Enterprises are beginning to change their buying behaviors based on the deployment speed, economics and customization that cloud-based technologies provide. Gartner cautions however that enterprises are far from abandoning their on-premise models and applications entirely for the cloud.
Based on an analysis of the Gartner Hype Cycle for Cloud Computing, 2012, the best results are being attained by enterprises that focus on a very specific strategy and look to cloud-based technologies to accelerate their performance. Leading with a strategic framework of goals and objectives increases the probability of cloud-based platform success. Those enterprises that look to cloud platforms only for cost reduction miss out on their full potential.
The Hype Cycle for Cloud Computing, 2012 is shown below:
Cloudwashing and Inflated Enterprise Expectations
While the hype surrounding cloud computing may have peaked, cloudwashing continues to cause confusion and inflated expectations with enterprise buyers. This just slows down sales cycles, when more straightforward selling could lead to more pilots, sales and a potentially larger market. Cloud vendors who have the expertise gained from delivering cloud platforms on time, under budget, with customer references showing results are starting to overtake those that using cloudwashing as part of their selling strategies.
Additional take-aways from the Gartner Hype Cycle for Cloud Computing include the following:
- Cloud Email is expected to have a 10% adoption rate in enterprises by 2014, down from the 20% Gartner had forecasted in previous Hype Cycles. This represents modest growth as the adoption rate of this category had been between 5 and 6% in 2011.
- Big Data will deliver transformational benefits to enterprises within 2 to 5 years, and by 2015 will enable enterprises adopting this technology to outperform competitors by 20% in every available financial metric. Gartner defines Big Data as including large volumes processed in streams, in addition to batch. Integral to Big Data is an extensible services framework that can deploy processing to the data or bring data to the process workflow itself. Gartner also includes more than one asset type of data in their definition, including structured and unstructured content. The Priority Matrix for Cloud Computing, 2012 is shown below:
- Master Data Management (MDM) Solutions in the Cloud and Hybrid IT are included in this hype cycle for the first time in 2012. Gartner reports that MDM Solutions in the Cloud is getting additional interest from Enterprise buyers as part of a continual upward trend of interest in MDM overall. Dominant vendors in this emerging area include Cognizant, Data Scout, IBM, Informatica, Oracle and Orchestra Networks, are among those with MDM-in-the-cloud solutions.
- PaaS continues to be one of the most misunderstood aspects of cloud platforms. The widening gap between enterprise expectations and experiences is most prevalent in this market. Gartner claims this is attributable to the relatively narrow middleware functions delivered and the consolidation fo vendors and service providers in this market.
- By 2014 the Personal Cloud will have replaced the personal computer as the center of user’s digital lives.
- Private Cloud Computing is among the highest interest areas across all cloud computing according to Gartner, with 75% of respondents in Gartner polls saying they plan to pursue a strategy in this area by 2014. Pilot and production deployments are in process across many different enterprises today, with one of the major goals being the evaluation of virtualization-driven value and benefits.
- SaaS is rapidly gaining adoption in enterprises, leading Gartner to forecast more than 50% of enterprises will have some form of SaaS-based application strategy by 2015. Factors driving this adoption are the high priority enterprises are putting on customer relationships, gaining greater insights through analytics, overcoming IT- and capital budget-based limitations, and aligning IT more efficiently to strategic goals.
- More than 50% of all virtualization workloads are based on the x86 architecture. This is expected to increase to 75% by 2015. Gartner reports this is a disruptive innovation which is changing the relationship between IT and enterprise where service levels and usage can be tracked.
Bottom line: Gartner’s latest Hype Cycle for Cloud Computing shows that when cloud-based platforms are aligned with well-defined strategic initiatives and line-of-business objectives, they deliver valuable contributions to an enterprise. It also shows how Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are the catalysts of long-term market growth. The following slide from the presentation High-Tech Tuesday Webinar: Gartner Worldwide IT Spending Forecast, 2Q12 Update: Cloud Is the Silver Lining (free for download) also makes this point.
Calling the hype around cloud computing “deafening”, Gartner released their annual hype cycle for the 34 different technologies in a 75 page analysis today. You can find the Hype Cycle at the end of this post and I’ve provided several of the take-aways below:
- The industry is just beyond the Peak of Inflated Expectations, and headed for the Trough of Disillusionment. The further up the Technology Trigger and Peak of Inflated Expectations curve, the greater the chaotic nature of how technologies are being positioned with widespread confusion throughout markets. The team of analysts who wrote this at Gartner share that conclusion across the many segments of the Hype Cycle.
- Gartner states that nearly every vendor who briefs them has a cloud computing strategy yet few have shown how their strategies are cloud-centric. Cloudwashing on the part of vendors across all 34 technology areas is accelerating the entire industry into the trough of disillusionment. The report cites the Amazon Web Services outage in April, 2011 as a turning point on the hype cycle for example.
- Gartner predicts that the most transformational technologies included in the Hype Cycle will be the following: virtualization within two years; Big Data, Cloud Advertising, Cloud Computing, Platform-as-a-Service (PaaS), and Public Cloud computing between two and five years; and Community Cloud, DevOps, Hybrid Cloud Computing and Real-time Infrastructure in five to ten years.
- There continues to be much confusion with clients relative to hybrid computing. Gartner’s definition is as follows ”Hybrid cloud computing refers to the combination of external public cloud computing services and internal resources (either a private cloud or traditional infrastructure, operations and applications) in a coordinated fashion to assemble a particular solution”. They provide examples of joint security and management, workload/service placement and runtime optimization, and others to further illustrate the complex nature of hybrid computing.
- Big Data is also an area of heavy client inquiry activity that Gartner interprets as massive hype in the market. They are predicting that Big Data will reach the apex of the Peak of Inflated Expectations by 2012. Due to the massive amount of hype surrounding this technology, they predict it will be in the Trough of Disillusionment eventually, as enterprises struggle to get the results they expect.
- By 2015, those companies who have adopted Big Data and extreme information management (their term for this area) will begin to outperform their unprepared competitors by 20% in every available financial metric. Early use cases of Big Data are delivering measurable results and strong ROI. The Hype Cycle did not provide any ROI figures however, which would have been interesting to see.
- PaaS is one of the most highly hyped terms Gartner encounters on client calls, one of the most misunderstood as well, leading to a chaotic market. Gartner does not expect comprehensive PaaS offerings to be part of the mainstream market until 2015. The point is made that there is much confusion in the market over just what PaaS is and its role in the infrastructure stack.
- SaaS performs best for relatively simple tasks in IT-constrained organizations. Gartner warns that the initial two years may be low cost for any SaaS-based application, yet could over time be even more expensive than on-premise software.
- Gartner estimates there are at least 3M Sales Force Automation SaaS users globally today.
Bottom line: The greater the hype, the more the analyst inquiries, and the faster a given technology ascends to the Peak of Inflated Expectations. After reading this analysis it becomes clear that vendors who strive to be accurate, precise, real and relevant are winning deals right now and transcending the hype cycle to close sales. They may not being getting a lot of attention, but they are selling more because enterprises clearly understand their value.
Source: Gartner, Hype Cycle for Cloud Computing, 2011 David Mitchell Smith Publication Date: 27 July 2011 ID Number: G00214915 © 2011
Today Cloud.com, Zenoss and BitNami released the results of a recent survey to determine the key IT objectives and obstacles to cloud adoption. The survey respondent base consisted of the development communities from BitNami, CloudStack and Zenoss Core, all open source projects, and included more than 500 IT professionals. For an analysis of the results see Cloud Computing Survey Finds Scalability and Cost Savings Driving Cloud Adoption on CloudTweaks.com. The following Infographic is based on the survey results.
A recent report published by Standard & Poor’s Equity Research Services on the computer software industry makes for interesting reading.
Zaineb Bokhari, Application Software Analyst authored the 47-page report. He has shown how the software industry is going through a fundamental restructuring due to the impact of SaaS, open source, and the many variations in licensing programs.
His analysis also shows how these factors taken together form a powerful catalyst of long-term disruption to business models. At one point, the study predicts the end of perpetual licensing due to the time-to-value contributions of SaaS-based applications. The report is available for download to Equity Research Services clients, including many college and university online libraries that have Standard & Poor’s subscriptions.
Here are the key take-aways from reading this report:
- IDC expects the market for global packaged software to grow at a compound annual growth rate (CAGR) of 5.8% from 2009 to 2014. Over the same period, IDC projects software-as-a-service will grow at a 25.3% CAGR.
- Standard & Poor’s reports that the SaaS category is still dwarfed by traditional packaged software, which IDC sized at $272 billion in 2009 (versus $13.1 billion for SaaS).
- According to IDC’s forecasts, the size of the SaaS will rise from just under 5% of the size of the packaged software market in 2009 to more than 11% by 2014.
- Standard & Poor’s expects corporate spending on enterprise software and related maintenance to grow in the low to mid-single-digit range (i.e., 3%–6%) in 2010, with some segments expanding at above-average levels.
- Overall revenues from SaaS delivery models reached $13.1 billion in 2009, a growth rate of 34.2% from 2008 according to IDC. IDC expects this revenue to rise to $40.5 billion by 2014, a compound annual growth rate (CAGR) of 25.3%. This is dwarfed by the $272 billion that IDC believes was spent globally on software in 2009.
- Application development and deployment is projected to have the most rapid growth of all segments, attaining a 39.2% CAGR from 2009 – 2014. Please see the table below, Worldwide Software-as-a-Service Revenues Forecast by Segment for a year-by-year breakout of this category.
- Infrastructure software is forecasted to grow at a 27.4% CAGR through 2014, totaling 11,345 instances by 2014 according to IDC. The year-by-year breakouts are also included in the following table.
- Applications are expected to have 20.4% CAGR through 2014 based in units and attain a 50.8% market share of all SaaS segments by 2014.
Bottom line: Enterprise software pricing models must change to stay in step with customers’ expectations of more value for their maintenance and licensing fees. The evolving economics of cloud and SaaS-based application deployment are in the process of permanently re-ordering enterprise software.
Flickr attribution: http://www.flickr.com/photos/8011986@N02/2964298027/in/photostream/#/
In August, 2010 Cisco completed a study that included interviews with 80 enterprise IT decision makers (CIOs, CTOs, and infrastructure VPs) from 43 enterprises and public-sector organizations across industries throughout the US, Europe and India. In addition, Cisco completed one-one-one interviews with 20 subject-matter experts.
The primary focus of the study was on the adoption of the public cloud for enterprise applications. The report Network Service Providers as Cloud Providers Survey Shows Cloud Provision Is a Bright Option can be downloaded here.
Cisco forecasts that the global market for Cloud Computing Service Revenue will be $43.8B by 2013, with SaaS contributing $29.5B, or 6 7%. Workload migration will also be the greatest in that segment as well. The study provides additional insight into the IaaS and PaaS key success factors and the implications network service providers. (Click on image to expand it for ease of reading).
The study found that in the Business Processing segment, the greatest near-term opportunity is in SaaS-based ERP, which according to this study is predicted to reach a 13% adoption rate by 2013. This is consistent with International Data Corporation estimates of SaaS-based ERP adoption in comparable time periods. ERP’s growth on the SaaS platform continues to be constrained by lack of Master Data Management (MDM) functionality, lack of a pervasive mobile APIs on the several SaaS ERP systems launched, and concerns over security of costing. ordering, production, and quality management data. (Click on image to expand it for ease of reading).
The following presentation includes an overview of cloud computing adoption trends from Forrester Research, followed by presentations by the Chief Technology Officers of Savvis and Gomez. Taken together, all three presentations shown below provide a realistic assessment of cloud computing adoption and performance.
The pace of cloud computing market forecasts produced and announced is quickening, with several new projections announced this month. In every one of these forecasts, the benefits of operating expense (OPEX) versus capital expense (CAPEX) financing play a role, as does the emerging trust in cloud computing as a viable platform.
This is a noteworthy study due to several insights gained from their research including the rapid adoption of SaaS-based platforms in small and medium businesses (SMB) and the prioritization SaaS is getting from CIOs in larger enterprises. There is also an assessment of the drivers and constraints of SaaS adoption in the Indian market. At 15 slides, this is a summary of their larger report, yet for the price (free) it’s an excellent glimpse into the Indian cloud computing landscape in 2010.