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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.

In this post, We offer our initial forecast of IT cloud services delivery across five major IT product segments.we offer our initial forecast of IT cloud services delivery across five major IT product segments that, in aggregate, represent almost two-thirds of enterprise IT spending (excluding PCs).  This forecast sizes IT suppliers’ opportunity to deliver their own IT offerings to customers via the cloud services model (”opportunity #1“, as described in our recent post Framing the Cloud Opportunity for IT Suppliers).

The development of this forecast involved a team of over 30 IDC analysts, led by Robert Mahowald (Business Applications/SaaS), Tim Grieser (Infrastructure Software), Steve Hendrick (Application Development & Deployment Software), Matt Eastwood (Servers) and Rick Villars (Storage), with additional contributions from David Tapper (Outsourcing/Hosted Services) and John Gantz (Global Research).

An Opportunity In Its Infancy - But, Even Conservatively, Poised to Drive Big Marginal Growth

Of the $383 billion customers will spend this year within the five major IT segments noted above, $16.2 billion - or a mere 4% - will be consumed as cloud services.  By 2012, customer spending on IT cloud services will grow almost threefold, to $42 billion.By 2012 - based on a conservative forecasting approach (see “fine print” below) - customer spending on IT cloud services will grow almost threefold, to $42 billion, accounting for 9% of customer spending.

What does that mean?  On one level, one could argue that - in spite of the all the buzz about Cloud Computing and Cloud Services - this model will not even crack 10% of IT spending four years from now. And therefore, one could reasonably ask: why all the fuss?

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One reason IT suppliers are sharpening their focus on the “cloud” model is its growth trajectory, which - at 27% CAGR - is over five times the growth rate of the traditional, on-premise IT delivery/consumption model.  Spending on IT cloud services is growing at over five times the rate of traditional, on-premise IT.As noted in our recent user survey, this rapid growth is being driven by the ease and speed with which users can adopt these offerings, as well as the cloud model’s economic benefits (for users and suppliers alike) - which will have even greater resonance in the current economic crisis.

Even more striking than this high growth rate, is the contribution cloud offerings’ growth will soon make to the IT market’s overall growth.  By 2012 - even at only 9% of user spending - cloud services growth will account for fully 25% of the industry’s year-over-year growth in these five major segments.  In 2013, if the same growth trajectories continue, IT cloud services growth will generate about one-third of the industry’s net new growth in these segments.

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[NOTE: Minor data typo corrected 01Apr09.  The main message - that Cloud IT growth will account for 25% of overall growth - remains unchanged.]

The implication for IT suppliers is clear: during the next several years, IT suppliers must position IT suppliers must position as leaders in IT cloud services or forfeit an ever-expanding portion of the industry’s growth.themselves as leaders in IT cloud services or forfeit an ever-expanding portion of the industry’s growth.  Cloud services’ accelerating impact on IT industry growth is consistent with the key insight from our cloud services user survey data: that IT cloud services are at a “crossing the chasm” moment, the point at which suppliers must step up their commitment to the new technology or model, and the point at which failure to do so starts to exact harsher penalties on supplier performance.

Applications Are Leading the Way - and Will Continue To Do So

Among the five enterprise IT segments we analyzed, Business Applications dominate cloud services spending, both in 2008 (57%) and in 2012 (52%).

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This should not be very surprising: Software-as-a-Service (SaaS) is the most mature and widely deployed form of IT cloud services, in contrast to the more nascent cloud infrastructure offerings.  And Business Applications - in which, for this forecast, we include Collaboration offerings - have consistently been the largest portion of the SaaS market.

Further, as we noted in IT Cloud Services User Survey, pt.1: Crossing the Chasm, Geoffrey Moore identifies applications (vs. component technologies) as the most successful offerings for crossing the chasm: they appeal to the line-of-business constituencies outside the IT department, who are most frustrated by the old model, and are most open to embracing new approaches.

Another reason for the dominance of applications in One reason for the dominance of applications in IT cloud services spending is the role that SMBs will play.IT cloud services spending is the role that SMBs will play in this IT industry transformation.  As we’ve noted many times, the opportunity to open up under-served SMB segments, in both developed and emerging markets, is the primary motivation driving many IT suppliers toward the cloud model.  And SMBs’ IT investments are driven - much more than large enterprise investments - by applications.

The implication of the application-centricity of the current The most direct path to becoming a successful player in the cloud is to have strong links to the application world.and near-term IT cloud services market is also clear: the most direct path to becoming a successful player in the cloud is to have strong links to the application world.  This means, for example, becoming a SaaS provider, becoming a SaaS platform provider, or - for those in non-application parts of the IT market - becoming a key partner of SaaS application or platform players.  (More on this in later posts.)

One other item of note in the IT cloud services spending shown above is the rapid growth in cloud storage.  Our storage analysts believe - and I concur - that the explosive growth of information in the cloud (and outside it) will, more than in any other infrastructure category, drive direct end user demand for storage in the cloud.

“Fine Print”:  Important Notes About This Forecast

Forecasts about emerging models and offerings are rarely perfect predictions of the future.  Here is some “under the covers” information about this forecast that will be useful in thinking more deeply about this forecast and its implications:

• An  ”End-User-Centric” View: These figures represent enterprise end-user demand for IT products and solutions, through both on-premise and cloud services models. By “end users” we mean businesses that consume these IT products and solutions either for their internal use, or as an “under-the-covers” ingredient within their offerings to the marketplace. Excluded from this forecast is spending by cloud services providers who are simply reselling the product/solution, without value-add other than the delivery model transform; we consider such services providers as resellers - the true “end-users” are their customers. In contrast, cloud services providers who are not explicitly reselling the forecasted IT product/solution as a service, but are using it as a supporting ingredient within their offerings, are considered end-users (e.g., Salesforce.com, a cloud services provider of CRM software, is counted as an end-user within the storage, server, and other IT segments outside of its own primary product/service segments [business applications, application development/deployment]).
• A Conservative Approach and Track Record: This forecast is on the conservative end of the spectrum. Our goal, as usual, is to be “anti-hype” - to recognize and highlight the disruptive trends in the market, but to avoid a forecast “bubble”. That was our track record in forecasting Internet adoption in the late 1990s, and our Internet forecasts have held up extremely well - through, and beyond, the Internet Bubble period. We have also had a conservative track record in forecasting the SaaS market, for which we have traditionally underestimated growth, and increased our forecast significantly each of the past several years. If you have a more aggressive view of IT Cloud Services adoption, the other end of the spectrum - a more aggressive forecast - could well be 1.5-2 times the spending level in the forecast above.
• Watch “Conditions On the Ground”: The ramp-up scenario for IT cloud services is very fluid - the forecast will be greatly impacted by: 1) major vendors’ degree of aggressiveness in developing and promoting cloud offerings, 2) the rate at which partner ecosystems morph to adapt to - and drive - the cloud model, and 3) macroeconomic factors - such as impact of the current global economic crisis.  In our view, while the economic crisis could negatively impact the growth of this market, it is more likely that it will accelerate the roll out and adoption of Cloud IT services, because of the model’s greater affordability (vs. traditional IT offerings), and IT’s critical role in supporting much-needed innovation and economic growth.
• IT Cloud Services Adoption Will Drive (but Shift) On-Premise Demand: It is important to note that while end-users certainly consider “on-premise” vs. “cloud services” as alternative (and competitive) options for specific solutions, the cloud services delivery model for those solutions will not, for the most part, subtract from on-premise IT demand. In fact, end user IT cloud services demand will actually drive demand for on-premise IT products and solutions - but it will shift that demand to cloud services providers. This makes it extremely important for suppliers of IT products and solutions to develop detailed understanding of the changing routes to market, including the role of cloud services providers, both as end-users and as a new and growing channel.
• Some Definitional Details:  Here are the submarkets we included in each of the five major IT segments in the forecast:
  • Business Applications:  includes Collaborative applications (such as Messaging, Conferencing and Team collaboration software), and Business applications (such as CRM, ERP, Financial, HCM, PLM and SCM).
  • Application Development & Deployment Software:  includes Application Development software, Application Lifecycle Management software, Enterprise Mashup & Portal software, Information Management & Data Integration software, and Middleware & Business Process Management software.
  • Systems Infrastructure Software: includes System and Network Management software, Security software, Storage Management software, and System software.
  • Storage: includes Disk Storage.
  • Servers: includes all classes of Servers.

[The following IDC analysts contributed to this IT Cloud Services analysis and forecast: Michelle Bailey, Darren Bibby, Ray Boggs, Jean Bozman, Brian Burke, Chris Christiansen, Laura DuBois, Matt Eastwood, Mike Fauscette, John Gantz, Frank Gens, Al Gillen, Tim Grieser, Steve Hendrick, Martin Hingley, Mark Levitt, Robert, Mahowald, Stephen Minton, Chris Morris, Henry Morris, Brad Nisbet, Melanie Posey, Dave Reinsel, Christina Richmond, Sandy Rogers, Jed Scaramella, Rona Shuchat, Will Stofega, David Tapper, Vernon Turner, Rick Villars, Janet Waxman, Melissa Webster.]

This post, part 3, identifies the most important attributes users want in their preferred IT cloud services providers.  

Winning in Cloud Services Means Addressing Cloud and Traditional IT Challenges

My number one takeaway from the chart below - which looks at users’ top-rated IT cloud services supplier attributes - is that successful suppliers will need to address both the biggest challenges of cloud services, and the biggest traditional IT user issues.

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The mesh of traditional and cloud issues - at the core of users’ selection of cloud services providers - is most obvious when looking at the top two rated attributes above.  

• The #1 attribute users want from cloud services providers - competitive pricing - is exactly the same as users cited as #1 in last March’s post on what users want from their IT suppliers overall.  
• The #2 requirement for cloud services providers - offering performance-level assurances - relates directly to the #2 and #3 challenges (performance and availability) users cited about cloud services in our recent post on cloud services benefits and challenges.  

The mesh of traditional and cloud IT issues continues as we move down the list of preferred supplier attributes.  

• The #3 attribute - understanding the customer’s business and industry - was #3 among users’ requirements for IT suppliers in general in last March’s survey.  
• The #4 attribute - allowing cloud offerings to migrate back onto customer premises if needed -  takes us back, once again, to users’ cloud concerns: worries about migrating cloud services back on premise was tied for #6 among cloud services challenges.

Cautionary Notes for Cloud Services and Traditional IT Players

This data suggests that there is a lot of opportunity for IT cloud services suppliers who display the attributes that cloud services customers are looking for - the attributes that directly address their customers’ greatest challenges and concerns.  But there are cautionary messages as well.  

It is clear that business leaders are not looking at IT cloud services in isolation, but as a part of their overall IT strategy.  Amazon, Google, Saleforce.com, and others, are going to have to get very good at addressing the broader IT issues.This certainly is a cautionary note for cloud services pure-play and start-up firms.  This finding suggests that Amazon, Google, Saleforce.com, and others, are going to have to get very good at addressing the broader IT issues: ones that go well beyond the cloud, but - as seen above - are also very relevant to customers’ cloud services choices.  In some recent briefings with some of these firms, I’ve noted that there is still some significant learning going on around these traditional user requirements.

There are also some important cautionary notes in these findings for traditional suppliers:

• First, traditional IT suppliers are the new kids on the block in the cloud services world: if they don’t fully embrace the new model - for example, When it comes to cloud services vendor selection, customers are less biased toward their large, established incumbent suppliers.if they hold back on core requirements (like very competitive pricing) - in order to protect their traditional offerings, their leadership in traditional IT will fail to carry over into the cloud world.  
• Second, many traditional IT suppliers are still just coming up to speed in understanding customers’ business/industry environments - they certainly don’t have an insurmountale lead over cloud services specialist in that area.  They need to “keep the pedal to the metal”, transforming their organizations (and offerings) to ones that are less “IT-centric”, and more directly relevant to customers’ business issues.
• Third - and this may surprise many people - the chart above suggests that, when it comes to cloud services vendor selection, customers are less biased toward their large, established incumbent suppliers, and are more interested in whether the supplier is a “future-oriented innovator”.  This is a direct challenge to traditional industry leaders who are moving too slowly into the cloud services world.  It is a shot in the arm for cloud services newcomers - provided they are able to offer credible responses to the traditional IT issues discussed above.