The New Forecast

Here is the new forecast, segmented by offering category, for 2009 and 2013:

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These figures represent revenues for offerings delivered via the cloud services model in five major enterprise IT segments (as defined in IDC’s IT market taxonomies): Application Software, Application Development and Deployment Software, Systems Infrastructure Software, and Server and Disk Storage capacity. These figures do not include spending for private cloud deployments; they look only at public IT cloud services offerings.

The revised figures are still in the same ballpark as last year’s forecast, although they reflect The five year growth outlook remains strong, with a five-year annual growth rate of 26% – over six times the rate of traditional IT offerings.about a six month revenue knock-back from what would have been expected from last year’s forecast, due largely to the global recession and, to a lesser degree, to better market tracking and tightened definitions.

The five year growth outlook remains strong, with a five-year annual growth rate of 26% – over six times the rate of traditional IT offerings. In spite of the challenging economy – or more accurately, because of it – this growth rate advantage expanded from last year’s forecast, in which cloud services were forecast to grow at over five times traditional offerings.

Cloud Services’ Impact on the IT Market: It’s About the Growth

What does this forecast tell us about the real impact of the cloud model on the IT market? Should we think of $17B in 2009 and $44B in 2013 as big or small? How important – financially, and strategically – are IT cloud services for the industry? Here are two ways to look at it.

One way is to look at the percentage of revenue that cloud offerings comprise of these five segments overall:

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This year, cloud services will total only about 5% of IT revenue. Even with a compound annual growth rate of 26% – over six times that of traditional IT – they will account for just 10% in 2013. Some might look at this, and conclude that cloud services are not very important – after all, in 2013, 90% of IT will NOT be from public clouds.

But, as we noted in last year’s forecast post, this “percent of total revenue” perspective is a very dangerous one. Why? Because it’s a rear-view mirror view: it misses the impact that cloud services offerings will have on net new growth in the IT market. Here is an analysis of net new IT growth in 2013, separated into growth from cloud services vs. growth from traditional IT products:

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Looked at through a growth-oriented lens, cloud services will certainly have a major impact on the IT market over the forecast’s time frame. Of the $27 billion in net new IT revenue in 2013, 27% will come from IT cloud services. Given the 6X growth advantage of cloud services offerings over traditional ones, that percentage will grow very quickly in subsequent years – meaning that suppliers who don’t position themselves as IT cloud services leaders over the next several years, will forfeit larger and larger portions of the highest-growth markets.Looked at through a growth-oriented lens, cloud services will certainly have a major impact on the IT market.

As we noted last year, IT cloud services adoption is currently in the “crossing the chasm” stage.  This revenue and growth data is very much in sync with this view. As Geoffrey Moore pointed out, in this period, total revenues are small, but – as the market is on the steep part of the adoption curve – growth is extremely high. The lesson of past technology adoption waves is that suppliers who wait to position themselves until revenues get big (e.g., greater than 10%), are too late, and find themselves edged out of the all-important mainstream adoption phase.

After a full year of discussion and debate among key IDC analysts, We’ve continued to refine our thinking about what defines cloud services, and what makes them new and important.and conversations with hundreds of leading IT users and suppliers, we’ve continued to refine our thinking about what defines cloud services, and what makes them new and important.  The revised definition is very consistent with last year’s definition, with improvements in two areas: 1) minor tweaking of cloud service “key attributes” to improve clarity, and 2) expansion of the definitional scope to accommodate both public and private cloud deployment models.

What Are “Cloud Services”?

As we noted last year, “cloud services” are fundamentally about an emerging delivery/consumption model – one that can be applied to IT industry offerings (e.g., as in software-as-a-service (SaaS), and storage or server capacity as a service), but also much more broadly, to offerings from many other industries, including entertainment, energy, financial services, health, manufacturing, retail and transportation, as well as from government and education sectors.

At a high level, cloud services can be described simply and informally as:

Consumer and business products, services and solutions delivered and consumed in real-time over the Internet

This is a useful simplification for discussing cloud services with non-technical business people, but it is obviously too broad a description to capture what’s important: how the emerging cloud model dramatically differs from prior online offering models in ways that promise to fundamentally expand and transform markets. After all, online services have been around for a very long time – from the timesharing systems of the 1970s through the first generation of transactional Internet commerce sites. Thus, IDC’s formal definition of cloud services includes the following eight key attributes, that – in combination – differentiate cloud services from these other online delivery/consumption models:

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As we noted last year, the cloud services model, by leveraging all eight of these attributes together, “make business and consumer cloud services easier and cheaper – and often better – to consume than through traditional delivery modes. These attributes lower costs (for customers and suppliers), speed and simplify access, speed and fine-tune provisioning (in line with true demand/usage), greatly increase the number and variety of available services (thanks to lower development and deployment costs, and standards), and improve the potential to integrate.”

As we’ll discuss below, in the more detailed description of each attribute, some of these attributes may manifest to different degrees, or in different ways, in different cloud service categories (e.g., “self-service” for cloud applications vs. cloud storage), but for all categories of cloud service offering, there is an important common thread:  these attributes manifest in ways that offer major customer advantages compared with traditional delivery/consumption models.

Detailing the Eight Cloud Services Attributes

Here’s more detail on what each of these attributes means:

• Shared, standard service – this is the most fundamental attribute of a cloud service, an attribute that is shared with the wide variety of previous-generation online services, and  the one that differentiates cloud services from many traditional, Cloud services are shared, standard services, built for a market, not for any specific customer.customer-unique outsourced or hosted offerings. Cloud services are shared, standard services, built for a market, not for any specific customer.  These services present themselves to users as “multitenant” offerings, although our definition – focused on the customer-facing aspects of cloud services – leaves room for service providers to use a variety of underlying deployment and architectural options.  The shared service model offers customers and suppliers both enormous operating efficiencies and upgrade/enhancement velocity. In a private cloud deployment, the IT department can be viewed as the cloud service “vendor”, offering a standard service within a single enterprise, or across an extended enterprise. [Last year, we referred to this attribute as "shared resources/common versions".]
• Solution-packaged – one of the most obvious user benefits of the cloud service model is that it is “turnkey”: the customer can access the offering without the need to own, manage or understand any underlying resources required to support the offering. The Cloud Service Provider (Cloud SP) bears that burden, offloading it from the customer, making it much simpler and faster to adopt for customers. [Last year, we referred to this attribute as "minimal/no IT skills to implement".]
• Self-service – cloud services allow customers self-service capabilities for service provisioning and administration. In the IT cloud services world, the range of self-service capability varies widely up and down the stack: in the infrastructure area (e.g., cloud storage, cloud servers), “click-to-buy” provisioning is widely available today, whereas much of the SaaS community lags here. While most SaaS vendors provide a lot of self-service administration, there is little “click-to-buy” provisioning simplicity and speed; some on-boarding and more complex customization functions typically require human intervention from the provider’s staff. IDC believes we’ll see SaaS vendors evolve in this area, providing more automation around self-service provisioning. Customer self-service is a key tool for providing greater operating efficiency, deployment speed and customer satisfaction.  [Last year, we referred to this attribute as "self-service requesting, near-realtime provisioning". This year we've expanded to address administration.]
• Elastic scaling – another of the key benefits users often cite in the cloud services model is the ability to quickly scale resources to need – delivering speed and cost-efficiency benefits. This is an area, like self-service, where the way in which the attribute is manifested varies by type of offering. We can easily see the elasticity of compute and storage cloud services, but what about SaaS? SaaS offerings – while typically less “instantly scalable” than the infrastructure services – still look much more elastic to customers than the traditional on-premise model.We would argue that SaaS offerings – while typically less “instantly scalable” than the infrastructure services – still look much more elastic to customers than the traditional on-premise model, since increasing/decreasing resources (seats/subscriptions, and associated supporting resources – CPUs, storage, bandwidth) can happen much faster than traditional on-premise offerings. Once an application is provisioned on-premise, those resources/costs are on the balance sheet; scaling down is not easy at all, given the portion of capital remaining on the balance sheet, and increasing (beyond a marginal change) usually takes significant time to provision. [Last year, we referred to this attribute as "dynamic and fine-grained scaling".]
• Use-based pricing – customers not only want services scaled to need, they also want them priced to use, whether that’s in proportion to usage, or to the number of users. As we noted last year, as a convenience to some customers, providers may mask this pricing granularity with long-term, fixed price agreements, but – to meet the cloud service definition – the supplier must design their offering so they have the capability to do fine-grained metering and pricing for customers who wish that. In a private cloud setting, some IT shops may take advantage of the fine-grained metering to support more detailed, usage-based chargebacks. [Last year, we referred to this attribute as "pricing model = fine-grained, usage-based (at least available as an option)".]

The last three cloud service attributes are related to the same thing: leveraging the power of de jure and de facto Internet standards – to reduce costs, increase reach and maximize interoperability and combinatorial value creation.

• Accessible via the Internet – this means that cloud services are designed to leverage the most ubiquitous public network on the planet. For public clouds, this is a no-brainer:  it means services must be accessible to (authorized) users who have access to the Internet. The core benefit to both the service provider and customers is broad, simple and low-cost access.  Obviously this doesn’t mean that a public cloud service is unsecured and unreliable; Cloud offerings take advantage of the huge marketplace of security and QoS offerings that are building up around the public Internet.rather that the service provider (and customers) leverage security and QoS/availability mechanisms that are Internet-based (e.g. SSL, IP VPN, CDNs, etc.), and take advantage of the huge marketplace of security and quality-of-service (QoS) offerings that are building up around the public Internet. For most private clouds (see Public vs Private Cloud discussion below), this attribute will still be a key one, especially where employees are mobile; but we could envision very secure private clouds where access is restricted only through private IP networks.  We will also certainly see interesting use cases where public cloud SPs offer customers with high-bandwidth and/or security needs the ability to access the public cloud via private lines – one example of what will be many “mash-ups” of public and private cloud services.  [Last year, we referred to this attribute as "accessed via the Internet". We've expanded with the notion that a user may access a private cloud service over their organization's private IP network.]
• Standard user interface (UI) technologies – to clarify, we’re talking here about the client and underlying technologies, not the visual layout of elements on the screen (or a device). Like the network access attribute above, this attribute is about leveraging Internet-related de jure and de facto standards and technologies that are widely-deployed – and typically service/application-independent – to give cloud SPs and their customers maximum reach and access to leading-edge innovation, at a very low cost. SPs should leave the client choice for users as “open” as possible, for both their own, and customers’, benefits.In the case of UI technologies, we are talking about Web browsers, as well as supporting technologies such as Ajax (asynchronous JavaScript, Dynamic HTML, XML), Flash, HTML, JavaScript, SVG, etc. Other service/application-independent clients – such as AIR – that sit outside the browser, but leverage the same de jure and de facto standard technologies, could also fit the bill as they become widely deployed on users’ devices. We are including de facto standards, so this attribute obviously has some degree of subjectivity to it. The core thought behind this attribute is this: SPs should leave the client choice for users as “open” as possible, for both their own, and customers’, benefits. [Last year, we referred to this attribute as "UI = browser and successors". We've expanded to include other service/application-independent, Internet technologies-based clients that may sit outside a browser.]
• Published service interface/API – The ability to combine services with each other, and to integrate them with traditional, on-premise systems, is the foundation for being able to rapidly create – and, importantly, allow others to create – new solutions and value, and therefore a core element of modern cloud services. Published cloud service APIs transform online services from “islands” to high-leverage building blocks within large innovation communities and marketplaces. It’s already obvious that cloud SPs who do not offer open/published, programmatic interfaces – and thus fail to develop large ecosystems of solution developers around their services – will simply not be competitive. These APIs, and the ecosystems around them, will be the foundation for expanding suppliers’ market power.In our view, this is the brightest red line that separates first-generation online Internet offerings and cloud services. It’s no surprise that the first-generation Internet businesses that have become cloud leaders – Amazon, Google and eBay – were among the first of the first generation online/ecommerce providers to open up their services with APIs, and recruit huge developer communities. In the IT industry, many SaaS vendors have published services APIs (SOAP, REST, et al.) that allow customers and other vendors to access functionality within their offering; some expose a minimal number of controls, while others publish many. But it’s hard to imagine any successful SaaS (or any –aaS/Cloud) vendors not providing a way for their offerings to be leveraged for greater value by customers, and by their own ecosystems. These APIs and the ecosystems around them will be the foundation for expanding suppliers’ market power. The successful Cloud SPs will have APIs in some form as the market matures, while “walled gardens” will have a hard time being competitive in the cloud services space – think “AOL vs. the Internet”. [Last year, we referred to this attribute as "system interface = web services APIs".]

It’s worth repeating: the reason the cloud services model is worth defining (and researching) is that the combination of these attributes delivers a unique and powerful set of benefits (in bold above) for the industries and organizations that deploy and use these services.

Deployment Models: Public vs. Private Clouds

A major market development in the last 12 months has been the emergence of the idea that the very same eight attributes above – which have given public cloud providers like Amazon, Google, Salesforce.com and others great advantages in cost, speed , simplicity and value-creation velocity – can be applied to corporate data centers within a private (single-, or extended-, enterprise) setting. “Private clouds”, by definition, don’t have nearly the same reach and scale as public clouds, but they do offer significant improvements over traditional private deployment models.

And so our definitional framework for Cloud Services is now expanded to include these two deployment models:

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As noted in the Cloud Services definition chart above, Public and Private models represent two ends of a deployment continuum, which we expect will frame a growing variety of models that mix aspects of both.

It’s important to note that the notion of private clouds didn’t just arise suddenly from public clouds, Private clouds are an evolutionary next step in CIOs’ decade-long efforts to transform their organizations into service-oriented IT delivery providers.but is really an evolutionary next step in CIOs’ decade-long efforts to transform their organizations into service-oriented IT delivery providers – what IDC has referred to for almost ten years as the journey toward “dynamic IT”.  Private clouds (and public clouds, for that matter) are built on the key elements of that transformational roadmap – consolidation, standardization, virtualization and automation – and add important new ingredients: turnkey packaging, self-service provisioning and administration, more granular and elastic scaling, granular usage metering and leverage of Internet standards and technologies.  For the past ten years, many CIOs have found the journey to dynamic IT, based on conventional offering approaches, very slow, difficult and costly.  We believe these new ingredients that private clouds add will help CIOs move much faster down the dynamic IT path.

Putting It All Together

Wrapping up, here’s a chart that puts these three elements – simple meaning, key attributes and the public/private deployment models – together into a single figure.

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This survey finding, from the IDC Leasing and Financing Survey Results (IDC#218599, June 2009) report, shows user interest in a number of acquisition options, as alternatives to leasing.  Two things stand out:

• Users rated cloud computing as the top alternative to traditional IT leasing. Cloud computing garnered the highest average rating (2.7 out of a maximum 4), as well as the highest percentage of respondents (27%) indicating an interest level of 4 (”very interested”).  It’s notable that the third highest-rated alternative was “utility-type computing”, which is synonymous with cloud computing.
• Cloud computing edged out outsourcing as a leasing/financing alternative. In tough times, as CIOs are squeezed, they’ve traditionally looked to outsourcing as a method for lowering costs, and spreading them out.  No doubt this finding will be particularly interesting – and challenging – to outsourcing services providers, most of whom are currently trying to determine just how serious they should be in adding cloud services options to their services profolios.

It’s clear that cloud computing is of growing interest, not just to the technologists, but to the money people – the CFOs, CEOs, Procurement VPs, as well as senior IT execs – who think about the capital and cost implications of IT.  And from these ratings, it looks like their initial impressions are positive.  The implications for the IT leasing and finance players, as well as traditional IT outsourcers is obvious:  they need to quickly determine how they will get their share of the growing cloud opportunity.

My response to the skeptics is very simple: within the next several years, none of those challenges will make a bit of difference to the vast majority of customers.  The public cloud is where the best and richest variety of business solutions will increasingly be found.They will still choose, in large numbers, public IT cloud services as core elements of their IT services delivery portfolios. They will do so for one big reason:  the public cloud is where the best and richest variety of business solutions will increasingly be found.  (You could certainly argue that this is already the case in the consumer IT solutions world.)

The online shift of the latest and greatest business solutions to the Web is happening because the Cloud is winning the war for developers:  a rapidly growing number of developers see the Web as the most attractive “platform” on which to quickly and affordably deploy their solutions.  It’s not a mystery:  the Cloud dramatically reduces the barriers for customer adoption (and upgrade) and dramatically expands the market reach for solution developers. Can you imagine a developer of a hot new solution choosing not to deploy in a Cloud/SaaS mode?  Hard to imagine.  They might not do so exclusively – they may continue to also develop for the big on-premise platforms, and many will also deploy their public cloud solution as a software appliance in a private cloud.  But it’s easy to see that the public cloud will be the number one deployment target for a large majority of solutions.

If this pattern sounds familiar, it should.  We’ve seen this movie before:  in the 1980s, people debated about the relative benefits of “PC vs. mainframes (or minicomputers)”.  If this pattern sounds familiar, it should. We’ve seen this movie before.The PC proponents pointed to dramatically lower “cost per MIPS”, and the PC opponents cited lower reliability or the lack of legacy tools in the PC world.  In the end, the real battle was not about any of these things – it was about the migration of an enormous amount of developer energy and solutions to the PC (and Wintel server) platforms. The new platform (PC, Client/Server) was the place you’d find the best and newest solutions.  (This is why the battle among the “Platform-as-a-Service (PaaS)” players is so strategic – they’re all vying to repeat Microsoft’s 1980s/90s Windows story, by attracting the richest solution ecosystems to their Cloud platforms.)

In the PC and Client/Server era, customers followed the solutions, and money flowed into the industry to develop solutions to the limitations of the new platforms.  We’ll see the same pattern this time – today’s public cloud challenges will not magically disappear or become unimportant to users.  But as more leading solutions pull more customers to the cloud, there will be more incentive for the industry to invest in developing creative solutions to these challenges.

At a recent IDC conference on cloud computing, we were surprised at how well the retail industry was represented among the attendees.  These attendees told us that their motives were investigative – they were there to learn, not to start buying.  They also told us that their interest was in “private clouds” – using the technologies behind utility computing and public cloud offerings to operate their own cloud for provisioning, running, and managing their corporate applications.

Taxonomies for cloud computing are proliferating (the most comprehensive ones being produced by IDC), but for the purposes of this discussion we will simplify and consider three types of clouds:

• Walk up Clouds. These are applications that are available, usually for a nominal fee if not free, for mass use and are provisioned simply by the user visiting the website.  The applications usually entail personal productivity products like word processing, spreadsheets, calendars, etc.  Google Apps are a good example.  As these applications gain sophistication in functionality, security, and interoperability, they can be viable alternatives for at least a subset of a retailer’s user base.
• Sign Up Clouds. These are applications that are offered on SaaS basis but require some contractual relationship to be consummated and involve some measure of implementation including user provisioning, process instantiation, and data migration.  The most famous example is salesforce.com, but Global Retail Insights (GRI) is seeing retail specific traction in merchandise planning (Predictix), supply chain collaboration (Generix) and associate training (Ignite).  European retailers seem to be particularly open to consuming software in this way although it is hard to say if they are taking a broad cloud view of these offerings or just see them as individual pieces of the portfolio that just happen to be delivered in an on-demand model.
• Sign In Clouds. This category is what the retailers at the conference were describing as a private cloud.  Infrastructure that can quickly and easily provision users, applications, and resources to the entire breadth of locations supported by IT in retail.  The premise goes well beyond just using the underpinning hardware and systems management – it would also allow the organization to connect to walk up and sign up clouds while maintaining oversight and control.

Looking at Cloud Benefits From Both Sides Now – Lower Costs and Greater Capability

Recent GRI research has looked at the business benefits of running POS systems from a centralized architecture.  By taking servers and associated management challenges out of the stores, retailers can save significant costs in operation and maintenance.  Extending this further by transitioning centralized POS delivery to the notion of a private cloud can magnify these savings even further.

However, benefits go beyond reductions in TCO.  Imagine a store manager who, in the context of serving her specific demographic, is able to create a custom application set for workforce scheduling, signage, merchandising, sourcing, et al without disengaging from corporate systems and performance reporting.  Or consider the ability to connect key suppliers to the private cloud where replenishment service levels and/or promotions can be defined, monitored, and evaluated in close coordination with regional and store management.  How about custom regional offerings for valued customers that are enabled by connecting the private cloud to ecommerce platforms.  The local control and flexibility of using a cloud approach can open up tremendous opportunity for improving store performance.

Essential Guidance

Cloud standards and vendor offerings remain fairly nascent and there may be some risk to moving to fast (anyone remember Linux base POS?).  However, the self-funding, high function nature of this technology once mature dictates that retailers should have an internal position paper prepared that includes a vision of how the approach may be utilized for competitive advantage.  Global Retail Insights also recommends incubating the technology by undertaking some proof-of-concept projects.  As always, the GRI team is available to support your efforts with relevant research and advice.

My gut reaction has been that the economic crunch would certainly amplify the economic benefits of the cloud services model, and therefore accelerate IT cloud services adoption.  Some data from a user survey my colleague Stephen Minton published earlier this year substantiates that view.

The survey was of 332 IT and line-of-business executives, predominantly based in North America, and spread across large, medium and small enterprises.  Stephen asked this group: “How will the economic situation affect your approach to cloud computing and SaaS?”.  Here are the responses:

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Almost half of the respondents claimed there would be no impact – a real testament to the power of inertia in many businesses!  But over half of the executives stated that they are, indeed, adjusting their approach to market conditions.

Intriguingly, twenty-four percent are reacting to the recession by moving more aggressively in the cloud/SaaS direction: either doing more evaluation, beginning to adopt, or increasing their adoption of IT cloud services.  While fourteen percent are reducing their pace of cloud/SaaS adoption – my guess is, this is not because of anything specific about cloud computing, but because they are reducing most of their IT investments in the down economy.

In a down economy as severe as the one we’re experiencing, it’s remarkable that one in four executives are thinking more aggressively about adopting ANY kind of IT.  But the cloud model’s economic benefits are compelling.  To me, this survey strongly suggests that the cloud model – which we forecasted last October would account for about 9% of enterprise IT spending in 2012 – is on a pace to drive closer to 10-15%.

One other important takeaway:  by far, the largest portion of customers leaning more aggressively toward the cloud model are in the “more evaluation” stage.  This  makes 2009 and 2010 a very important time for suppliers to be actively educating the marketplace about the cloud model and their cloud offerings – very appropriate, given our assessment that the cloud model is in the “crossing the chasm” stage of adoption.

The interest in cloud computing by these Energy industry IT leaders was strong – we had a lively 1-1/2 hour discussion, which could have easily gone on for twice the time.  Here are some of the comments/questions that these execs had about cloud computing – they offer some interesting insights to the IT industry about how users are thinking about cloud computing right now, and what vendors should be focusing on to position for success in this industry transition:

• Integrating Cloud and on-premise IT. Most of the meeting participants wondered aloud how to ntegrate cloud services with their existing IT systems and IT service delivery strategy.  There was a lot of note-taking when I mentioned that a growing number of vendors are rolling out “bridging” offerings, aimed at simplify the deployment of on-site virtualized workloads/applications to the cloud.  (I spoke about this fit of cloud services into CIOs’ gameplans at IDC Directions – noting that the future of Cloud services will be as elements of a coherent, integrated portfolio of service-oriented offerings, including virtualized on-premise and externally-sourced cloud offerings.  I also wrote about this connection between CIOs’ long-term SOA strategy and cloud services three years ago in How SOA Will Really Be Adopted: Under the Covers, and On the Net.)
• Vendor lock-in and cloud interoperability. They’re very concerned about vendor lock-in by cloud services providers, and are interested in standards that will allow greater ability to switch providers.  They also indicated that they want to see more progress in allowing interoperability and integration among different providers’ cloud services and platforms.  Both the information/service portability issue and the inter-cloud interoperability/integration issue are serious ones for users, as we noted in The “Open Cloud”: a Pre-Condition for Broad Cloud Adoption?.  Yes, we’re seeing cloud vendors develop multi-lateral interoperability agreements, as well as third-party interoperability bridges.  But customers like the ones at this meeting are still waiting for more: for the major Cloud SPs to commit to collaborating with each other on broad, open and durable interoperability commitments.
• Credible cost comparisons. The energy execs want to see more detailed/credible cost comparisons between cloud and traditional IT deployments.  This means a true apples-to-apples comparison; not comparing, say, Salesforce.com CRM with just SAP or Oracle licensed CRM software packages, but with all of the related capital and operating costs of those packages (including the costs of the IT stack required to run those packages).
• User experiences. They want more examples of companies, particularly ones of their (large) size,  that have successfully migrated to a cloud solution.  One participant asked specifically about whether many large companies had yet successfully migrated to Microsoft’s Exchange Online offering.
• Accommodating more “customization” in the cloud. One participant noted that IDC surveys I shared showed “standardization” as a key cloud benefit, but – conversely – that users also want the ability to “customize” cloud services to some extent; he wondered how that tension would be sorted out as the cloud model matured.  I shared IDC’s view that the web standards foundation of the cloud model, and emergence of the platform-as-a-service (PaaS) deployment model (i.e., common application infrastructure shared among solutions ecosystem participants), would allow a growing population of specialized solutions providers to create off-the-shelf extensions on top of broad, standard cloud solutions – and that this would allow users to acquire very “customized” solutions that still took advantage of the mass market economics of the cloud model. We already see this model taking hold in the developer/integrator communities developing around the SaaS vendors’ PaaS offerings (e.g., Salesforce.com’s Force.com and Netsuite’s SuiteCloud).   
• Will Cloud providers survive the downturn? in the current economic downturn, they are concerned about the viability of some smaller cloud/SaaS players, and are looking for those vendors (or third parties) to provide assurance of viability, and mitigation plans should those assurances fail.

On Monday, 30+ IT vendors announced the creation of the “Open Cloud Manifesto” group, with a declared intent to “initiate a conversation that will bring together the emerging cloud computing community (both cloud users and cloud providers) around a core set of principles. We believe that these core principles are rooted in the belief that cloud computing should be as open as all other IT technologies.”

Much has been made about the fact that IBM and the rest of this group were not able to convince key Cloud players – particularly Amazon, Google, Salesforce.com and Microsoft – to join in.  One obvious reason: these companies are all rivals for a strategic control point in the cloud: the application platform.  (To me, the interesting exception was SAP, which is among those competing at the application platform level in the cloud, but still signed on to the IBM-led Manifesto.)

Yes, this kind of IT vendor rivalry is as old as the IT industry.  But anyone who’s listening to customers today (including – importantly – those not yet leveraging the cloud), knows that driving more agreement around cloud service interoperability and data portability is going to be a very important element in moving cloud computing “across the chasm“.  Many users I’ve been talking with about the Cloud are very excited about the model, but many are also worried that they may be walking into a whole new round of vendor lock-in as they start taking advantage of cloud services.

In fact, just last week – right after I gave a speech about Cloud Computing at IDC’s Innovation Forum in Milan – there was a panel discussion about cloud computing, and the issue of interoperability among cloud players’ offerings was the very first thing that came up. Gianluigi Castelli, IT Director for Eni S.p.A., the $100B-plus energy giant, was asked if cloud computing was something he was considering.  He said that Eni was thinking over how and when they would use cloud services.  He noted that he was under significant pressure to cut his budget, and presumably cloud computing would have some strong appeal for that reason alone.  But he went on to say (my paraphrase): “We need to see some standards…  interoperability is a pre-condition we need to see in this area.  And I have some doubts about whether the vendors will succeed in doing that.”

Given that Gianluigi, and – according to our research – many other CIOs, consider standards a pre-condition for their adoption of IT cloud services, let’s hope his pessimistic assessment of vendors’ ability to deliver those standards is wrong.

Last month we released IDC’s IT and Telecom industry predictions for 2009. The overarching story this year will be about the IT industry’s ongoing and massive transformation – toward emerging markets, SMB and consumer customer segments, and toward Internet/Cloud, mobile, sustainable, community-developed and solutions-packaged technologies and offerings – colliding with the deep global recession.

The key question: Will the recession put the industry’s transformation on hold? Or will it drive even faster change and disruption?

Here’s a video summary of our predictions:

And here’s the 15-page Predictions 2009 document: for IDC clients, and for everyone else.

And lastly, here’s the IDC Predictions web site, where we’re be posting dozens of more detailed, segment-specific predictions: by IT industry product and service segment, by region, by industry, and more.

We’ve written for several years about the unique opportunity Microsoft has to play a market-maker role in industry’s shift to the Cloud, particularly by helping its thousands of application solution and channel partners migrate to the Software-as-a-Service delivery model.  SMBs (including in emerging markets) offer the under-penetrated opportunity that will economically fuel the industry’s transition to the cloud, and Microsoft (with its partners) is, by far, the strongest SMB player.

By announcing Windows Azure and the Azure Services Platform, the company is finally defining a cloud-based Microsoft is finally defining a cloud-based destination for its Windows-oriented partner ecosystem.destination for its Windows-oriented partner ecosystem to migrate their offerings and skills to. Details about pricing and wide-scale availability are still a bit murky – Microsoft spokespeople claim the roll-out schedule will depend on the response of their partners; if that’s so, my guess is there will be great pressure on Microsoft to move quickly, given the growth we predict.

We’ll be commenting more on the Microsoft announcement, here as well as on idc.com.  But my main reactions are:  1) This is good news for Microsoft, its partners and cloud services market growth, and 2) It’s about time – now, Microsoft, keep the pace up.