Wednesday, 5 October 2011

Cloud? It will never take off

Key IT executives have this week been attending the IT research event hosted by Canalys in Barcelona and the Tweets have been interesting. One came from a nameless distribution man who picked up a point by Canalys that said only 5% of IT spend would be on Cloud this year so his comment was, "Focus on the 95%, I say."
You can't argue with facts, can you? And I'm sure Canalys know their stuff but perhaps their definition of Cloud spend differed to that of the Tweeter's own company. A quick survey within that company shows that they spend significant money hosting several portals throughout Europe on hosted SharePoint servers. Their entire ERP system, the most significant spend in their IT budget, is a hosted SAP server. Over 70% of the company's sales transactions are via a hosted web portal which links directly into the stock control system which is the same hosted ERP server and the application is served to users ia the Public Cloud. In fact, with the exception of corporate email and file storage, almost the entire backbone of that company's IT is a mixture of hosted Private and Public Cloud applications with corresponding infrastructure. Companies tend to ignore these simple facts but in that context, well over 50% of that company's IT spend is on Cloud based applications and services.
Where is the mismatch on reporting this as surely Canalys is not a stupid company? The reason is that much of the research is focused on the client end. After all, the lion share of users in most businesses use Microsoft Office based products and the vast majority of the emails and file storage associated with this is an on-premise solution. Most people consider Cloud adoption to be only really occurring when the client software is changed.
So in that context, Cloud IT spend will certainly be 5% or less.
That same person's company will be facing the falling PC market head on as major categories of PC product experience catastrophic collapses in sales. Meanwhile, tablet sales rise substantially, dominated by Apple. In this context, the face of client based computing is changing dramatically and significant spend on IT for business productivity is being made on devices that only work in the Cloud. The software consumed by these devices is not only cheaper but it is served by Cloud App Stores and the spend, more often than not, is coming from the pockets of employees.
It could argued that it is only a matter of time before Smartphones, tablet and App sales become part of the mainstream IT budget as these machines become more productive for business. The threat to companies like RIM is imminent while the obvious rise of Google and Apple back into corporate world is already gaining momentum. The reality is that research that puts IT spend on the Cloud at just 5% seems immediately flawed or we are not talking about the same thing.
Apple will introduce iCloud shortly along with iPhone 5 and there will no doubt be new iPads soon, while Google has bought Motorola. It is very clear that some companies have more of an insight on the future than others - or perhaps have the two most successful computing companies of the millennium to date gone stark raving mad?
While it makes good sense to understand that the market has not adopted Cloud for many mainstream productivity applications, the window of change is there for all to see. It might possibly be that only 5% of that IT budget will go on Cloud based applications this year but it is foolish to believe that the market transformation is not happening in front of our eyes and at a pace that no one could have predicted.
IT spend is changing. PC companies are squirming and suffering, some surrendering in the face of dwindling margins. Meanwhile, every Apple Mac, iPad or iPhone that is sold yields Apple a cool 33% gross margin. What is apparent is that some companies get it more than others and they seem to be making more money because of it.
The disturbing fact here is that by and large Apple and Google are client computing companies. The fact that they are growing faster than any other IT company tells us that if we believe the 95% figure of IT spend on non Cloud products then Google and Apple should be nowhere with poor outlooks.
That isn't the case. Facts and statistics can be used in all sorts of ways but you cannot argue with numbers. Last quarter Apple was sitting on more liquid cash than the US Treasury. It didn't accumulate this wealth by being an industry also-ran. Google is not just an advertising and search company.
Denial is a powerful tool in business but sometimes it stifles innovation. Already, it has been shown that Cloud is adopted more widely by faster growing companies led by younger executives. I guess they haven't stopped to read the Canslys research.
Just this month, I have blogged that my entire application suite is now Cloud based. As a small business, I have significantly decreased my costs and future-proofed my business. I have also made sure my IT spends are smoothed and not lumpy based around upgrade time. The Cloud is a compelling proposition for small businesses. I have also become a true mobile executive and it feels quite liberating!
So we can ignore it or lead it. Denying it will ensure companies miss the boat.

- Posted using BlogPress from my iPad

No comments: