Cloud projects climbing IT priority list

A recent ESG survey indicates that investments in cloud services and related infrastructure will increase in 2011, meaning the much-hyped technology may start to hit its stride in the real world.

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A recent ESG survey indicates that investments in cloud services and related infrastructure will increase in 2011, meaning the much-hyped technology may start to hit its stride in the real world.

Spending on cloud infrastructure and services is expected to increase this year, according to ESG's recent 2011 spending intentions survey. In late 2009, when we asked survey respondents about their organization's IT priorities for 2010 and the first half of 2011, cloud computing and software-as-a-service (SaaS) ranked 22 and 24, respectively, out of the 24 priorities listed. In late 2010, when asked about IT priorities in 2011 and the first half of 2012, respondents ranked cloud computing in the top half of the priority list (number 12) and placed SaaS in spot 14.

That bodes well for cloud infrastructure and service providers, and indicates that the cloud investigations users conducted in 2010 could translate to real investments in 2011.

Background

To assess IT spending priorities over the next 12 to 18 months, ESG recently surveyed 611 North American and Western European senior IT professionals representing midmarket (100 to 999 employees) and enterprise-class (1,000 employees or more) organizations. As part of the survey, we asked questions pertaining to both SaaS and infrastructure-as-a-service (IaaS). The survey defined those two cloud-related terms as follows:

  • SaaS: A software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet.
  • IaaS: A computing model in which the equipment, including servers, storage and networking components, used to support an organization's operations is hosted by a service provider and made available to customers over a network, typically the Internet. The service provider owns the equipment and is responsible for housing, running and maintaining it, with the client typically paying on a per-use basis.

Adoption trends

While 34% of respondents currently use SaaS, a surprising 91% report they'll spend at least some of their 2011 budget dollars on SaaS-based applications. But even at those organizations using SaaS today, usage is pretty light; a large majority (70%) use SaaS to deliver fewer than 20% of their applications, and only 15% of respondent firms deliver 31% or more of their applications via SaaS.

That picture changes significantly when we asked users to consider how they'll deliver applications three years from now: the percentage of those survey takers using SaaS for 20% or fewer of their applications shrinks to 39%, while the percentage of those respondents delivering 31% or more of their applications via SaaS rises to 30%.

The apps respondents deliver via SaaS run the gamut of enterprise apps, from accounting and financial applications to security, but the ones most likely to be delivered via SaaS are customer relationship management (CRM) and email, which isn't surprising given the amount of data they generate.

Among ESG survey takers, IaaS usage is lower than that of SaaS, with 17% currently using IaaS to meet infrastructure requirements. But things are looking up on the IaaS side as well, with 81% of respondents reporting they'll spend at least some of their 2011 budget on the technology.

The bigger truth

Few technologies have been able to maintain the level of hype that cloud has for IT users and vendors alike. Typically, new technologies just can't live up to the expectations and promises vendors set. Cloud is bucking the trend for multiple reasons, not the least of which is that no one can seem to agree on exactly what it is. ESG believes cloud is ultimately a service delivery model where applications (and/or infrastructure) are delivered as a service to a consumer. The jury is still out in end-user and vendor circles as to whether or not "private cloud" counts as a cloud initiative or is just IT with a services-oriented architecture.

The spending survey indicates that reducing costs, especially operational costs, is still one of the top drivers of IT decision making in 2011, and the cloud certainly seems to be gaining popularity as a means to help contain overall IT costs. Because the value propositions for IaaS and SaaS are related to cost reduction, ESG specifically asked users about cost-cutting measures and saw cloud computing start to emerge as a viable option. Organizations in cost-reduction/containment mode indicate a significant increase in their willingness to consider cloud computing services (23% in 2011 vs. 17% in 2010 and 13% in 2009) as a way to control IT costs this year.

Will cloud strategies continue their momentum in 2011? ESG research indicates they will -- at least from the end-user side. Because 2010 was mostly about cloud talk and hype, and end users now indicate a willingness to invest in this area in 2011, it looks like vendors will have to "put up or shut up" and deliver on the cloud promises they've been making to deliver truly cost-effective, secure and available IT services.

BIO: Terri McClure is a senior storage analyst at Enterprise Strategy Group, Milford, Mass.

This was first published in March 2011

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