The global cloud computing market will grow from $40.7 billion in 2011 to more than $241 billion in 2020, according to new Forrester forecast data reported in Sizing The Cloud by Stefan Ried, Ph.D. and Holger Kisker, Ph.D. Based on Forrester’s cloud market taxonomy, this new report outlines the different market dynamics for the three core layers of cloud computing – the public cloud, the virtual private cloud, and the private cloud. The total size of the public cloud market will grow from $25.5 billion in 2011 to $159.3 billion in 2020. The market for virtual private cloud solutions will grow from $7.5 billion in 2011 to $66.4 billion in 2020. The market for private cloud solutions will grow from $7.8 billion in 2011 to $15.9 billion in 2020.

The cloud market will change as we move toward 2020. While the successes of early leaders have prompted many other providers to offer IaaS solutions, Forrester feels that this market will reach a peak of $5.9 billion in global revenues in 2014 and then enter a period of significant commoditization, price deterioration, and margin pressure. SaaS represents the largest and most sustainable growth opportunity, thanks to rapidly increasing demand from companies of all sizes. At the same time Forrester believes that desktop virtualization is reaching the end of its cycle of innovation, while a new set of technologies that allow virtualization of large-scale, server-based enterprise applications are starting to become more important.

The market is not one-dimensional and is maturing at different levels and serves different groups within the enterprise. As the report suggests, cloud value propositions are compelling to individual end users, corporate buyers, and tech providers such as independent software vendors (ISVs). As a result, the benefits of cloud computing range from personal productivity to operational flexibility to cost savings.

Cloud-based solutions and services will continue to be useful in a rapidly changing market as companies can more easily align their underlying operational processes and systems as their business requirements change. I covered several of these trends as I have written on how the cloud can make CIOs more strategic and on the rise of cloud based apps in a down market.  I was pleased to receive a review copy of this useful report. You can find it at the Forrester site.

Here is an interesting study by IDG that found that cloud computing is enabling a more central role for IT in shaping business strategy and driving innovation. The research polled 200 IT managers in the U.S. and Europe. The vast majority (96 percent) believes that the primary role of IT has changed over the past five years, and 71 percent feel the trend to continue over the next two years.  While 54 percent of the survey participants acknowledge the current value of IT is largely defined by its role as owner and operator of IT infrastructure, they believe within two years, the primary value of IT will become managing the IT supply chain. Half feel that the cloud is contributing to this change.

Looking further into the results, IT professionals believe cloud computing can accelerate agility (63 percent), innovation (58 percent) and collaboration with the enterprise (57 percent). Respondents also anticipate cloud computing will boost IT productivity (55 percent) and decrease the resources dedicated to IT support (40 percent). These changes will likely trigger a demand for more business and management experience in senior IT professionals. Nearly 70 percent of respondents feel an increasing number of CIOs and senior IT staff will have a business (as opposed to a technology) background in the future.

The nimble nature of cloud based IT coupled with the reduction in maintenance needs, should allow CIOs to focus more on business issues. However this transition will set up challenges. At last years, MIT CIO Symposium, panelists talked about the CIO Paradox. They have to drive innovation, manage risk, and control costs and these goals can be at cross purposes.  They often inherit costly legacy systems and then are told to go forth and innovate.  I wonder what the talk will be at the 2011 session. I am planning to attend and will be reporting on it here.

According to a recent survey over 60 percent of respondents in the mid-size business space say they are ready to look to the cloud. Many are already using virtualization but only 4 percent are using the cloud now to back up data.  In addition, 63% say they are using 10% or less of their applications on a SaaS platform. So this projects a major shift in the mid-size business IT architecture.

Are these companies prepared?  It seems that there is work to be done as 79% do not have a plan for their move into the cloud.  Many see the advantages as 63% feel that the cloud offers cost savings and 29% feel that the cloud offers more flexibility. At the same time, only 8% believe there is no advantage to the cloud.

Many of the vendors are now offering SaaS platforms or at least options so there is challenge here for them to further penetrate the mid-size market. The good news is that the desire for the cloud is there, the caution is the lack of strategic planning in place.

Social media is generally operates on a cloud platform. In the large company space I have seen at least one study that indicate over 80% of companies plan to use social media in 2011 but another study found less than half have a strategy for social media use.  This parallel between social media and the cloud is not surprising.  In both cases vendors need to avoid prompting tools and services because they are the latest thing and help clients address planning and strategy requirements to make sure their applications are kept for the long run.

While cloud computing continues to increase I found it interesting, and not surprising, that more firms are choosing private clouds than public ones. As reported in ComputerWorldUK, Gartner surveyed 1,587 CIOs and other senior IT decision makers about general IT spending trends, with 484 respondents providing answers relating to questions on cloud computing. The survey wnet across 40 countries, from April to July 2010, and found that 39 percent of respondents allocated some IT budget to the cloud.

ComputerWorld quoted Bob Igou, research director at Gartner, “One-third of the spending on cloud computing is a continuation from the previous budget year, a further third is incremental spending that is new to the budget, and 14 percent is spending that was diverted from a different budget category in the previous year,”

The Gartner analysts said that this investment trend shows a “shift towards the ‘utility’ approach for non-core services, and increased investment in core functionality, often closely aligned with competitive differentiation.” In addition some 43 percent of respondents expected an increase in spending for private cloud implementations designed for internal or restricted use of the enterprise compared to 32 percent looking at public cloud implementations. This later trends shows the flexibility of the cloud and a desire to combine utility with security.

The benefits and risks of using the cloud are well known: flexibility, agility, and cost savings versus security and control concerns. Building private clouds seems a logical approach.

I recently was talking with David Linthicum, author of a recently published work entitled Cloud Computing and SOA Convergence in Your Enterprise: A Step-by-Step Guide, which discusses the business case for considering cloud. In talking about cloud computing, our chat moved to Web 2.0, to which Dave made the observation that many in Web 2.0 circles do not see cloud computing as part of that paradigm. Why not?  Dave says to some degree there are political/turf reasons, as some Web 2.0 proponents see cloud as a threat to their established order.

Add to that the fact that cloud and Enterprise2.0/Web 2.0 (I’ll address them as one in the same for this post) address problems at different levels. Namely, cloud addresses access to IT-centric services, such as storage capacity on demand, processing capacity on demand, and infrastructure on demand.  For example, one of the key business values seen with cloud is the ability to scale up applications by adding off-site processors. The “private clouds” that are now being discussed arise out of virtualization solutions deployed on top of IT systems.

In the Enterprise/Web 2.0 view of the world, this is all behind-the-scenes stuff that the IT guys worry about. Enterprise/Web 2.0 proponents talk about building communities, collaboration, and moving information more openly and efficiently across networks.

What is happening, unfortunately, is that Enterprise/Web 2.0 and cloud are becoming two separate initiatives within enterprises, when they should be very closely linked. Because the essential value that Enterprise/Web 2.0 is bringing into organizations is the ability to conduct business, connect all essential parties in transactions, and open up formerly clogged information channels is through technology services that may be once, twice, or three times removed.  In other words, delivered from the cloud.  Facebook and Twitter are clouds, clear and simple.

As companies move to increase social networking and collaboration across their enterprises with internal and external tools and applications, the success of Enterprise 2.0 rests on their simplicity, accessibility and usability. In other words, complexity and technology issues are abstracted away from end-users.  This is also the goal of cloud computing.  Perhaps, on some level, cloud computing is actually “Enterprise 2.0″ for IT managers?

Over the past year, I’ve been exploring the potential for Enterprise 2.0 and Web 2.0-oriented services to not only pull both enterprises and individuals through the rough-and-tumble economy, but also to change the way we approach work and business.

Dion Hinchcliffe has just published an overview of some compelling options Enterprise and Web 2.0 approaches offer organizations in the current economic climate and upcoming recovery; far smarter than the rip-and-replace approach to workforce and knowledge management we’ve known in the past.

Move to lower-cost online/SaaS versions of enterprise applications; move IT infrastructure to the cloud. Dion cites statistics that show moving to SaaS versions of applications can save organizations up to 40% in their IT budgets. “Recent reports say that moving to a SaaS version of your Customer Relationship Management (CRM) system will save the average firm 25% to 40%, a number that likely translates well to other types of business applications given the core nature of CRM to most enterprises.” Dion cautions, however, that a move to SaaS for strategic applications is not a trivial undertaking, and it’s best to start with more peripheral applications. However, cloud computing provides much greater agility as business shifts — reducing underused capacity and investments in one part of the business, and straining resources in another part.

Use Enterprise 2.0 to capture the knowledge and know-how of employees. A couple of months back, Harvard’s Andrew McAfee speculated that the auto industry could benefit immensely by tapping into the collective knowledge of its workforce.

Dion is of the same mind, warning that companies that engage in layoffs risk losing “tens of thousands of years of built up expertise and capability, largely untapped; the knowledge residing in inaccessible places such as e-mail accounts, file servers, meeting notes, and most devastating of all, in the minds of the departing workers.” He urges organizations to take a different tact, developing networks that can learn and accumulate knowledge. “Enabling open, persistent, freeform collaboration amongst far-flung workers allows vast amounts of institutional knowledge to pour out into visible places on the network where that information can then be studied, reused, and learned by others including (perhaps especially) new workers down the road…. Making your intranet a vibrant, ever growing, worker-powered, two-way social media landscape is one of the surest investments you can make in your organization.”

Embrace new low-cost models for production — such as crowdsourcing. “Crowdsourcing — in which organizations tap into the knowdledge, innovation, and vitality of social networks — represents and new frontier for management. The advantages, Dion points out, include “using the vast audience of people on the network as a primary source of innovation, research, and product development as well as customer support, sales, and marketing.” However, he cautions that crowdsourcing requires a certain set of skills “that is very different from traditional corporate hierarchical command-and-control.” Managers need to understand how to leverage social networks.

Lower customer service costs by pro-active use of online customer communities. Related to crowdsourcing, greater efficiencies and knowledge can be gained from creating or tapping into the collective wisdom of online customer communities. However, Dion points out, few companies have mastered this capability yet. There’s an urgent need for this kind of resource: “With the rank and file of the customer service and account representative ranks of organizations shrinking rapidly in many cases, now is time to provide your customers an entirely new and largely superior channel for communication, collaboration, and working together and amongst themselves.”

Open your supply chain to partners on the Web. This could be one of the biggest growth areas over the coming year, Dion says. “If you want double-digit growth during the downturn in whatever otherwise staid industry you are in, there are few more powerful 2.0 techniques for doing it than turning your business into a strategic open platform on the network.”

Analyst firm Gartner just issued a statement that it believes there is “confusion” in the market over the definition of “cloud computing,” and wants to set the record straight.

Gartner defines cloud computing as “a style of computing in which massively scalable IT-related capabilities are provided ‘as a service’ using Internet technologies to multiple external customers.”

However, the consultancy’s analysts say, there have been different perceptions of what is included in cloud computing.  ”The term cloud computing has come to mean two very different things: a broader use that focuses on ‘cloud,’ and a more-focused use on system infrastructure and virtualization,” said David Mitchell Smith, vice president and Gartner Fellow. “Mixing the discussion of ‘cloud-enabling technologies’ with ‘cloud computing services’ creates confusion.”

Gartner says some commentators and vendors have applied the “cloud” label to internal initiatives, such as virtualization and automation. However, in the broader context, cloud computing applies to “the perspective of the Internet/Web/software as a service (SaaS). The focus is more on cloud than computing with the emphasis placed on access to services from elsewhere (that is, from the cloud).”

Gartner says the internal aspects and the external Web-based aspects are related, but that the internal definition is more of a “subset” of the larger phenonemon.

Is Gartner getting too picky on this? By employing the same standards and principles, organizations will be supporting their own, secure internal “clouds” as well as relying on the global cloud. In many cases, the overlap will not even be apparent to end users.

Web services guru David Chappell has published a think piece on “cloud platforms,” which he defines as platforms that “let developers write applications that run in the cloud, or use services provided from the cloud, or both.” Cloud platforms are also referred to as on-demand platforms and platform as a service (PaaS).

David says there are two forms of cloud platforms: cloud infrastructure services and cloud applications services. Cloud infrastructure services include on-demand storage, integration, and identity. Cloud application services include Software as a Service, search, mapping, and other application services.

David notes that we’re only in the early stages of this evolution, and “cloud platforms aren’t yet at the center of most people’s attention.” However, he continues, “the odds are good, though, that this won’t be true five years from now. The attractions of cloud-based computing, including scalability and lower costs, are very real. If you work in application development, whether for a software vendor or an end user, expect the cloud to play an increasing role in your future. The next generation of application platforms is here.”

Will integration issues dampen the enthusiasm around cloud computing? What are the role of data environments in these new scenarios?

The folks that manage data integration have some interesting observations to make on this topic. I recently had the opportunity to speak with Chris Boorman, chief marketing officer with Informatica, and Ron Papas, senior vice president and general manager for Informatica On Demand, about the enterprise data management implications of this growing trend.  (The interviews are posted here and here in this two-part series.)

As cloud computing engagements increase in sophistication and edge ever closer to the mission-critical core of the enterprise, recognition is growing that there are enterprise data management issues that still need to be worked out. “Our belief is that cloud computing or on-demand computing is simply a way of further fragmenting data, because customers are absolving themselves from responsibility for the management, storage, security, and backup and recovery of the availability of that data,” Chris pointed out. However, he emphasized, “you must never, ever, absolve responsibility for the quality and the ownership of the data, and having such quality and ownership as part of your core business processes. And that requires integration.”

Cloud computing hands off many of the aches and pains associated with systems and application development and management to someone else. But this does not relieve enterprises of the requirements and responsibilities around effectively managing enterprise data. Many observers, in fact, are concerned about the implications of cloud computing on enterprise data management and integration, since much of the processing and storage of information shifts to outside providers.

As Informatica’s Ron Papas put it, technically, there isn’t a lot of difference between on-site systems and data stores and cloud-managed systems and data stores.  However, there’s a big difference in the ownership of these applications:

“What’s that’s doing is it’s bypassing the traditional process of having IT design the whole integration processes into the solution. So, before you know it, you could be up and running with Salesforce.com without having put much thought into integration, because it’s really being led by the line of business side. You could have someone in the sales and marketing unit that somehow bypassed IT and went up and implemented Salesforce. All of a sudden, they realize they need access to that data. they need it synchronized.”

More companies are emphasizing their ability to compete on analytics, and the ability to integrate and leverage enterprise data is key. Whether on-site or in the cloud, effective data integration is a must.

Thanks largely to Rob Patterson’s previous posts on the issues and opportunities, regular readers of the FASTForward blog will know by now that Twitter (and other similar services like Pownce, Jaiku, Friendfeed, Identi.ca and Kwippy) have strong potential for practical use by project teams and connected networks of knowledge workers.

These services can be used to keep people aware of fast-moving issues, events and changes, and bring the strengths of IM and online presence together in useful ways.

Here comes another dimension to group instant messaging … one which promises to further close the gap regarding utility and the ability to reach into a network and connect with someone to whom you want to discuss whatever it may be that interests you or what you may need to know or find out.

A friend who is well-known to many in the Web 2.0 arena, Stuart Henshall, and his colleague David Beckemeyer (TelEvolution / PhoneGnome, Earthlink), have just launched Phweet, a service whereby a user with one click can ask someone who has just twittered (or pownced, or jaiku’d, or fed a friend or kwipped) whether or not they will accept a VoIP call.  Once accepted, voila !  Connection is established and the voice conversation begins.

In terms of how it operates technically, this service effectively eliminates the need for dial-tones (arguably the last remaining communications bottleneck the telcoms "own") in order to talk to someone else via voice.  Powerful stuff !

Please note that this service is alpha, and applies only to twitter at the moment, though I believe there plans to enable it for the other similar service I have mentioned.

Of course group IM users can already connect with someone they "know" and ask about / initiate a VoIP call in any number of ways, but this service makes the functionality available during the course of using the group IM service, thereby enhancing existing online presence and creating what some are calling ambient intimacy.

Go ahead, sign up and try it out.  I have … it’s easy, fun and potentially very useful, especially for project teams or private networks of people who are connected together on some issue or other.

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Tags: Stuart Henshall, David Beckemeyer, Phweet

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