Forrester Sees Opportunity for Smaller Cloud Providers in 2023

While hyperscale cloud providers like Amazon Web Services (AWS), Microsoft, and Google Cloud have all but cornered the market for large enterprise and government verticals, there's plenty of opportunity for smaller cloud providers, according to Forrester Principal Analyst Lee Sustar. “The global cloud market is far broader than the top players,” he explained in a blog.

Cloud customer choices are shaped by specialized use cases, data sovereignty, industry cloud capabilities and much more, Sustar said. The Forrester Wave: Public Cloud Development And Infrastructure Platforms, Global, Q4 2022, found that smaller cloud providers can succeed with more discrete approaches to the market around data, analytics, development and integration. As more customers embrace a multi-cloud approach to avoid dependencies on single vendors, they’re exploring alternatives for general-purpose IT or particular workloads such as AI/ML, Sustar said in the blog.

Differentiation

The Forrester Wave revealed that cloud providers are now attempting to differentiate themselves from their rivals in different ways, from ARM chips and advanced networking to streamlined cloud-at-customer hardware and integrated management, Sustar said. The correct approach, he added, depends on customer needs.

Data and Analytics

Forrester predicts that the public cloud market will exceed $1 trillion by 2026, and for smaller providers, even a percentage point or two of market share can make a difference in the viability of some providers, he said.

"The focus is therefore on higher-revenue services around data and analytics—it’s more revenue to feed the never-ending hyperscaler build-out and keeps nonhyperscalers in the cloud game. That’s good news for customers who increasingly demand services that enhance these capabilities and make them easier to adopt within their businesses," Sustar said.

Platform Operations Grows Up

Public cloud services are finally moving away from lift-and-shift as the only cloud migration pattern, Sustar said in the blog.

"Providers are finally focused on platform operations enablement in response to customer demands for simplification, automation, and the emergence of open source, cloud-native Kubernetes-based distributed compute backbone. Legacy and cloud-native infrastructure services alike are easier to run as a result, allowing platform teams to put more resources on security, developer support, and site reliability," he said.

Getting Serious About Security

The baseline security offerings from the major cloud providers have steadily improved in recent years, Sustar said. Security consoles now have incredible functionality, although cloud providers are taking divergent approaches, he added. "...rom a silicon-centric approach for isolation and confidential computing to multiple service offerings that in some cases include multi-cloud capabilities. These are welcome developments for organizations seeking better alignment between security and cloud operations," he said.