Tipping Point Reached For Cloud Computing?

Has the tipping point come for software to be widely adopted as an online service?William S.
Written by Tom Steinert-Threlkeld, Contributor

Has the tipping point come for software to be widely adopted as an online service?

William S. McNee, president and CEO of Saugatuck Technology in Westport, CT, believes it has.

He says that mainstream adoption within small and medium-sized businesses is “accelerating” – and that 20 percent of enterprise IT workloads will be run “in the cloud” by 2013.

This will lower operating costs, reduce IT staffs and cut down on carbon footprints, he says.

Speaking recently at a forum sponsored by a software-as-a-service purveyor, NetSuite, held at the New York Stock Exchange, McNee said, “On-premise solutions are going to drop off the cliff.”

Basing his comments on a survey by Saugatuck of 150 chief financial officers with budget authority, he said the movement toward what increasingly is being called “cloud computing” will put not just payroll and other administrative processes on remote servers and software, but “mission-critical computing,” as well.

The chart atop this story shows, in red, the applications that Saugatuck expects to see the greatest acceleration in adoption this year and next. Whereas only 18.3 percent of companies said they would use some form of software as a service in their finance and accounting operations by the end of 2008, twice as many, or 39.3%, expect to by the end of 2010. Also rising rapidly: Compliance and risk management, procurement, and business intelligence applications.

Driving the movement is an expectation that new services can be unrolled faster, improvements made behind the scene without staff, ease of integrating services not just by application but across geographies and countries, and lower total costs, compared to in-house applications. That will help the CFOs fill in an estimated two-thirds of the gaps they face in meeting their ROI goals over this span of time, he said.

The survey was taken in summer 2008, before the Fall brought a credit crisis and global economic slowdown. So the gaps could be bigger, now.

Nonetheless, by the end of 2010, in fact, he expects 70% of companies will have deployed at least one application in the service “cloud.”

Putting computing into the cloud makes it easier to update and integrate services. McNee asserted that more than 70 percent of SAP’s installations of its R/3 set of business applications predate 1998.

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