Businesses Want Cloud To Grow Business, Not Just Cut Costs: Study

As end users continue to adopt cloud-based technology over the next two years, they will be doing so to grow their business, not to cut costs, according to a new study by Microsoft and 451 Research

"To do more with less is yesterday news based on our findings. In the next two years, more than 50 percent of customers will [use cloud] to focus on growing their business. Only 26 percent see the benefit of cloud as a cost-saving opportunity," said Marco Limena, vice president of Microsoft's hosting and cloud service providers business. "Cloud is giving them the opportunity to grow business and realign the organization to new company strategies. The benefits of cloud are introducing new products and getting them to market faster and supporting them."

The survey was conducted among small, midsize and large businesses across a wide swath of industries, Limena said.

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"That is a dramatic shift into how they are leveraging cloud for business growth. They are looking to innovate to transform their business. That becomes more important in the next two years," Limena said.

Meanwhile, the total worldwide hosting and cloud market size will grow from 6.9 percent of all IT in 2010 to 20.6 percent by 2014, according to the study. Platform-as-a-service is growing at a 70-percent compounded annual growth rate over that period and Infrastructure-as-a-Service has a 69 percent CAGR, according to the study. Meanwhile, the more mature dedicated hosting and shared hosting models are growing at 8 percent and 9 percent CAGR, respectively.

Accordingly, 68 percent of customers said they plan to adopt a hybrid cloud model in the next two years, up from 49 percent today, according to the study.

"The key message is that the next phase is the hybrid model, with each customer defining their own strategy and own consumption," Limena said.

Drilling down, Microsoft found that the growth of the hybrid model comes at the expense of both the public-only and private-only models today, Limena said.

"The math is basically going 10 points both directions. People don't want to be locked into those configurations because the workload might need to move in a different direction with new requirements. They like the interoperability of public and private cloud," Limena said.

Today, enterprise applications, email and database applications are the three largest SaaS applications by use, according to the study, but several other application areas will drive more SaaS growth in the next two years including business support applications, analytics/business intelligence/data mining, e-commerce, unified communications and media streaming, according to the study.

These applications will be "cloud native" for many customers with implications for underlying infrastructure and data centers, according to the study.

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In addition, 451 Research found that 62 percent of businesses will look to use cloud-based versions of their current on-premise applications before looking at a new vendor, Limena said.

"Software is sticky. As we move to the cloud, people like to stick with brand and with products they used in the past. That's a great message for MS and our service provider partners who can leverage the strength they've built over many years," Limena said.

John Engates, CTO at Rackspace, said customers' interest in growing business was not surprising, though he said hosting and cloud technology can kill two birds with one stone.

"Moving resources to off-premise data centers could be cost-cutting measures to get out of [capital expenditures], but they're also growing and it allows you to be flexible in terms of where you deploy and how you deploy. As opposed to data center just in your back yard, it lets you go more places faster," Engates said.

He added that services opportunities around hosting and cloud create big opportunities for hosting providers and VARs offering hybrid solutions too.

"In a SaaS model, when you have custom applications, you can't just throw them over to a public cloud and hope it runs. You have to think about the architecture. That's what a hosting provider does," he said.

PUBLISH MAY 29, 2013