***This is part two of a four-part series on cloud computing for xchangemag.com.***
If the only thing players can agree on is a general insistence that cloud computing, whatever it is, will be a force in the market, it begs the question, how big of a force?
Without a clear definition on cloud computing, it’s tough to say. But at least a couple firms are taking a shot.
Investment bank Merrill Lynch predicts cloud computing will comprise a whopping $160 billion industry by 2011. The firm said in a May 2008 report that the number includes $95 billion in business and productivity apps, and another $65 billion in online advertising.
In contrast, research firm IDC expects spending on IT cloud services to reach $42 billion by 2012.
Tom Nolle, founder and president of high-tech consultancy CIMI Corp., believes the IDC forecast is much more reasonable, saying of the Merrill Lynch folks who came up with the above estimate: “They’re smoking dope.”
Prasad Ravi, president and CEO of NOC services provider INOC, agreed that $160 billion “is a very, very big number.”
However, continued Nolle, “If I want to take something called cloud computing and say cloud computing is an execution of applications on the network coupled with IT resources, then I can make an argument for cloud computing being that large a market.” Even so, numbers such as $160 billion could only be reached by assuming enterprises will take 10-20 percent of their spending and transfer it to the cloud, he said, and “there’s nothing to suggest that such a thing would happen.”
While calling cloud computing “the most over-hyped term I can think of as long as I have been covering the industry,” David Cearley, vice president and analyst at research firm Gartner Inc., in the same breath said “cloud computing is going to be one of the most disruptive trends in the IT market over the next five years.
“I think we’ll see the cloud computing market be on par with the size of the outsourcing market in five years,” continued Cearley, adding that SMBs and startups likely will gravitate to cloud computing more quickly than enterprises, so providers should keep that in mind as they create marketing strategies. However, providers have to deliver the low-cost environments that people are assuming will come with cloud computing. “If that’s not there, cloud computing will fail,” he said.
IDC’s Frank Gens, senior vice president and chief analyst, agreed, and added that cloud computing’s popularity could well mushroom in light of the weakened economy.
“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,” Gens said. “This advantage is especially important for small and medium businesses, a sector that will be a key target in any plan for recovery.”
