Cloud Benefits Are Limited, Warns Analyst

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Don’t put your IT in the public cloud unless it is already outsourced, badly broken or new, says Canalys

The benefits of cloud computing are limited, and IT players should only use it in specific situations, according to analyst firm Canalys.

The vast majority of the IT markert is not using the cloud, and this will remain true for some time, said Steve Brazier, CEO of Canalys, opening the Canalys Channel Forum in Barcelona. Organisations should only use it if they are dealing directly with consumers, if they have already outsourced their IT, if they are working on new projects, or if their IT systems are so broken they might as well start from scratch.

Private cloud still beats public cloud

“Ninety-five percent of the IT industry is not in the cloud,” said Brazier, comparing the total of IT revenue for 2011 ($1.7 trillion) with the amount of business IT that is in the cloud ($81 billion). Even though cloud is growing rapidly, at around 25 percent a year, it will still only make up eight percent of the IT industry by 2015, he said.

Consumer cloud is a better opportunity, he said. It is currently on $47 billion, but consumers are “less worried about information security and privacy.”

Brazier predicted that Apple will rule the consumer cloud space. “Apple’s iCloud will be the biggest consumer cloud in twelve months,” he said, forecasting that a global launch of the iCloud would be the most prominent element in today’s iPhone announcement.

Indisde the IT industry, vendors should not be pushing the cloud at businesses unless it is appropriate, he said: “When customers talk about the cloud, you should say ‘Do you serve consumers?'”

The private cloud will continue to be bigger than the public cloud, said Brazier, predicting it will grow faster. Currently on $50 billion, private clouds for business will grow to $123 billion by 2015, while public cloud for businesses will grow from $31 billion to $74 billion in that time.

And anyone thinking of serving business customers by re-selling cloud services should think carefully: “I am sceptical of the ability of the channel to make money there.” There are intermediaries who would reduce the margin, he explained.

Cloud is only for some IT

Businesses should move IT to the cloud only if they face consumers, or if it is a service which is outsourced already, said Brazier, revealing that the biggest cloud provider for business at the moment is infact payroll outsourcer ADP.

If an application has been outsourced already, then the organisation has already overcome issues of regulation and security, he explained.

New applications can be launched on the cloud, if companies wish to do so – and a good example might be analytics, which is currently growing very fast.

However, shifting internal IT services wholesale into the cloud is not a good idea, he said: “It would be close to madness to take something that works inside the company and put it in the public cloud.” This adds the risk of unreliability, losing skills which the company owns, and other problems.

Microsoft’s attempt to put Office into the cloud is an example of this error, he said: “Microsoft has its strategy completely wrong”.  By promoting Office 365, the company is taking something that works on PCs and moving it into the cloud.

Of course if an IT function is actually broken, then moving to the cloud can be a good thing, he said.

Economic doom and gloom

Despite the economic gloom, Canalys reckons the top IT companies have grown by 18 percent so far this year, though Brazier admitted this was following a sharp decline before that.

He thinks there is a 60 percent chance the economy will weather the current storm, in which case companies should expect to grow ten percent next year. However, he reckoned there was a 25 percent chance the economy would fail, so companies should have a contingency plan: “Each of you spend a day running that alternative, planning what to do if your business declines by 15 percent. Put those plans in a drawer.”

There is also, he said, a 15 percent chance that Barack Obama, Angela Merkel and Hu Jintao would agree a plan and co-operate to generate new prosperity for all.

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