The factors that will shape cloud computing in 2023

I think it is fair to say that 2023 will be a pivotal year for cloud computing. Some of the key trends from previous years, such as widespread cloud adoption among enterprises and scaleups, will be even more relevant due to the need for companies to make savings to compensate for the economic downturn.

Running in parallel with the ongoing shift to the cloud, we will see security taking centre stage and a much wider discussion about sustainability issues.

Here then, inspired by things that I saw and heard at the big tech events from the end of 2022, are what I believe will be the key trends for 2023.

1. The cloud vs the economic crisis

Inevitably the economic crisis will cast a shadow over this year, with IT execs mulling over what the financial downturn, which is likely to be more pronounced in some parts of the globe than others, will mean for their operation.

For the leading cloud providers, AWS, Google, Microsoft and Oracle, a dip in the global economy might well be good news. For cloud consumers, less so.

There are all sorts of reasons for companies to shift from on-site servers to cloud computing. It might give them more flexibility, improve their security, enable them to extend their business offering and even make them feel as if they are doing something a bit cool and edgy. But the overwhelming reason is going to be because cloud services are likely to be less cash intensive in the short term and cheaper in the medium to long-term when FinOps is implemented.

In a world where efficiencies are top of many execs' agendas, saving dollars, pounds and euros by porting to the cloud is going to seem like a very smart move.

For some companies, it will make financial sense as the transition could take a long time – in some instances as much as three years – and if companies can avoid paying upfront, then they might not get the full bill until the economic situation is a little less difficult.

The downside for companies is that the growing cost of energy, largely caused by the war between Ukraine and Russia, could mean that Cloud Vendors feel they have no option but to increase their prices. One smart move for customers might be to buy commitments for a one or three-year deal to lock the current rates (however, cloud prices haven't increased, so there is still uncertainty around how this would impact commitments.) As a customer, you are locked-in with the provider for the duration of the agreement, yet this should not be a problem as changing Cloud Vendor can be as complex as migrating to the cloud.

2. Sustainability is becoming a catalyst for moving to the cloud

Across the globe, companies are being scrutinised ever more closely by their customers and investors to see if their pronouncements on carbon reduction are actually being met. One way that companies can take a significant chunk out of their carbon usage is to adopt cloud computing.

It might sound like a cynical move, but by shifting the burden of the carbon generated by hosting to a third-party, companies can make themselves appear a lot greener. While each cloud vendor provides a way to measure carbon emissions, the tools differ wildly in accuracy, scope and timely data, making it currently hard (impossible) to get a clear picture. Recently, at Google Next, a much-improved carbon reporting tool was announced.

The pressure to make carbon reductions is coming at companies in different ways. In the US, some of the leading financial institutions like Blackrock, driven by their own net-zero ambitions, are insisting they won't invest in companies if they can't display that they are hitting their climate change-related targets.

In areas of Europe, the drive to lower carbon emissions in enterprises is being more formalised as countries begin to roll out carbon taxes.

Whether it is the carrot or the stick approach, the drive to net zero is clearly going to be a catalyst for more companies adopting cloud computing in 2023.

3. A big push on machine learning and AI

Firstly there are excellent business reasons for companies to adopt AI and ML. Whether it is at the back-end as they automate basic operation tasks or front-end customer service where chatbots can augment offerings made by human beings, there are all sorts of ways that AI can transform businesses. Also in an age where the mantra is very much around productivity and cutting costs, AI and machine learning can generate some big wins very quickly.

Interestingly too, we are only at the start of this journey. The industry will be awash with people talking about what the technology is going to offer next, and at the root of it all will be cloud computing.

For cloud providers, encouraging companies to integrate AI into their operational systems is a smart move as it further embeds them within their cloud system and might mean they end up spending more money with them.

4. The growing importance of security

The whole tech industry seems obsessed with security issues and it is not surprising given that the average cost of data breaches increased 2.6% from $4.24 million in 2021 to $4.35 million in 2022.

I think one of the key things to look out for in 2023 is that there will be a lot of reiterating how the cloud is the most secure solution for enterprises. Companies that have their own systems. By offloading part of the security risks to AWS, companies can save a considerable amount of money. There is also an opportunity cost of continuing to build and maintain security systems that can be offloaded.

As security in the cloud is better than in the data centre, it is no surprise that cloud security is being pushed in the data centre, improving the hybrid cloud experience. AWS Outposts install AWS servers in a customer's data centre or Microsoft ARC allowing software (SQL Server) running in data centres to be managed and updated by Azure, no need to worry about patches and compatibility between on-prem and in-the-cloud instances.

As companies use more cloud-native systems (e.g. Lambda), the more they can delegate security. For EC2, AWS manages security from the data centre floor, up to virtualisation. Then from the OS up it is the customer's responsibility. When using Lambda, the only aspect that stays in the customer security perimeter is the code. AWS takes care of everything below code. With the move of Lambda execution towards the edge, with CloudFront Lambda@Edge, it is possible to deliver incredibly fast responses to customers all over the world, leaving all the security concerns to AWS. The code is now neither running in a customer's computer nor in the cloud, it is as close as possible to the customer while centrally managed from the cloud. This is perfect to build an IoT super fast feedback loop; my favourite example (not implemented yet) is a function that changes the setting of any red lights in real-time to allow an ambulance to get to the hospital faster.

AWS lives and dies by its security record, so you can be sure that it will take the utmost care to ensure it is never compromised. After all, it recently signed a $10 billion deal with the US National Security Agency (NSA) for its cloud services. I think we will see more integrated security between AWS native and other security software this year, as well as a lot more executives asking their IT leaders about their security systems, and it is yet another reason why the cloud will look like a sensible place to be.

5. Multi-cloud and hybrid cloud are increasingly looking like smart options for some companies

I wonder if we will see more hybrid cloud systems emerge in companies in an organic way. That's because their on-site servers aren't replaced when they reach a redundancy point. Instead, cloud providers undertake their jobs.

Microsoft appears to be doing a great job of working with companies that have their own servers. You can install their software in your environment, and then they manage so much for you. It can save a lot of time and money.

So 2023 looks like a momentous year for the cloud computing industry with new challenges, new opportunities and new innovations from the leading providers. It will be fascinating to see what the major players such as AWS, Oracle, Microsoft and Google have planned and what the implications of those changes will be for the number of increasingly tech-driven customers.