IDC: Economic crisis to bolster cloud computing

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Spending on IT cloud services to reach US$42 billion by 2012, says research

By Elizabeth Montalbano | New York | Tuesday, 21 October, 2008

The current economic crisis in the US may have a silver lining for IT companies that invest in cloud computing, as it will contribute to significant growth in that sector over the next five years, according to research firm IDC.

Based on a survey of IT executives, CIOs and other business leaders, IDC said that it expects spending on IT cloud services to reach US$42 billion by 2012, a growth of threefold that will in part be bolstered by the current economic crisis that began in the US and is spreading around the world.

"The cloud model offers a much cheaper way for businesses to acquire and use IT — in an economic downturn, the appeal of that cost advantage will be greatly magnified," Frank Gens, senior vice president and chief analyst at IDC, said in a statement. "This advantage is especially important for small and medium businesses, a sector that will be a key target in any plan for recovery."

Aside from the economic crisis, three market forces are driving the overall shift to cloud computing and services, according to IDC. They are the search for growth and revenue in emerging geographic markets in Brazil, Russia, India and China, as well as the overall small and medium business sector.

Two other factors contributing to the growth spurt are the shortcomings of traditional approaches in helping these new markets increase IT revenue and competitive pressures from new players promoting the new cloud-based business and IT model, according to IDC.

IDC differentiates between cloud services and cloud computing, but is reporting sharp growth in both areas. The research firm defines cloud services as both business and consumer services that people use over the internet and cloud computing as an emerging IT development, deployment and delivery model that enables real-time delivery of products and services over the Internet.

Spending on cloud computing will capture 25% of IT spending growth in 2012 and nearly a third of growth in 2013, IDC predicts.

Moreover, by 2012 almost 10% of customer spending on IT will be on cloud offerings, including software as a service and cloud storage, Gens said in video about the report posted to the IDC website.

While the definition for cloud services does include what people typically think of as web-based services from Google, Amazon.com and eBay, among others, the segment also includes any web-based services that other companies will offer to make engagement with customers and partners easier, Gens said in the video.

"Cloud services will increasingly be a delivery model for many traditional companies in manufacturing, finance, health care, energy , media and other industries for companies that are looking to better serve their current customers as well as to find new customers, new growth and greater profitability," he said.

This in turn will naturally spur growth in cloud computing, since these services need highly scalable, affordable and flexible IT infrastructure to support them, Gens said. As companies rely more on delivering services to customers via the web, so the need for servers, storage, IP networking infrastructure, system-management software and the like also will grow, he said.