Muon Cloud

Is Cloud Computing a storm in a marketing teacup or will it go the way of the last ‘next big thing’? In January 2009 one of my fellow BCS Elite Group members posted the following question about it on LinkedIn: Is it here to stay and how big will the market become within the next 3 years? So I quickly answered the question in this blog post, and in October 2011 I finally returned to add a new section below with some more recent forecasts, and I compared these with the forecasts from 2008, which was quite revealing…

My initial answer to the cloud computing market size question

I’ve written before about the drivers for cloud computing in the credit crunch, but I haven’t backed up my words with third party numerical predictions for market penetration so I did some Googling and here is what I found:

• In a May 2008 research note entitled “The Cloud Wars: $100+ billion at stake”, Merrill Lynch analysts wrote that by 2011 the volume of cloud computing market opportunity would amount to $160bn, including $95bn in business and productivity apps (email, office, CRM, etc.) and $65bn in online advertising.
• In an October 2008 IT forecast IDC predicted that over the next five years spending on IT cloud services will grow almost threefold, reaching $42 billion by 2012 and account for 9% of revenues in five key market segments. More importantly, spending on cloud computing will accelerate throughout the forecast period, capturing 25% of IT spending growth in 2012 and nearly a third of growth the following year.

But can you ever trust what analysts predict? From past experience, no, but I think that the current bubble of interest in cloud computing will grow and last a good while, whereas the very similar ASP marketing bubble quickly popped and disappeared. Yes, there are strong drivers, the market conditions are in its favour and the technologies are maturing fast; but the main reason for my faith in the future of cloud computing is its name. The word ‘cloud’ stirs the imagination, conjures up mental pictures, and when customers are inspired to imagine they are more likely to change.

October 2011 update – new cloud market forecasts

Different analysts estimate the present and future size of the cloud computing market differently, of course, but it’s no surprise, given the depressed state of the financial markets, if the numbers in October 2011 are not quite what Merrill Lynch and IDC predicted in 2008. Here then are some new predictions:

• The October 2010 Cloud Computing Market: Global Forecast (2010 – 2015)  report from Markets and Markets estimated the size of the global cloud computing market as $37.8 billion in 2010 and forecast a tripling of this market to $121.1 billion in 2015
• In September 2011 Ovum predicted that the global market for public cloud services will more than triple from $18 billion in late 2011 to $66 billion in 2016, as enterprise adoption grows. They also say that in 2011 SaaS accounts for 87% of the cloud revenue, with IaaS at 9% and PaaS at 5%, but by 2016 these fractions will change to 62% for SaaS, 23% for IaaS and 16% for PaaS.
• In August 2011 IDC’s study of Worldwide Software as a Service 2011-2015 said there was a $16.6 billion market for SaaS in 2010 and that this will grow to £53.6 billion by 2015. As for the public IT cloud services market as a whole IDC said in a June 2011 press release that Public IT Cloud Services spending will reach $72.9 billion in 2015, increasing from $21.5 billion in 2010.

So Merril Lynch’s 2008 prophecy of a $95 billion SaaS Market in 2011 has not materialised, and IDC have downscaled their predictions significantly since then, too, but the latter are in agreement with their rivals, Ovum and Markets and Markets, regarding a three-fold growth (if not the current size!) of the public cloud computing services market in the next four to five years. However, Ovum’s prediction of a significant drop in the proportion of the market that is SaaS-related (from 87% to 62%) certainly disagrees with IDC’s prediction of only a slight shift in SaaS’s share of the cloud market (from 77% to 74%) so it will be interesting to see who got that right. Will there be a significant move from SaaS to PaaS?

Now, I haven’t read through the analysts’ latest reports myself, so this blog post deals only with headline figures that are generally released but I know a lot of web searches land on this page so I decided to update it. I wish you the best of luck with your own research!