Industry clouds are all the rage, but are they driven by marketing or customer need?

Industry clouds – cloud applications designed for specific sectors – are fashionable staples of supplier marketing, but are they what corporate IT is demanding?

Enterprise IT spending on public cloud computing will overtake spending on traditional IT in 2025, according to research by Gartner. This rapid shift in buying habits, driven in part by the Covid-19 pandemic, has seen widespread adoption of cloud-based infrastructures, applications and business process services. In fact, Gartner says almost two-thirds (65.9%) of spending on application software will be directed toward cloud technologies in 2025, up from 57.7% in 2022.

As customer demands for more scalable, focused and affordable computing systems increase, so do the pressures on suppliers to deliver viable options. As Michael Warrilow, research vice-president at Gartner, warns: “Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets.”

For the big US public cloud suppliers, AWS, Google and Microsoft, this is boom time. Gartner says public cloud services are expected to exceed $480bn this year. Much of the optimism for this growth is based on the big cloud suppliers’ strategy towards industry clouds, verticalised cloud solutions based on increasing sophistication and integration of services. Last year, all three suppliers announced industry cloud strategies.

In December 2021, Liz Herbert, Forrester vice-president and principal analyst, said AWS was trying to “elevate the approach so that it is more holistic, more industry-based, more business-connected”, an analysis that could also be levelled at Google and Microsoft. But is this just marketing? Maybe it is, as all three businesses admit that they have, to some extent, already been selling cloud services in this way. But what it does do is make product offerings clearer and more integrated.

As Alysa Taylor, corporate vice-president of business applications and global industry at Microsoft, wrote in a blog last year: “We created the Microsoft industry clouds by bringing together common data models, cross-cloud connectors, workflows, APIs [application programming interfaces], and industry-specific components and standards, with the breadth of Microsoft’s cloud services, including Microsoft 365 and Teams, Azure, Microsoft Power Platform, Dynamics 365 and security solutions. Through these industry clouds, we aim to empower everyone to deliver value faster, adapt quickly to changing conditions, build for the future, and do all of this with security at the core.”

At the time, Microsoft announced three new industry-specific cloud offerings – Microsoft Cloud for Financial Services, Microsoft Cloud for Manufacturing, and Microsoft Cloud for Nonprofit – to add to its existing healthcare and retail offerings. Other suppliers have been doing the same, but why now? Is this about tying customers into one supplier, an old proprietary tactic, or have the needs of industry to transform and scale grown so complex that they require more dedicated help?

Understandable progression

For Parthiv Shah, global managing partner, cloud strategy and transformation at Tata Consultancy Services (TCS), this is an understandable progression. Customers are demanding it, he says. They want solutions to specific problems and not off-the-shelf cloud services that require a lot of internal tinkering. For one, there are skills shortages, but it’s also a costly way of doing things. As a result, Shah understands the industry focus and likens it to TCS’s own approach to how it works with customers.

“Our customers are asking for industry-specific cloud solutions,” he says, adding that to meet this demand, TCS provides “configurable industry and cross-industry solutions to meet specific transformation needs”.

TCS takes an enterprise-as-a-service (EaaS) approach, which Shah says helps maximise the value from cloud for customers by choosing the right­ cloud deployment, service model and migration options for them.

“However, today’s workloads on the cloud represent 20-30% of what the end state could be, showing that currently, cloud solutions aren’t attractive for every organisation,” he says. “Industry-specific solutions are part of improving this.”

“A truly valuable industry cloud should enable organisations to enjoy scalable, robust and secure cloud services without compromising on the vertical-specific requirements”
Selina Yuan, Alibaba Cloud Intelligence

Nick Taylor, Accenture’s cloud first lead in the UK and Ireland, agrees with this sentiment. He says we have reached a point with cloud where the technology itself has matured significantly, but many organisations are seeing limited value from just lifting and shifting their existing systems to cloud providers.

“They are discovering that much more value is in intelligence rather than storage, driven by data and AI [artificial intelligence],” says Taylor. “This is where industry, or function-led, cloud propositions have distinct benefits – being tailored to directly address an industry’s unique challenges and business opportunities means they bring far more value.”

Value is a key word. Without tailored solutions, this has the potential to become a costly and complex mess. Taylor cites the insurance industry as a good example. “Many solutions are moving to SaaS [software as a service] and there are opportunities to analyse the huge volumes of data and create more integration between claims management, fraud, underwriting, risk and pricing,” he says.

TCS’s Shah agrees, saying that certain industries, such as financial services and healthcare, “need tailored solutions rather than an ‘off-the-shelf’ approach,” adding that, although there might be some extra complexity, “the benefits still outweigh the challenges”.

This fits with what the suppliers are saying. As Selina Yuan, general manager of international business at Alibaba Cloud Intelligence, puts it: “We have seen steady growing demand for industry-specific cloud services from a range of verticals. The beauty of industry clouds is to combine the convenience of public cloud services with industry-specific applications.

“A truly valuable industry cloud should enable organisations to enjoy scalable, robust and secure cloud services without compromising on the vertical-specific requirements, such as dedicated rules and regulations set for specific industries.”

Scale and compete

This counts for businesses of all sizes, too. For Infor customer Kiviks Musteri, a commercial fruit farm in Sweden (it saw its first apple trees planted back in 1888), industry clouds are enabling the business to punch above its weight. According to Nina Hjalmarsson, supply chain director and CIO at Kiviks, although there is a need to retain the authenticity, family-run values and environment that is intrinsic to Kiviks’ success, it also needs to compete with larger rivals. 

“Given the scale of our business, it is impossible to have the resources and IT infrastructure that our larger counterparts might, so we have to work smarter, be more agile and ensure optimum levels of efficiency,” says Hjalmarsson.

“We have to work smarter, be more agile and ensure optimum levels of efficiency”
Nina Hjalmarsson, Kiviks Musteri

The pandemic saw a surge in sales for Kiviks, accelerating its need for transformation, not just to manage its supply chain more efficiently, but also to provide transparency, governance, traceability and scalability. It chose to migrate to Infor’s CloudSuite Food and Beverage, an industry cloud system that is also geared to managing specific safety and regulatory requirements. It sits on AWS and handles all aspects of logistics, providing visibility into costs, instilling greater control and trust in the figures to calculate profitability and manage growth in a refined and measured way.

“We see the value of the new system every day through small improvements in many areas,” says Hjalmarsson, “easier ways of working, greater visibility to intervene or seek out opportunities, or review better ways of working. We can stay ahead of our competitors through being more agile in responding to new trends, collaborating on a new idea and launching these on the shop floor quickly because our processes are being more efficient today.”

The fact that Infor’s CloudSuite Food and Beverage integrates with other key systems at Kiviks maximises the value of its cloud programme, ensuring that all insights are available to support decision-making and planning. Trust is a big word and Hjalmarsson reckons that for the first time, the business has oversight of its facilities, giving it confidence in its decisions and planning, so much so that there are plans to go even further.

“As we move forward, we are looking to delve deeper into the profitability of our product mix, reviewing margins and profitability, and looking at where our strategy can be refined,” says Hjalmarsson. “We also view our move to multi-tenant cloud as a springboard to initiatives such as Industry 4.0, which we are keen to exploit to enhance our environmental credentials and our work to achieve our long-term sustainability goals.”

Cloud concerns

TCS’s Shah agrees with this idea that industry clouds can provide an underlying digital fabric that “provides both operating efficiency and growth benefits for organisations”. He says TCS customers have realised “scalability, resiliency, sustainability and improved business agility by establishing modernised multicloud platforms”.

But what about the downside? Surely there are concerns? What about security? Public-based cloud services have often been stigmatised with being less secure than private and hybrid clouds, so are industry clouds a risk?

Shah says the market for industry clouds has not reached maturity, so companies should not expect to have access to turnkey, plug-and-play cloud systems just yet. He adds that each industry will, of course, have its own unique issues to deal with and cloud suppliers building industry cloud ecosystems have to be aware of that. It begs the question whether one supplier can really have all the answers wrapped up in a neatly marketed industry cloud package.

“It is no longer enough to reduce the attack surface and blast radius with network-level segmentation”
Galeal Zino, NetFoundry

Nowhere is this more relevant than in security. Like many industries, the automotive industry has security concerns, especially when it considers a future based on electric vehicles (EVs). Next-generation vehicles are datacentres on wheels. Software is the major component – and the major risk factor, because EVs, for example, rely on four times as much code as a commercial aircraft.

Developing an industry cloud solution for the automotive industry is therefore fraught with difficulties. The industry is evolving quickly, and with it, risk and demands for scalability. It brings with it a unique set of challenges.

According to Galeal Zino, founder and chief executive of NetFoundry, there are two basic requirements.

“The first is for zero-trust networking security,” he says. “In the auto industry, this is mandated by various international standards, but implementation is the critical factor. It is no longer enough to reduce the attack surface and blast radius with network-level segmentation. Instead, they need to be minimised by implementing zero-trust security at the application level.

“The second challenge is: how you do multicloud native networking? The apps in the vehicles need to connect securely to many clouds and increasingly to edge datacentres. Doing this with private APNs, VPNs and MPLS has always been costly and complex for mobile network operators and ISVs, nor are these methods always secure. Solutions like the one developed by Arm, Capgemini and NetFoundry provides mobile operators and ISVs with a secure alternative.”  

Read more about industry clouds

Zino is referring to a project launched last November at AWS Re:invent, where Capgemini, Arm and NetFoundry published a blueprint for zero-trust security based heavily on open source. These firms hope to see it adopted as standard by the auto industry and suppliers of software and services, including of course, industry cloud providers.

It is collaborations like these that can help to plug potential gaps in industry cloud offerings, but this shouldn’t detract from what these highly targeted cloud solutions can actually enable. As Deloitte says in its report Reimagining digital transformation with industry clouds, they “not only allow organisations to shift internal resources to focus on their strategic ability to win, but perhaps more importantly, they can hypercharge an organisation’s capacity to change”.

And that is the point. Industry clouds are marketing, but they are also highly focused on customer needs, a formalisation of products and services that perhaps already existed and packaged more neatly for customers to consume. Transformation is a big factor here. The pandemic has accelerated change and it is understandable that some CIOs have been hesitant to change too quickly.

After all, cloud-based services have had a reputation for being a bit of a rabbit hole of hidden costs. Unsurprisingly, suppliers are therefore focusing on the potential efficiencies of industry clouds and the broad benefits of integrated, tailored solutions.

As Deloitte says in its Tech trends for 2022: “Organisations will find much more than hyperscaler-developed products and services in industry clouds. Indeed, there is a growing ecosystem of sector-specific business capabilities from established vendors such as MuleSoft, Oracle, Salesforce, SAP, ServiceNow, as well as startup and open-source projects.”

There is also the internal resources conundrum to consider. This should free up resource for other development work, innovation and differentiation. Given the current state of digital skills gaps, that can’t be a bad thing.

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