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10/20/2008
07:54 PM
Roger Smith
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IDC Says IT Cloud Services To Reach $42 Billion By 2012

Based on a survey of IT executives, CIOs, and other business leaders, IDC said this week it expects spending on IT cloud services to grow almost threefold in the next five years, reaching $42 billion by 2012.

Based on a survey of IT executives, CIOs, and other business leaders, IDC said this week it expects spending on IT cloud services to grow almost threefold in the next five years, reaching $42 billion by 2012.The growth will in part be helped by the economic crisis that began in the United States, according to a statement by Frank Gens, senior VP and chief analyst at IDC. "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."

According to IDC, the shift toward cloud computing is being driven by three market forces: 1. The search for growth (and revenue) in important new segments, including emerging markets like Brazil, Russia, India, and China (BRIC) as well as the small and medium business sector;

2. The need for -- and emergence of -- new approaches, since "traditional offerings and approaches, while they will continue to adequately serve much of the market, are too costly, and take too much time, skills and effort to adopt to appeal to these emerging opportunity customers."

3. Competitive pressures from startup IT suppliers like Salesforce.com, which have entered the market in a conventional IT role (software vendor) but with an unconventional approach (software in the cloud), as well as "non-IT" companies like Google, Amazon.com, and eBay, which have entered the IT market from decidedly unconventional starting points (online advertising and search, retailing, etc.).

IDC differentiates between the concepts of cloud services and cloud computing. Cloud services are defined as both business and consumer services that people use over the Internet, and cloud computing is the emerging IT development, deployment, and delivery model that will enable real-time delivery of products and services over the Internet. IDC says that as more and more companies deliver services to customers via the Web, so the need will grow for the latter -- all key ingredients of cloud computing, namely scalable infrastructure, cloud applications, cloud development/deployment, cloud-oriented management tools, and IP networks.

Without raining on IDC's cloud parade, I think the weak link in the argument of rapid cloud services growth is the current shape of IP networks that connect end users to the cloud, thus enabling all of the other cloud products and services mentioned above. I came to this conclusion from reviewing Internet power outages thus far in 2008 that show the grid has been brought down by storms, floods, earthquakes, backhoes, thieves, and random gunfire -- not to mention rats, squirrels, birds, snakes, raccoons and at least one opossum. With news that Congress is considering passing yet another new stimulus package to try to jump-start the economy, this time focused on infrastructure projects such as roads and water projects, it makes some sense to divert a few funds to keeping the internet IP network infrastructure viable (or, at least, animal-proof) if we expect to keep the U.S. cloud in better shape than ones in Brazil, Russia, India, and China.

For More Information: see InformationWeek's Guide To Cloud Computing

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