For Some Partners, AI Turbocharges Private Cloud Business

by Wade Tyler Millward, CRN

Naveen Sharma compares the classic public cloud vendor business model to buying wine. The seller loves for a customer to try a glass, and then maybe drink another, when buying the bottle was probably the better decision for the connoisseur's wallet.

But now that the world is about 20 years into the cloud technologies era, some customers are turning their noses at the consumer-on-demand public cloud model in favor of private cloud on on-premises, Sharma – senior vice president and global head of AI and analytics at Teaneck, N.J.-based Cognizant – told CRN in an interview.

And the generative artificial intelligence (GenAI) revolution has customers even more mindful of what IT investments will make the most sense for performance and budget – especially as AI vendors continue to experiment with AI business models ranging from per-seat to consumption-based.

"That cost pressure is absolutely real," said Sharma, whose company ranks No. 8 on CRN's 2024 Solution Provider 500. "There is a certain amount of cloud repatriation that is happening, and that's happening purely from a cost perspective."

AI Private Cloud Business

Flexera's 2024 "State of the Cloud" report, which surveyed over 750 IT professionals and executive leaders mostly representing enterprise companies headquartered in the U.S., found that public cloud spend was over budget by an average of 15 percent.

But a growing interest in private cloud does not spell the death of public cloud by any means. In June, market research firm IDC reported that spending on shared, public cloud infrastructure reached $26.3 billion in the first quarter of 2024, increasing 44 percent year over year – compared to dedicated, private cloud infrastructure growth of 15.3 percent year over year to $6.7 billion.

The solution providers who spoke with CRN said that AI has boosted their overall cloud businesses – with innovations from hardware vendors, economics and other factors sometimes tipping customers in favor of a private cloud and on-premises data center as part of the IT environment instead of relying on public cloud.

"This renewed interest in cloud, this renewed interest in data center – it's really blossoming into a renewed interest in IT," Neil Anderson, vice president of cloud, infrastructure and AI solutions at Maryland Heights, Mo.-based World Wide Technology – No. 7 on CRN's 2024 Solution Provider 500 – told CRN in an interview.

Flexera's report even found that respondents remain bullish on cloud, with 31 percent expecting spend to increase in the next 12 months and estimated wasted cloud spend in infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) has been trending down after reaching a high of 32 percent in 2022.

The Argument For Private Cloud

Anderson said that WWT has seen "a resurgence in private data center spend because customers are absolutely determined – if I'm going to run AI against my most sensitive intellectual property, I'm going to run it on prem in my own data center. I want to control it."

Hybrid Setups

The Flexera report found that cloud users are growing more interested in multi- and hybrid setups. The number of respondents using multiple public and one private cloud increased from 19 percent to 23 percent year over year, with failovers and app siloing on purpose two reasons why.

WWT's Anderson said that clients could employ different cloud types depending on the scenario. A single client could leverage public cloud for an AI-powered contact center chatbot used by that client's customers, for example. The same client might use on-premises wares for an AI model capturing sensitive bank data for an algorithm.