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Analysts: Cloud Computing Will Defy Recession

Michelle Maisto covers mobile devices, Android and Apple for eWEEK and is also a food writer.

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Two new research reports point out the strengths of hosted applications and systems despite the dire economy

Two separate analyst reports from Strategy Analytics and Forrester claim that so-called cloud computing will continue to grow in importance despite the econonic downturn.

A recent report from Strategy Analytics notes the growing importance of cloud computing — both as a real-time networking tool and as cost-saving, recession-response measure.

Cloud computing is a hosted information technology format in which software is provided as a service over the air and data is stored on remote servers; enterprise users need little more than a device and an Internet connection, which enables workers and even businesses to be entirely mobile. There’s no server room to be tied to.

Google Apps, Salesforce.com, Microsoft Office Live and Intuit QuickBase are all popular examples.

Cloud computing is still young and developing, however, and businesses and individuals are still figuring out how to cope when these systems, out of their hands, go down. On 24 Feb Google’s Gmail went down for three hours at the beginning of London’s workday, disrupting Goople Apps and barring millions from their e-mail.

Amazon’s Simple Storage Service crashed twice in 2008, each time for a few hours, and in mid-February, Nokia’s Ovi social-networking service crashed after a server overheated, wiping out three weeks’ of user updates.

Lack of control over their data, as well as security concerns, have been the main issues keeping many businesses from moving toward hosted solutions, studies show.

A 24 Feb study commissioned by consultancy Avanade revealed that “by a five-to-one ratio, executives report they trust existing internal systems over cloud-based systems, due to fear about security threats and loss of control of data and systems.”

And a “2009 Cloud Computing Trends Report” commissioned by Hosting.com similarly found that 64 percent of all respondents and 75 percent of larger companies named security as their top concern. Large and small businesses, however, turned to cloud computing for the same reasons: a reduction in costs, uptime, scalability and performance.

In these challenging economic times, the cost-savings that cloud-computing offers — users generally pay by the seat, and server costs are the worry of the host solution — may prove enough to push many companies past their security fears and toward adoption.

“The economy, yes. But the portability of information is the other thing,” says Philippe Winthrop, also with Strategy Analytics.

“Portability is the flipside of the security issue. People need to be mobile and have their data everywhere. For a lack of a better term, they’re willing to compromise on the security issue, and so we’re going to see ‘mobile’ cloud computing adoption grow.”

In another new report, Forrester Research has unearthed more evidence that cloud computing is rapidly gaining traction in new vertical business sectors.

The Cambridge, Mass.-based IT researcher said in a new report published on 13 March that providers are now finding success selling SAAS subscription applications in Web conferencing, collaboration, and ITSM (IT service management).

SAAS’s earliest sales successes — beginning in 2003 — were in CRM and HCM (human capital management) applications. Forrester also said that both of those applications continue to demonstrate high potential for growth in the enterprise.

Despite the current recessionary economy, SAAS users, vendors and industry analysts at the OpSource SAAS Summit in San Francisco on 12 March were cautious but optimistic. For example, OpSource CEO Treb Ryan told eWEEK that his startup company — which provides a complete Web operations suite for SAAS and Web companies — is anticipating breaking into profitability for the first time in 2009, based on its good sales prospects.

The Forrester study evaluates the top 14 SAAS application technologies based on growth and greatest potential for success.

This is the latest in Forrester’s TechRadar series — a research methodology that aims to predict the success of a set of related technologies over the next decade.

“SAAS applications have advanced beyond early market applications in human resources and CRM to become a game changer in the enterprise software market,” said Liz Herbert, senior analyst at Forrester Research, who coordinated the study.

“SAAS adoption continues to increase, and it is now relevant for a wide array of applications. This new research provides strategic direction to end users evaluating SAAS technologies and planning their next decade of investments.”

The SAAS TechRadar evaluation is based on interviews with industry experts, vendors building or implementing SAAS application technologies, and enterprise customers and users of various SAAS technologies.