Cloud disruption gains momentum driven by lower costs and greater simplicity

The Cloud is the biggest disruptive force to hit the IT industry for the last 20 years; and by the way that's why it's not "the same" as using AMS as an online service bureau 20 years ago although for some bizarre reason people feel compelled to say that the Cloud is "nothing new".

There are a whole lot of astounding things about the technology which is making Cloud such a force, but the reasons people are buying, and will do so in increasing numbers, can be boiled down to two basics:

1. reduced cost;
2. reduced complexity.

Of course those same two forces are the cause of fear and denial in the traditional channels of supply of IT services to business. Complexity is the friend of the service company, and simplicity and reduced price the enemy, or so it might seem. In any case that's a story for another day.

AMI Partners has undertaken a number of Cloud surveys recently, and the momentum of the two forces shows out in those results. (I don't know AMI I just found them during a Google search.)

Their studies confirm CRM, payroll, accounting/financials and web-conferencing tend to be the leading applications currently used in the Cloud. Adoption intentions remain strong for CRM, Business Intelligence (BI) and web/video conferencing for the next 12 months. Their research showed that

1. Remote Managed IT services (RMITS);
2. SaaS; and,
3. web/video conferencing; 

  are the highest-growth components within the Cloud, with a 20%+ CAGR, each. On the other hand total Cloud-related spending will grow at a CAGR of 13% to exceed $95 billion by 2014, about 11% of total WW SMB ICT spending.

Cloud a replacement mechanism for current higher priced services

In the case of fairly simple bread-and-butter solutions and processes, including a variety of managed IT services, the Cloud essentially acts as a replacement mechanism driving costs lower, says Deepinder Sahni, AMI’s Senior VP for Global Sizing and Segmentation. In fact in the US in particular where these smaller businesses are still under financial pressure the move to Cloud and SaaS is seen to have greater momentum, for these cost-saving reasons, then elsewhere in the world.

Small business wants to migrate, but needs education

AMI report that the biggest impediment to even faster Cloud growth in small businesses (SBs - up to 99 employees) is not the willingness but the how-to.

According to Michael McDonald, a Senior Associate with AMI, "small businesses have been laggards in adopting new technologies that fall outside their comfort zone, often looking to larger firms as test cases".

"The larger issue is the lack of knowledge regarding Cloud," according to McDonald. "Even though some budget has been allocated for SaaS products, we see a gap between planned and actual spending. Small businesses have the capital available to make significant advances in the Cloud; however, they are still uncertain as to how a Cloud solution will benefit firms of their size."

Cloud service providers targeting SBs should understand that educating the decision-makers of these companies on the ease and simplicity of migrating to SaaS applications is essential.

Further, channel partners should be armed with simple case studies demonstrating these benefits, according to AMI. This is a pointer to how vendors should be responding, and also engaging with both partners and SBs through social media, for example. Why social media? Well, it's the most cost-effective for reaching out to this market segment, and to leveraging word of mouth between these business owners.

Despite the pressure on current channels and service providers, there is an upside. It's related to the opportunities that arise from the same factors they fear most - simplicity and lower cost. I'll talk about those in my next post.

Right now Cloud is here, it is not going away, and it will disrupt the IT industry as we know it. Now is the time to get ahead of the wave, because Cloud also presents great opportunities for the industry.

http://xeesm.com/walter

• VMworld 2010 Roundup (datacenterknowledge.com)
• Trend Micro Launches a Breakthrough Encryption Solution for the Cloud (prnewswire.com)