Gartner Shines a Light on Cloud Computing Growth

Cloud computing is to grow 48.7 percent in 2012 according to Gartner:

The fastest-growing segment within the ITO market is cloud compute services, which is part of the cloud-based infrastructure as a service (IaaS) segment. Cloud compute services are expected to grow 48.7 percent in 2012 to $5.0 billion, up from $3.4 billion in 2011. 

Gregor Petri, research director at Gartner said:

“Today, cloud compute services primarily provide automation of basic functions. As next-generation business applications come to market and existing applications are migrated to use automated operations and monitoring, increased value in terms of service consistency, agility and personnel reduction will be delivered.”

At the start of this year Flexiant engaged with analysts, such as Gartner, to explain why we believed that value will migrate from enterprise IT to outsourced managed cloud services thereby creating ‘the decade of the service provider’. We explained that, unlike other vendors in the market, our primary customer was the service provider and that our development efforts exist to ensure that the service provider can capture the opportunities for growth that are emerging. Critical to this is the ability to meet the exacting service delivery expectation of the enterprise audience.

In February most analysts were warming to the concept of value migration, however one or two remained fixed in their belief that enterprise spend on internal IT infrastructure would continue to grow. We believed that this latter view was, and is, myopic.

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Why market share might not be the goal worth having

Tony Lucas of Flexiant says in his presentation at HostingCon 2012 that service providers need to find their cloud niche to be successfulIn the January issue of Harvard Business Review a study of 2,347 established companies, over 10 years, identified only 10, less than 1% that grew by 5% every 10 years. Does this mean that all of the growth ambitions of the service providers who are working with Flexiant are unrealistic? Not necessarily so.

Today, at HostingCon 2012 in Boston, Tony Lucas from Flexiant spoke about ‘Finding your Niche in the Cloud’. We will be posting Tony’s presentation within days.

While listening to Tony speak I reflected on the Harvard study and wondered whether the predicted 47% growth in hosted private clouds this year was reasonable and whether the service provider market was prepared for the opportunity to measure up to the customer demand that Tony envisaged.

If service providers are to exceed the rate of 5% per annum growth then they need to differentiate the services they provide. Critical to this is selecting the markets that they are going to serve. This to most, if not all of us, is a pretty obvious first step.
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Gartner supports our belief that this is the decade of the cloud service provider

Yesterday Gartner gave its quarterly forecast on enterprise IT spend. For the first time it produced a more in depth look at public cloud spend. The title of the update, ‘Cloud is the Silver Lining’, nicely summarises the results. Gartner states there will be a decreased spend in enterprise hardware computing and a significant increase in IT outsourcing.

The biggest beneficiary of this will be cloud infrastructure as a service (IAAS) which is estimated to grow at 41% CAGR. Furthermore, between 2012 and 2016 the spend on public cloud is predicted to double from around $100bn to $200bn. All of this at a time where overall IT spend shows no significant growth.

This reinforces Flexiant’s firmly held belief that this is the decade of the cloud service provider. Indeed we are the only company with a cloud orchestration solution that is service provider ready and that will enable service providers to capitalise on this predicted growth in demand.

However, the Gartner analysis is only part of the story. There is growing evidence that the current investments in wholly owned, enterprise private clouds will also migrate to service provider owned, hosted private clouds. In this scenario the enterprise will retain systems management control. Recent research, sponsored by Microsoft showed that, even at this early stage, over half of respondents agreed that most of internal IT will be based on private clouds and already one third agreed that most of this will be externally hosted.
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