Spending on Cloud Computing Going Up, Up, Up

Ann All

Is there any doubt that interest in, and thus spending on, cloud computing is on a steep upward trajectory?


Not according to Gartner, which projects that spending on software-as-a-service will grow a healthy 22 percent in 2009, to reach $9.6 billion. That'd be pretty impressive any time, but is especially striking during a year in which Gartner and many of its fellow analysts expect IT spending levels to drop from the previous year. Then again, the recessionary climate has been (in the words of Garret Morse playing baseball player Chico Escuela on "Saturday Night Live"), very, very good to SaaS, with CIOs eager to turn some of their capital software costs into operational ones.


In addition to an emphasis on cutting capital costs, Gartner research director Sharon Mertz notes the increasing maturity of SaaS business and technology models, interest in using SaaS as part of broader cloud computing strategies, and fewer concerns about security, response times and other SaaS bugaboos.


A chart showing that content, communications and collaboration applications lead the way in SaaS spending is included in a ZDNet item about the report. (Just yesterday, I wrote about how collaboration appears to be usurping CRM as the cloud's "killer app.") CRM is in second place, followed by ERP, supply chain management and other enterprise applications.


Gartner foresees the biggest growth in cloud office suites, with spending growing from $136 million last year to $512 million in 2009. So, will this be a breakthrough year for Google Apps? Maybe. As I wrote last month, Google recently introduced some improvements that should make Google Apps an easier sell in some companies.


SaaS is best suited to apps that won't require much customization. As I wrote in a recent story, more complex apps can still be deployed in the cloud, but may be better suited to middleware-as-a-service or platform-as-a-service (PaaS) layers. Examples of middleware-as-a-service include cloud storage or databases, while the best-known examples of platform-as-a-service are Amazon's Elastic Compute Cloud (EC2) and Salesforce.com's Force.com, Forrester Research analyst James Staten told me. As he and the other folks I interviewed for the story explained, the higher up the "cloud stack" a company goes, the less control it maintains over its applications. So PaaS offers the greatest amount of control and SaaS the least.


My money's on most companies settling on a hybrid SaaS/on-premise software approach, which offers the ability to customize apps in instances in which customization lends a strategic benefit while opting for a less costly and complicated straight SaaS model elsewhere. (Since I wrote that back in September, I've decided other layers of the cloud stack may be included as well.) Sounds like a possible management nightmare, doesn't it? Which is why there's a growing number of tools to help companies manage cloud environments, as IT Business Edge blogger Art Cole pointed out last month.

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