Over-the-top (OTT) streaming – or, simply, delivering media content directly over the internet – has redefined the media content consumption landscape. In 2019, the number of active global monthly OTT video subscribers surpassed 750 million, accounting for more than 30 percent of digital video viewers globally.
Cloud vendors have significantly contributed to this exponential growth by providing core cloud-native delivery infrastructure to OTT players at lower costs, making it much easier for them to reach global audiences and dynamically scale their workloads with just a few clicks. In fact, over the years, the role of cloud vendors has shifted from infrastructure providers to prime drivers of technology for the OTT industry – so much that they now lead media technology altogether.
Initially, cloud vendors’ core offerings comprised storage, processing, transmission, packaging, and transcoding, which enabled OTT players to gain scale, cost, and flexibility benefits. Now, the cloud has become the default infrastructure provider for OTT delivery. In fact, all of the flagship OTT players have migrated to cloud-based OTT workflows. For example, Netflix completed its migration to Amazon Web Services (AWS) in 2017, and Spotify completed its Google Cloud Platform adoption in 2018.
The major cloud vendors, such as Amazon, Google, and Microsoft, lead the global technology landscape, and they are leveraging their expertise in advanced technologies to offer not only their core functional offerings but also compelling value-added services over the cloud. These value-added services include:
These additional services have become core differentiators for cloud vendors versus traditional Independent Software Vendors (ISVs) that offer media streaming solutions. They’re also enabling OTT players to create true differentiation in their offerings. Additionally, the cloud has become a great leveler for players who are entering the OTT market relatively late, as it provides them the latest cutting-edge technology at the click of a button, saving them precious time in getting up and running.
It will be interesting to see how the market shapes up in the next 12-18 months, as more content and production houses start setting up their OTT platforms and make the existing battle of viewer acquisition and retention fiercer.
For more industry-leading insights on the OTT industry, please reach out to Akshat Vaid and Shivank Narula.
Oracle held the European edition of its flagship event, OpenWorld, in London recently. Against the backdrop of cloud wars, leadership changes in the ecosystem (Mark Hurd’s untimely demise and the change of guard at SAP), and blazing growth by hyperscalers (the two boutique firms in Seattle), the market is keenly watching what Oracle has in store.
Here are my take-aways from the event.
1. Cloud FOMO: Oracle is investing heavily in its datacenter footprint and expects to have 36 regions by the end of the year, with a datacenter opening every 23 days. It claims it will have more regions than AWS by the end of 2020.
This is turning out to be a common trend among hyperscalers and cloud vendors, creating an asset bubble. Capital spending is at an all-time high, as the exhibit below shows. Will this create further price wars and overcapacity in the market? Only time will tell.
2. Doubling down on data: Oracle announced a slew of initiatives aimed at infusing data and, to a lesser extent, AI across its offering stack:
3. Ecosystem bets in a multi-cloud world are crucial: Oracle is now sharpening its focus on partnerships and the ecosystem to compete in the multi-cloud environment – this is on the back of its Azure and VMware partnerships. With Microsoft Azure, it announced a new interconnect facility based in Amsterdam. Because Amsterdam is a crucial European datacenter location and hub for Oracle, this facility will help companies in the region share cross-application data and move on-premise workloads to the cloud, according to Oracle.
4. Cloud interoperability – are we there yet?: With Google Anthos and Azure Arc, interoperability is back. While the partnership with Azure did highlight some degree of interoperability progress, I didn’t see enough. This is likely a prickly concern for enterprises as cloud vendors start erecting their own walled fortresses, hindering true interoperability. We have opined on cloud interoperability before, and it’s going to be a key issue for the ecosystem to solve over the next 18-24 months, especially as the cloud-native conversations gather momentum.
5. The dawn of the new CEO mindset: One of the highlights of the event was a client showcase. The CEO of Italian coffee major, illycaffè, Massimiliano Pogliani, spoke to Oracle CEO Safra Catz about a critical aspect of modern business – the changing role of the new CEO. He described it as being the activator of collective intelligence across the organization’s human capital. He also described his company’s mission around three themes: good (product obsession), goodness (sustainability), and beauty (the experience.) We are seeing greater recognition by some forward-looking CEOs of their purpose and impact, including Novartis CEO Vas’ focus on the journey to unboss and Salesforce chief Marc Benioff’s call for a new type of capitalism.
The cloud landscape is becoming very interesting as all segments attack the opportunity: hyperscalers continue to invest in expanding their datacenter footprint; enterprise platform providers are focusing on verticalization (e.g., ServiceNow under Bill, Salesforce acquiring Vlocity); and system integrators are trying to keep up with the massive implementation opportunity while battling a talent shortage. We are going to see share shifts as these changes gather steam.
From an enterprise perspective, the cloud conversation is now veering toward journey-in-the-cloud versus journey-to-the-cloud, aka lift-and-shift. This shift is bringing total cost of ownership (TCO) back into the picture. We are in for interesting times ahead.
What’s your take on today’s cloud wars? Please share your thoughts with me at [email protected].
Today, nearly all companies invest in assembling digital platforms as a source of significant efficiencies and competitive advantage. Platforms enable a data-driven world and allow companies to create new business value in improving experiences for customers, employees and partners. Multiple platforms and other software components usually comprise the platform a company assembles. For example, a consistent component of almost all platforms is the heavy use of cloud and the rich set of capabilities available from the hyperscaled platforms. But companies need to understand the consequences of the presence of this component in the platform they build.
Read more in my blog on Forbes
Fundamental changes are happening to the core set of assumptions that underpin how cloud ecosystems have been operating. Some of the traditional assumptions are no longer true today or won’t be true soon. The changes are for the worse – they raise prices and introduce significant additional complexity for companies that operate in a hybrid and multi-cloud environment.
Infor – a global leader in business cloud software specialized by industry – announced on February 4, 2020, that Koch Equity Development (KED) LLC, the private investment arm of Koch Industries, Inc., has entered into a definitive agreement to acquire Golden Gate Capital’s equity stake to take 100 percent ownership of Infor. Before the agreement, Koch Industries owned about 70 percent of Infor. While the official figures are not out, public sources peg the deal at close to US$13 billion, including preferred shares.
Why did Koch do this? Here’s our analysis of the key reasons.
For Infor – potential growth through synergies: As we’ve already noted, this acquisition may give Infor access to a captive customer base in Koch Industries’ subsidiary and partner network. Given Koch’s presence in more than 60 countries, this may also allow Infor to expand the geographic footprint of its client base, especially in markets outside of North America where it has limited presence. This is coming at a time when enterprises in Europe and APAC are beginning to embrace SaaS offerings.
For Koch – potential RoI: We see this takeover as a typical private equity play to improve the value of an existing asset by riding the ERP demand wave. While Koch Industries has been making investments in its portfolio on the technology sector, we do not see this tweak in ownership as a sign of change in Koch’s portfolio mix. Given that a large chunk of Infor’s client base is still struggling with aging on-premises applications, Infor will need strong investment backing to convince its existing user base of its long-term cloud ERP vision.
For systems integrators – potential opportunities: Koch industries generated over US$100 billion in annual revenues in FY19. While we do not have estimates for the ERP transformation opportunities within Koch portfolio companies, it is likely to be a significant opportunity for systems integrators to focus on, using an Infor playbook.
For enterprises – better incentives, more supply-side investments: If Koch backs its investment with a large innovation fund, enterprises may gain on the following parameters:
Infor has seen almost flat growth of around 3 percent over the past five years, due primarily to its long-term focus on SaaS revenues, which directly cannibalized its existing license revenues from on-premises offerings. In FY19, Infor’s SaaS revenue – which is about 20 percent of its overall revenue base of US$3.2 billion – grew at approximately 21 percent, while its licensing fees declined at about 12 percent. Given this strong focus on SaaS, Infor is well positioned in the manufacturing and allied verticals to overcome some of the critical cloud migration challenges and cater to some industries’ process-specific demands.
However, over the past year, there have been multiple big-ticket acquisitions in the enterprise platform market, geared to improving product capabilities – especially in areas related to cloud and analytics. In this hyper-competitive space, it will be challenging for Infor to compete credibly at scale based only on promoter-backed cash flow. Watch this space for more on how this move pans out.
A blog I wrote last year discussed the ugly market share war among the three top cloud infrastructure providers – Amazon Web Services (AWS), Microsoft Azure (Azure), and Google Cloud Platform (GCP.) Now we need to talk about how Independent Software Vendors (ISVs) like Oracle, Salesforce, and SAP are changing the battle with their industry-specific clouds.
The fact is that AWS, Azure, and GCP don’t really have industry clouds. These cloud IaaS vendors enable clients to run business applications and services on top of their cloud platforms, but haven’t built industry-specific application or process capabilities. They acknowledge that their clients want to focus more on building applications than infrastructure, which defeats their positioning in the industry cloud market. The core of what they offer is compute, data, ML/AI, business continuity, and security, and they rely on technology and service partners to build industry-relevant solutions. For example, GCP partnered with Deloitte for cloud-based retail forecasting, and AWS joined with Merck and Accenture for a medicine platform. They are also partnering with core business application vendors such as Cerner and Temenos.
ISVs have continued to expand their industry cloud offerings over the past few years. For example, in 2016 Oracle acquired Textura, a leading provider of construction contracts and payment management cloud services, SAP introduced its manufacturing cloud in 2018, and in 2019 Salesforce launched its CPG and manufacturing clouds. Further, Oracle and SAP have built solutions for specific industries such as retail, healthcare, and banking by focusing on their core capability of ERP, supply chain management, data analytics, and customer experience. And while SFDC is still largely an experience-centric firm, it is now building customer experience, marketing, and services offerings tailored to specific industries.
So, what will happen going forward?
So, what should enterprises do?
What do you think about industry clouds? Please share with me at [email protected].
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