It takes time to fully understand and trust emerging technologies. This is seen when analyzing the adoption rate of enterprise-level cloud computing services.
Cloud users are growing. But the market is highly centralized; the leading players by worldwide cloud computing revenue are Amazon Web Services (32%), Microsoft Azure (22%) and Google Cloud (9%).
The cloud has emerged as a solution in many ways, but it also comes with problems.
The fact that roughly two-thirds of global revenue is generated by just three players can have negative consequences for consumers. For example, in addition to rent-seeking incentives (pricing power), such market structures also creates dependency risk.
Concentration risk is also an area of concern for regulators. In this regard, the European Digital Operational Resilience Act, which will be applied in 2025, states that ”The lack of rules at Union level is compounded by the absence of national rules on mandates and tools that allow financial supervisors to acquire a good understanding of ICT third-party dependencies and to monitor adequately risks arising from the concentration of ICT third-party dependencies.”
Users, especially organizations, must have a great deal of trust before they choose to delegate data control, storage and application execution to a cloud provider. This is in exchange for convenience and economies of scale. It has been several decades since distributed computing rejected this centralized paradigm on the grounds of efficiency and fault tolerance.
Decentralized computing is now seen as a mechanism for trust due to distributed ledger technology (DLT). Today, decentralized services enabled by DLT complement oligopolistic markets such as the cloud industry. Again, adoption will take time as this is an emerging technology.
However, this new form of cloud technology is likely to lead to increased shareholder value due to cost reduction as well as innovation-based enhanced processes and products. As a result, organizations must be open to innovation and willing to discuss cloud exit and migration strategies. DLT-based cloud storage can also be used as a fail safe and redundant backup container with automatic fail-over mechanisms at the back end. To get the most benefit out of DLT, it should also be incorporated into cloud service providers’ strategic plans.
Once organizations understand and trust cloud services using DLT, it is likely to become more widely adopted, leading to a less concentrated market as well as more secure services.
Editor’s note: For further insights on this topic, read Guy Pearce’s recent Journal article, “Cloud Computing Evolution and Regulation in the Financial Services Industry” , ISACA Journal, volume 2 2023.
