10 Cloud Predictions For 2012

2012 Is The Year The Cloud Becomes Mature

Based on the very high interest in this blog and its cloud predictions we are planning to host a Forrester Teleconference entiteled "2012 — The Year The Cloud Matures: A Deeper Dive Into 10 Cloud Predictions For The Upcoming Year" on February 28th, 1-2pm EST/6-7pm UK time, where we will highlight and go through the 10 below predictions one by one. For more details and registration please follow the link to the: teleconference web page.

1. Multicloud becomes the norm

As companies quickly adopt a variety of cloud resources, they’ll increasingly have to address working with several different cloud solutions, often from different providers. By the end of 2012, cloud customers will already be using more than 10 different cloud apps on average. Cloud orchestration will become a big topic and an opportunity for service providers.

2. The Wild West of cloud procurement is over

While 2011 still witnessed different stakeholders within a company brokering (sometimes unsanctioned by IT) a lot of cloud deals, most companies will have established their formal cloud strategy by the end 2012, including the business models between IT and lines of business for their own, private cloud resources.

3. Cloud commoditization is creeping up the stack

Cloud infrastructure services are getting highly commoditized with increasing margin pressure year over year. All cloud vendors are trying to move up the value chain to deliver higher-value cloud services. In 2012, you will see more and more infrastructure-as-a-service (IaaS) vendors offer technology platform services, platform vendors offering software services, and applications vendors packaging business process services into their offerings.

4. Collaboration will emerge as a key business benefit for cloud computing

Cloud computing is still mainly driven be the idea of resource sharing, which delivers cost and standardization benefits. However, traditional cloud solutions do not leverage shared resources for collaborative processes between different cloud users. In 2012, we’ll see more collaborative cloud solutions emerging where business partners collaborate on information, business objects, or even end-to-end business processes in the cloud. Cloud collaboration will become a key business driver to move to cloud solutions.

5. We will see the next wave of SaaS solutions in PLM, BI, and SCM

Software-as-a-service (SaaS) today is mainly driven by customer relationship management (CRM), procurement, collaboration software, and human capital management (HCM). All other software segments still have significantly lower SaaS adoption rates. However, in 2012, interest will shift to SaaS solutions like product life-cycle management (PLM), business intelligence (BI), and supply chain management (SCM), all of which will break through a strong 25% of companies using these solutions in 2012.

6. The cloud market will grow beyond $60 billion

All cloud markets will continue to grow, and the total cloud market (including private, virtual private, and public cloud markets) will reach about $61 billion by the end of 2012. By far, the largest individual cloud market continues to be the public SaaS market, which will hit $33 billion by the end of 2012.

7. Private clouds will go beyond virtualization

A virtualized data center is not (yet) a private cloud. With an increasing understanding of cloud computing, companies will shift their focus from technical virtualization projects to focus on the change management aspects required for flexible business models between IT and the line of business.

8. The first cloud brokers will emerge

The cloud broker is a new business model managing the flexible sourcing of internal and external cloud resources on behalf of a company (see Forrester’s “Cloud Broker — A New Business Model Paradigm” report). While the CIO will initially take the role, we will see the first real broker companies emerge in the market much faster than many people might expect.

9. Large enterprises will take the lead in cloud markets

Initially slower than small and medium-size businesses (SMBs), large enterprises have understood that the main benefits of cloud services — such as scalability, speed, flexibility, and remote user support — are as appealing to them as they are to SMBs. So, large enterprises spent 2011 mostly catching up, and by 2012, they will be leading in cloud adoption rates in every cloud segment compared with SMBs.

10. The lines between cloud and on-premises licensing models are blurring

While on-premises applications are typically licensed in perpetual license agreements and SaaS in subscription deals, these lines are blurring as customers demand more flexibility in their deals. In 2012, we will see all of it: capital expenditure (capex) and operational expenditure (opex) licensing models, upfront payments, financing, subscriptions, flat-rate- and dynamic-usage-based pricing, and outcome-based pricing for all the different deployment options — on-site and in the cloud.

Please leave a comment or contact me directly.

Sincerely,

Holger

Comments

Cloud

The comments are great. How would a small business use this. Who do we contact or find good companies to provide this on a budget.

Cloud

Hi Wayne,
thanks for your interest and comment. I'm not sure which aspect of cloud computing you are specifically interested in. Please contact me at hkisker@forrester.com with some more details and I'll be happy to point you in the right direction for a market overview of appropriate cloud service providers.
Best regards, Holger

hello sir. u r prediction is

hello sir.
u r prediction is very informative, but can we have prediction for-2012 in INDIAN perspective..

please also mail u r comments to my mail id..

thank u..

Re: Cloud predictions for India

Dear Vinay Kumar,
with my colleague Michael Barnes I have recently published a report "Navigating The Asia Pacific Software-As-A-Service Market". Our research clearly showed that the demand for SaaS in the Indian market is growing stronger as compared to most other APAC countries. I have forwarded your interest to our Forrester team in India and a local colleague will contact you soon for further details and discussion.
Kind regards, Holger

10 apps per user

Holger hi,

About your first point: "By the end of 2012, cloud customers will already be using more than 10 different cloud apps on average." do you have an estimate of how many of the 10 apps will be SaaS and how many "private" cloud apps (on average)?

Thanks
Daniel

P.S.: Very interesting blog.

Re: 10 apps per user

Hi Daniel,
I have not been counting private cloud apps in this prediction (which would go into the hundreds for larger companies) but the average of 10 cloud applications only includes real public cloud SaaS applications. We have currently a survey in the market which will give us concrete information by end of this year on this question. I will follow up on the topic with concrete data here in the blog comments soon to (hopefully) support this prediction with data.
Best regards, Holger

$ value of subscriptions

Holger thanks,

Do you happen to have also an estimation of how much enterprise users are going to spend for those 10 (average) SaaS applications in aggregate?

Looking forward for the data on usage.

Best regards
Daniel

Re: $ value of subscriptions

as mentioned in the blog I estimate the aggregated, global SaaS application market to reach $33 billion in 2012. We have not broken this number down to average SaaS spending per enterprise, if this is what you are looking for. Since this will vary a lot by company size, application etc I'm not sure if such a number would make much sense.
Kind regards, Holger

$ value of subscriptions

Thanks but actually I was referring to $ value per each subscriber, not the overall expense for the company they work for, which I agree doesn't make much sense due to the differences you point at.

I am trying to make some sense into the expected average expense per single user, assuming they are using 10 apps. I find it difficult to calculate since there are apps going for a very low price (e.g. $5/month), on the other hand professional apps for Sales/Marketing, HR, Project Managers, etc. can be in the range of $100/month and more.

Another way of calculating it would be to divide $33B by the total number of users (again people, not companies).

Thanks
Daniel

Re: $ value of subscriptions

As already mentioned by you there are SaaS apps for few $/user/months and others for several hundreds. A sales person wíll need different applications as compared to a c-level manager. I actually think that an average spending per user does not make much more sense than an average spending per company - it depends on too many parameters. In any case we have not calculated such number or have a fugure for total SaaS users to get to such number at this point in time.
Best regards, Holger

New IT Identitity

There are two statements in your prediction which I think are closely linked: “New and flexible business models between IT and lines of business” and “most companies will have established their formal cloud strategy by the end 2012”. I think the one requires the other or in other words the execution of a corporate cloud strategy requires the new co-operation of IT and line of business to be in place. Would you agree the new role of IT is more focused on optimization of corporate practices, corporate standards and business processes and their “translation” to the applied business applications? After in-house application development moved to standard applications quite a while ago and data center operations now vanishes to asp or to the cloud what is now the core responsibility of a "cloud ready" IT?

Re: New IT Identitity

Hi Oswald,
I agree with your statement about the close link between a formal cloud strategy and the business models between IT and LoBs. However, since the new business models require significant change management (including to turn IT into a profit center) I expect enterprises will first have a formal strategy to e.g. manage the procurement process, roles etc for external cloud solutions but the implementation of the new business models will take somewhat longer until completed. Best case it should go hand in hand, yes.
IT's new responsibility will be the flexible sourcing of business needs with internal and external IT resources. The future will be hybrid models of own and external cloud resources so there will be plenty of work for future IT - actually cloud moves IT upwards in terms of business value for the enterprise, it's a big opportunity for CIOs and their teams.
Best, Holger

Cloud Commoditization creeping up the stack

What is your point of view on service providers developing value-added services to commoditized IaaS to improve margin and increase account stickiness? I am referring to managed services for guaranteed SLAs, infrastructure performance, visibility of the service etc. When will users be willing to pay for these services?

Re: Cloud Commoditization creeping up the stack

Hi Belinda,
users are already paying for these value-added services and they are an important differentiator in such a commoditizing market. However, all service providers I'm talking to focus their portfolios more on the higher value cloud layers of platforms, applications and business processes.
Kind regards, Holger

I think you'll find VAR and

I think you'll find VAR and value-add will be the key going forward, the idea of virtualization/standardization driving us towards commodity pricing is a reality and it means that we will have to develop ways to entice a customer to stay with us instead of going with another provider. If prices are equal, why do your customers choose you?

Re: 10 Cloud Predictions For 2012

Great insights! Those predictions look promising. Cloud computing is continually making progress, no wonder a lot of business are into using cloud, if your predictions are correct , the birth of cloud brokers will be accepted by the consumer wholeheartedly. :)

Very good predictions! I

Very good predictions! I think the lines are blurring also with respect to IaaS, PaaS and SaaS. When you predict service providers moving up the chain, they don't necessary need to move from IaaS to PaaS and SaaS. They can move from IaaS to "IaaS plus".
The market is growing fast, and it is very difficult under such grow to move to completely new areas.
For example, we at Zadara Storage, use IaaS components to create an enterprise storage platform for the cloud users. The end result is a better storage for the cloud servers. We run in top of IaaS providers like Amazon and Rackspace, serving their customers that need enterprise class storage. This is a "IaaS plus" service or in a new word "StaaS" (Storage as a Service).

Re: Very good predictions

Thanks for your comment. I fully agree with you that adding higher value services etc does not necessarily mean moving from IaaS to PaaS and SaaS. Your example of better storage in the cloud is a good one. However, I would be careful adding new terms and abbriviations to the cloud taxonomy as there is still confusion in the market and some vendors are "cloud washing" their traditional offerings by simply using new cloud-like names. In case you really want to use e.g. 'StaaS' I'd like to suggest to always add a short explanation like 'an enhanced IaaS offering for simplified server storage in the cloud' since not everyone will be familiar with the exploding list of innovative new abbriviations aside IaaS, PaaS, SaaS and BPaaS.
Best regards, Holger

Completely agree! The last

Completely agree! The last thing we need are more x-aaS!!!

The idea rings true however, we are driving towards a Cloud value chain, and when all is said and done your typical -aaS company will have their hands in quite a few pots.

CLOUD COMPUTING

Developers have to create applications to a cloud platform focused public that these applications will not run automatically in the other clouds.

SaaS Adoption in Australia, compared to North America

I enjoyed reading this and wondered if you have previously discussed SaaS adoption rates/trends in Australia, as well as comparing them to North America and Europe? Do we see different climate/issues in Australia that we don't see in other markets?