineering cloud fault-tolerant computing, data center outages, and, yes, even capacity issues within these large computing giants, to name a few. Many of these requirements are good to have built as part of the software architecture, but many older applications don't always have this built-in and sometimes require significant modifications.

Another challenge with the cloud can be the rapid rise of costs when a business that relies on cloud services matures. Cost curves tend to grow quickly, and without a mature cloud department constantly overseeing the deployments, it's easy to see costs rapidly get out of hand.

Server Repatriation

Server repatriation has been an interesting topic in the latest round of cost optimizations for larger SaaS companies. As companies take a microscope to costs, there have been opportunities to create savings by reducing cloud spending. A closer look also can reveal unique opportunities to even support the company's baseline workloads by going with a hybrid approach or leverage reservations.

Planning a data center for a large project can be challenging, but when you have a fallback of the cloud, companies can save money by using the cloud, find a good baseline, and then sensibly use capex to build data center racks at an amortized cost, while expanding into the cloud in peak traffic.

This unique capability to leverage the cloud while optimizing cloud costs will eventually make cloud vendors re-evaluate their bullish approach to pricing the cloud paired with the double-digit growth year over year.

Conclusion

The cloud has some fascinating applications. From leveraging new technology more quickly to allowing startups to create and scale a solution quickly with little capital, it creates new ways to go to market. While the future of the cloud is as strong as ever, evaluation of when and how to use the cloud as growing companies will assess their costs regularly, large-scale companies might eventually evaluate the value of the growth of the cloud with the added engineering overhead.

Cloud providers will need to eventually stabilize and begin to show more value of why the higher cost of service is still important at scale.