IDC Study Explores the Future Trajectory of Cloud Computing

By Greg McNevin

October 21, 2008: IDC is tipping cloud computing to enter a period accelerated adoption, saying the technology is currently poised to capture IT spending growth over the coming five years.

The analysts say that cloud computing is reshaping the IT marketplace, creating new opportunities for suppliers and catalysing changes in traditional IT offerings. IDC expects that over the next five years spending on IT cloud services will grow almost threefold, reaching US$42 (AU$60) billion by 2012.

More importantly, the firm says that spending on cloud computing will accelerate, capturing 25 percent of IT spending growth in 2012, and jump to nearly a third the following year.

“A recent IDC survey of IT executives, CIOs, and their line of business colleagues shows that cloud services are 'crossing the chasm' and entering a period of widespread adoption,” said Frank Gens, senior vice president and chief analyst at IDC.

“Moreover, IDC expects the cloud adoption trend to be amplified by the current financial crisis. The cloud model offers a much cheaper way for businesses to acquire and use IT – in an economic downturn, the appeal of that cost advantage will be greatly magnified.

“This advantage is especially important for small and medium businesses, a sector that will be key target in any plan for recovery,” said Gens.

IDC says that the shift toward cloud computing is being driven by three market forces. First there is the search for growth (and revenues) in important new segments, including emerging markets like Brazil, Russia, India and China (BRIC) as well as the small and medium business (SMB) sector. Then there is the shortcomings of traditional approaches in capturing the growth in these increasingly important markets.

And lastly IDC says that competitive pressures from new players with little to lose and everything to gain from pushing the new model.

Because of these three factors, IDC says that there are two key things IT suppliers should garner from the growth of cloud services. The first is potential opportunities for delivering IT products or services to customers via the cloud model – getting into the software-as-a-service (SaaS) business for example – and secondly how current and future offerings can support customer development, deployment, and delivery of a wide variety of business and consumer cloud services.

The firm says that to succeed, cloud services providers need to address a mixture of traditional and cloud concerns, and according to its survey, the two most important things a cloud services provider can offer are competitive pricing and performance level assurances.

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