IDC Finds Cloud Computing Entering Period of Accelerating Adoption and Poised to Capture IT Spending Growth Over the Next Five Years

FRAMINGHAM, MA – October 20, 2008 – Cloud computing is reshaping the IT marketplace, creating new opportunities for suppliers and catalyzing changes in traditional IT offerings. Over the next five years, IDC expects spending on IT cloud services to grow almost threefold, reaching $42 billion by 2012 and accounting for 9% of revenues in five key market segments. More importantly, spending on cloud computing will accelerate throughout the forecast period, capturing 25% of IT spending growth in 2012 and nearly a third of growth the following year.

"A recent IDC survey of IT executives, CIOs, and their line of business (LOB) colleagues shows that cloud services are 'crossing the chasm' and entering a period of widespread adoption," said Frank Gens, senior vice president and chief analyst at IDC. "Moreover, IDC expects the cloud adoption trend to be amplified by the current financial crisis. The cloud model offers a much cheaper way for businesses to acquire and use IT – in an economic downturn, the appeal of that cost advantage will be greatly magnified. This advantage is especially important for small and medium businesses, a sector that will be key target in any plan for recovery."

To determine how big the cloud computing opportunity might be, and what it will take to capture that opportunity, a broad group of IDC analysts collaborated on the development of a formal point of view on just what cloud computing is.

When people talk about cloud computing, they are usually referring to the online delivery and consumption models for business and consumer services. In most cases, however, the "computing" lies behind a more recognizable service, like banking or shopping or online storage. Accordingly, IDC believes it is important to distinguish between cloud services and the cloud computing environment that enables these services.

* Cloud Services are the consumer and business products, services, and solutions that are delivered and consumed in real time over the Internet. (IDC identifies eight key attributes that more clearly define the new generation of commercial cloud services.)

* Cloud Computing is an emerging IT development, deployment, and delivery model, enabling real-time delivery of products, services, and solutions over the Internet.

The attributes of cloud services make the consumption of goods and services easier and cheaper – and often better – than through traditional delivery modes. These attributes also lower costs, simplify and accelerate access, enable fine-tuned provisioning, greatly increase the number and variety of available services, and improve the potential to integrate these services.

As the foundation for cloud services, cloud computing consists of a growing list of technologies and IT offerings that enable cloud services, including infrastructure systems (servers, storage, networks), application software, system and application management software, IP networks, and pricing agreements.

The shift toward cloud computing is being driven by three market forces: the search for growth (and revenues) in important new segments, including emerging markets like Brazil, Russia, India and China (BRIC) as well as the small and medium business (SMB) sector; the shortcomings of traditional approaches in capturing the growth in these increasingly important markets; and competitive pressures from new players with little to lose and everything to gain from pushing the new model.

IDC believes there are two principal opportunities for IT suppliers from the growth of cloud services. One area of opportunity for the IT supplier is to consider delivering its own IT products or services to customers via the cloud model. This means considering whether to get into the software-as-a-service (SaaS) business, the storage cloud business, the server cloud business, etc. The other area of opportunity for IT suppliers to consider is how its current and future offerings can support its customers’ development, deployment, and delivery of a wide variety of business and consumer cloud services. In other words, providing the tools for others to get into the cloud services business.

To succeed, cloud services providers need to address a mixture of traditional and cloud concerns. According to survey respondents, the two most important things a cloud services provider can offer are competitive pricing and performance level assurances. These are followed by the ability to demonstrate an understanding of the customer's industry and the ability to move cloud services back on-premises if necessary.

More information about IDC's cloud services research can be found online at www.idc.com/research/cloudcomputing. Current postings include IDC's definitions of cloud services and cloud computing, results of the cloud computing survey, and the IT cloud services forecast.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 44 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

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