Cloud Computing, SaaS Boom Fueled By Recession

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Typically, when the economy goes bust, tech sales suffer.

Not so with cloud computing. Quite the contrary, actually. When the economy took a tumble, cloud sales rose -- and will continue to rise -- creating new opportunities for solution providers as their clients look to cut costs, reduce their IT footprints, eliminate unnecessary resources and work more lean and mean.

But the cloud's success, despite the global financial shortfall, is multilayered. According to Eric Berridge, co-founder of New York-based solution provider Bluewolf, a confluence of cost savings, quicker time to value and tighter IT budgets were all catalysts for the mass cloud adoption.

"You don't have to buy all of that infrastructure," Berridge said, adding that with an economic downturn CFOs can't stomach shelling out the dough for bulky and pricey hardware and software and, even if they can, money is so tight that managing it all just creates more headaches.

"With cloud, it's pretty easy to go to the CFO and say, 'I can still do all of the same things with no additional infrastructure and no new hires,'" Berridge said.

In Bluewolf's case, revenue was flat from 2008 to 2009, when revenue dipped for companies that didn't embrace the cloud. Berridge said some of Bluewolf's contemporaries saw revenue drop 15 percent to 30 percent in that same stretch of time. And now that the economy is showing signs of stabilization, or perhaps recovery, Berridge predicts a 30 percent to 40 percent revenue increase as clients find their feet and embrace the cloud.

Gartner also anticipates a massive cloud computing explosion, fueled mainly by economic turmoil. In a report released this week, Gartner said global cloud computing services revenue will rise from $58.6 billion in 2009 to $68.3 billion this year. By 2014, Gartner expects the global cloud services revenue to reach nearly $150 billion. Meanwhile, Gartner estimates that over the course of the next five years enterprises will spend $112 billion cumulatively on software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS), combined. That spending is in direct relation to increased economic pressures.

"In part, this can be explained by macroeconomic factors," Ben Pring, Gartner research vice president, said in a statement. "The financial turbulence of the last 18 months has meant every organization has been scrutinizing every expenditure. An IT solution that can deliver functionality less expensively and with more agility (remembering that time is money) is hard to ignore against this backdrop."

Next: SaaS Seeing Increased Adoption

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