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January 1, 2010 • Vol.32 Issue 1
Page(s) 12 in print issue

Cloud Computing & SaaS In 2010
What To Expect After The Uncertainty & Hype Fade

Key Points

• Cloud computing and SaaS will see significant growth, yet most enterprises will still only use the applications and services for noncritical and low-security needs.

• There will be significantly more applications from which to choose and more competition among service providers in 2010.

• Mobile applications will emerge as developers work around operating system compatibility issues.

Cloud computing and SaaS (software as a service) were big in 2009 and will only get bigger this year as network managers cut costs and boost productivity by running applications that otherwise would require more manpower, hardware, and software resources in-house. Although it’s unlikely that data centers and IT departments are going away anytime soon, admins should increasingly be able to cut through the vendor hype, observe their colleagues’ success stories, and learn for themselves through pilot programs and low-risk projects about how cloud computing and SaaS can help them in 2010.

According to research firm Gartner, cloud computing services revenue should total $56.3 billion for 2009, representing a 21.3% increase compared to 2008. The market is expected to explode to $150.1 billion in 2013.

Gartner expects SaaS revenue to total $7.5 billion in 2009, which represents a 17.7% increase over 2008 revenue of $6.4 billion. SaaS demand is expected to continue to surge to a total of more than $14 billion by 2013.

As small to medium-sized enterprise networks and data center managers step up the pace at which they rely on third-party cloud computing and SaaS applications, the landscape should evolve in parallel so that applications will become more mature and enterprise-ready next year. Here is a look at how you can better take advantage of the offerings and what to expect in 2010.

Don’t Expect A Cloud Burst

Despite cloud computing’s and SaaS’ explosive growth, the vast majority of small to medium-sized enterprises are still not expected to outsource most or all of their IT needs anytime in the near future to the cloud. Instead, admins should look to what cloud computing and SaaS opportunities can offer in limited outsourcing opportunities and tread carefully in the beginning.

“Cloud is not a panacea, and it doesn’t replace the need for a data center in the majority of cases. Instead, cloud will be part of a hybrid data center/outsourcing approach for the foreseeable future, and organizations/IT departments have to decide what stays in-house and what should be sourced from outside,” says Clive Longbottom, service director for business process facilitation at Quocirca ( “Then, the integration of the two and where the integration takes place have to be covered. However, cloud and SaaS are pretty unstoppable now.”

It is the continued lack of reliability and security concerns that remain “a major hindrance to widespread adoption of public cloud services,” says Jamie Erbes, vice president and chief technology officer for HP Software & Solutions ( “We expect to see [network managers and admins] to continue to leverage SaaS offerings for non-mission-critical processes and departmental applications,” Erbes says.

Enterprises should begin to increase their investments in internal and private cloud implementations in the coming year. “Customers we’ve talked to see this solution as an avenue to meet near-term cost reduction goals while at the same time positioning them to transform to an internal service provider model,” Erbes says.

Application Evolutions In 2010

The good news is that admins can expect more viable applications and competent vendors in the space in 2010. “We expect to see an upswing in demand for software solutions that promote a more agile sourcing model and provide visibility into and manageability of internally and externally sourced services. And finally, we expect to see more competition in the cloud service marketplace,” Erbes says. “Traditional service providers, such as telcos and outsourcers, will move into the cloud service arena, and emerging players will expand their portfolio of offerings while at the same time new entrants move onto the scene, ranging from startups to established [providers].”

Technologies such as converged infrastructure, virtualization technologies, and the automation software that drives them will become increasingly available in 2010, Erbes says, while service management will come to the forefront as IT shops work to institutionalize an internal service provider model. “Software solutions that provide automation for governance and multi-supplier management processes will be winners in this market,” Erbes says.

Finally, cloud computing and SaaS applications will offer increased “peripheral functionality,” offering new opportunities next year, Longbottom says. “All of this allows data center managers to look at halting the growth of the data center, keeping things under control, and even in shrinking the data center through virtualization, so [enterprises are] saving not only on power and cooling but also on real estate costs and management costs, as well,” Longbottom says.

Mobile Apps That Work

The need for mobile cloud computing and SaaS applications from a user’s perspective is straightforward, says Mark Beccue, an analyst for ABI Research. “There are enough people out there who are saying ‘we are mobile, and we have these devices, and we need [mobile cloud computing and SaaS applications].’” Beccue says.

Next year, mobile cloud and SaaS applications should become available that allow users to upload and share data and collaborate in real time on a shared file. “The idea is also to put data on a single spot on the cloud and then access it with mobile devices right now,” Beccue says.

The problem has been that developers have largely been unable to develop applications that will work across the different operating systems of mobile devices, whether for an iPhone, a BlackBerry, or other enterprise-class smartphones. “As a business case, it is difficult for companies to develop an application that covers all operating systems,” Beccue says.

However, developers are increasingly using a single Web standard for writing applications that can work on multiple operating systems. “If a phone has a capable enough browser, then it doesn’t matter what the OS is with a single Web standard,” Beccue says. “Interesting things are beginning to happen there.”

The other issue is coverage, the perennial problem associated with cell phones. “The biggest caveat is connectivity. You have to think through what happens when connectivity is lost,” Beccue says. “You have to know whether applications can run in the background, cache, then get back up when connectivity is up or [if you can] use applications where [connectivity] doesn’t matter much.”

Despite the market’s rapid growth, the application sector for cloud computing and SaaS offerings is still very new. “It is not going to bust, but we are in unproven ground. Things are going to evolve,” Beccue says. “But there are major gains to be had and probably cost-cutting opportunities.”

by Bruce Gain

Biggest Trend To Watch For: Increased Server Outsourcing

Data-processing overloads, bogged-down networks, and lack of manpower remain key drivers in enterprises’ reliance on the cloud and SaaS for applications. As a result, the biggest trend in 2010 will likely be an increasing shift to use leased servers on the cloud, says Rob Enderle, president and principal analyst for the Enderle Group. “[Enterprises will do this] in order to keep down capital expense while still dealing with increasing service requirements,” Enderle says.

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