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Despite predictions of a cloud shift accelerated by the pandemic and Gartner projecting a $651 billion public cloud market in 2024, organizations have barely scratched the surface of public cloud adoption. So it might seem odd at this stage to ask, Whats the next big thing in public clouds?

The war between traditional on-premises data center infrastructure providers such as Dell, HPE, and Cisco and the public cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud is far from over. However, one opportunity worth examining is industry clouds.

Industry clouds are collections of cloud services, tools, and applications optimized for the most important use cases in a specific industry. APIs, common data models and workflows, and other components are available to customize capabilities. Industry cloud solutions from major public cloud providers also typically offer a variety of software and services, including industry-specific applications, from partners. For example, Microsoft and SAP partner to deliver SAP supply chain solutions through Azures manufacturing industry cloud.

Industry clouds are of interest because of their potential to create value for both customers and public cloud providers. Established companies in industries feeling the sting of competition from cloud-native disrupters are especially good prospects for these types of solutions. For these companies, moving their core business applications to general-purpose public clouds can be challenging because they often rely on homegrown legacy applications or industry-specific software designed for on-premise data centers. These companies face a difficult choice. Simply lifting and shifting applications to the cloud could result in sub-optimal performance. Yet rewriting or optimizing them for the cloud would be time consuming and costly. Industry clouds have the potential to accelerate and take the risk out of their cloud migrations.

An essential component of an industry cloud is that it must address the specific requirements of the industry it is designed to serve. For example, healthcare providers place a high priority on improving the patient experience but also require high levels of security, data protection, and privacy. These are necessary to demonstrate compliance with Health Insurance Portability and Accountability Act (HIPAA) regulations. Financial services companies value data analytics and AI for customer insights and new product development, and trading applications require latency measured in fractions of a second. Like healthcare, the financial services industry is a highly regulated industry. Specific characteristics of the retail industry include the need to continually collect and analyze large sets of data to improve inventory management.

For some of these requirements and especially when there are several in combination general-purpose cloud solutions might not be enough. And given this has been the focus of most cloud migrations thus far, many traditional companies in highly competitive industries have fallen behind in the race to the cloud. This means they are not realizing anywhere near the value they could from adding public clouds to their IT infrastructures.

In addition to public cloud, there are many industry specific SaaS options and new ones emerging. For example, in the healthcare industry, there are electronic health record (EHR) SaaS options available. Healthcare SaaS offerings include critical functions such as billing and supply chain. Another example is the pharmaceutical and life sciences vertical. Pharmaceutical SaaS offerings support clinical, medical, and compliance functions. The important point to highlight is that SaaS has been and continues to be the top cloud migration choice with a projected market spend for 2021 of $117.7 billion according to Gartner. SaaS is an excellent choice for supporting industry specific needs, and the big hyperscalers have taken notice.

Given the opportunity in industry clouds, its not surprising that Amazon, Microsoft, Google, and IBM now all offer a broad range of industry-specific cloud solutions. For long-established companies such as IBM and Microsoft, this development mirrors that of their computer and software businesses, which evolved from providing customers with technology to solve their business problems. Both IBM and Microsoft have long histories of vertical market experience and large vertical market customer bases they can leverage to build and support industry clouds. This gives them an advantage with some customers. But for all public cloud providers, industry clouds are a logical next step in the ongoing maturation of public clouds.

The industry cloud opportunity has also attracted the attention of cloud service providers that offer support for migrating industry-specific applications to public clouds. Before the cloud, cottage industries sprung up to help customers of industry-standard applications deploy and maintain them. Some of these companies have evolved their businesses to support cloud migrations of these applications.

For example, in healthcare, where Epic and Cerner dominate the U.S. hospital EMR market, with 29% and 26% of the market, respectively, numerous firms exist to help companies bring these applications to the cloud. Given regulations and the business imperative to protect data in EMRs, most of these companies support a hybrid cloud approach, a solution that combines on-site data centers with public clouds. They also provide solutions and special expertise in privacy, security, and disaster recovery. While some host the applications on private clouds, many form partnerships with one or more public cloud providers.

At the same time, Epic and Cerner are establishing their own relationships with public cloud providers. Its worth noting that a failed relationship between Epic and Google offers an object lesson for cloud providers seeking to make their mark in specific industries. Epic severed ties with Google after it came to light that in its work with Ascension, a large Missouri-based health system, Google employees gained access to patient information without consent when information was being transferred from on-site servers to Google servers. Even though Ascension has continued to work with Google, Epic shifted its focus to Microsoft. Cerner, too, moved away from Google in favor of Amazon.

Its still early days for industry clouds, and no doubt some are more marketing strategies than offerings tailored for specific industries in meaningful ways. That will change. However, in the meantime, companies evaluating industry clouds from public cloud providers should do so carefully, taking care to compare not just the industry cloud offerings from different providers but also the industry cloud of each provider to their general-purpose solution. There might not yet be that much of a difference.

Kash Shaikh is CEO and President of Virtana, a cloud platform with AI-powered observability for migrating, optimizing, and monitoring cloud applications.

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Industry clouds could be the next big thing - VentureBeat