IDC: Prudence boosts utility model's popularity

Despite belt tightening efforts by user organizations, they must continue to invest on analytic and business intelligence tools for their future growth, says analyst.
Written by Victoria Ho, Contributor

The drive to have more cash in the bank is pushing the popularity of utility usage models. But companies must keep investing on analytic tools or miss out on future opportunities, according to an analyst.

Sandra Ng, group vice president, Asia-Pacific communications, peripherals and services research, IDC, said at an IDC conference Friday, the buzz surrounding cloud computing is a result of companies tightening their belts on big purchases, opting instead for leased usage models.

As a result, services companies are growing faster than hardware companies in the IT industry, with the trend expected to continue over the next 12 months, she added.

Ng highlighted several technologies that companies will look to to help cut cost. Of these were unified communications (UC), virtualization, green IT and cloud computing.

She said, however, companies would do well to invest in tools such as analytics to pave the way for future growth when the economy rebounds.

Companies should pay attention to tools for business intelligence (BI) and customer relationship management (CRM) to hedge against loss of market share during the current downturn, Ng said.

'Early stages' for cloud computing till 2012
Chris Morris, director, Asia-Pacific services, IDC, said enterprise interest in cloud computing centers around interoperability and how to integrate the cloud with on-premise infrastructure.

"Customers want to know about vendor lock-in in the cloud" and if there can be more "customization" in that space, he said.

Morris said these concerns will likely stay in the forefront till 2012, while cloud computing offerings mature. He added that "probably half of cloud vendors will cease to exist" by then, while the industry moves to whittle out those with less solid business plans.

By 2012, usage of cloud computing will be much higher among enterprises with software-as-a-service (SaaS) business applications leading the way. There will also be a "very large increase" in the use of cloud-based storage, followed by collaboration software, IT management and applications development and management, the analyst noted.

But spending on cloud services between 2008 and 2012 will be "modest", Morris added. Cloud revenue made up 4 percent of total enterprise spending in 2008, with this figure expected to grow to just 9 percent in 2012.

According to IDC estimates from October last year, worldwide IT cloud services spending will go from US$16.2 billion to US$42.3 billion in 2012, representing a compound annual growth rate (CAGR) of 27 percent--much faster than on-premise's growth of 5 percent within the timeframe--albeit from a much smaller base.

The next immediate opportunity for the cloud lies in "commodity" offerings such as business continuity storage and desktop productivity, said Morris.

"If [vendors] don't have a commoditization plan for [their cloud offerings] yet, they've missed the bus already," he said.

Morris said there is a further opportunity for companies to take their testing and development environments to the cloud, where there is demand for quick scalable compute power.

Replacing legacy systems with cloud infrastructure remains "the hardest" task, requiring higher implementation effort, with lower perceived value, he noted.

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