Economy Creates the Perfect Storm for Cloud Services

What Can the Industry Do to Keep Customers Rolling In?

By Paula Bernier (News - Alert)

The faltering economy and advances in technology created a perfect storm that led IT managers to seek new and better ways of doing things, propelling forward the adoption of cloud services.

It's still early days for the cloud, Ellen Daley, vice president and principal analyst at Forrester Research (News - Alert), says; however, even now that the worst of the economic tsunami has passed (or so most economists tell us) adoption of the as-a-service model continues.

Nonetheless, there are some key barriers to widespread adoption of cloud services.

But a variety of communications companies are doing their best to educate the market about cloud computing, and to provide answers and solutions to business customers' concerns about service based on it. In many cases that involves bringing together ecosystems of equipment suppliers, network operators and software specialists.

For example, ADVA (News - Alert) Optical Networking, IBM and Level 3 have joined forces to launch a pilot through which they're providing customers in New York with secure wavelength services to deliver high-bandwidth access between their sites and IBM (News - Alert) cloud data centers.

"It's directed at three different media companies that obviously are running out of space," says Todd Bundy, director of global alliances at ADVA Optical Networking (News - Alert). "What they are doing is connecting into the IBM cloud data center. And it saves them a ton of money because rather than expanding their existing data center, which can be very expensive, they just get on a wavelength service, which is totally secure and it gives them all the bandwidth they would ever need, to take them from their data center into IBM's cloud data center."

Bundy of ADVA Optical Networking adds that to deliver a successful end-to-end cloud service offering, you need a strong partner like IBM, which has the sales force and expertise it takes to put together and bring to market a reliable and secure solution.

Cisco, Forrester Research and Verizon Business (News - Alert) also recently came together on cloud computing. In this case, it was to stage a Webinar about the growth in and benefits of cloud computing.

Forrester's Daley, one of the speakers at the online event, says that in addition to the economy, the faster pace of technological change, the introduction of more complex technologies, and new regulatory requirements are motivating IT staffs to seek more support for their organizations. And, she adds, given enterprises and small and medium businesses are in large part educated about what's available in terms of communications solutions, and the rise of new technologies like virtualization are bringing down costs of such options, the market for managed services and cloud computing are being moved further forward.

"There really is a so-called crisis of complexity," adds Michael Haley, distinguished engineer for IBM CHQ –EI Cloud Infrastructure.

Haley continues that cloud services can help businesses address that while improving their IT utilization by 30 to 50 percent. "So these


customers are already experiencing significant improvements, and they're doing so beyond experimental elements and actually starting to weave this into part of their business."

According to Forrester, although technology spending by global business and government customers experienced a 9 percent year-over-year downturn in 2009, the tech sector is expected to be a bright spot in the economic recovery going forward. And one of the biggest opportunities on that front is linked to data center services, which Daley says includes software as a service, infrastructure as a service and CDN offerings.

"We're about to enter another era of sustained tech investment and growth," she says, calling the next phase the "smart" wave of growth.

The research firm believes global managed services growth will outpace technology growth in 2010 by more than double. And it is forecasting that the global managed services opportunity will be $217 billion by 2014.

Although cloud services are often associated with Amazon and Google (News - Alert), which were early to market with their offerings on this front, delivering a solution that includes not only the applications, but also a network that can support the necessary security and performance for those applications, is key, according to Cisco (News - Alert), Forrester and Verizon Business.

"Network assets are going to be important in this game," says Daley. "It's not going to be an over-the-top game…. And telcos and service providers have a good story there."

John "JT" Tomljanovic, director of IT solutions global product management for Verizon Business, believes that within two to 10 years everything customers buy is going to be purchased as a service.

"So I don't think people are going to be buying data centers, they're not going to be buying servers, they're going to be coming to companies like Verizon" to deliver it all, he says.

Joe Crawford, executive director of IT solutions product management at Verizon Business, adds that the fact that a service provider can turn a CPU up or down is nothing special and probably never will be. What's important, he says, is what rides on top of that.

He says solutions in the as-a-service space require hardware, software, networks and data centers. Crawford adds while Verizon Business has many of the pieces to put together those solutions, it will also call on its partnerships with software vendors when it makes sense.

Indeed, Verizon Business just last month announced that SAP (News - Alert) AG has certified the company's cloud-based on-demand Computing as a Service platform for the delivery of SAP business applications. Verizon Business is the first global provider to receive SAP certification of its cloud services.

Crawford adds that Verizon Business expects to announce a variety of certifications along these lines in the near future. He also notes that Verizon Business can make such cloud services look like just another node on a company's private network. "We're really seeing that take off," he says.

And the buyers are not just IT managers, he adds. Increasingly, those who purchase cloud-based services are non-technical, line-of-business buyers, according to both Crawford and Forrester's Daley. Crawford adds that he recently spoke to a CTO who was so concerned about that trend that he is moving to put some standardization around his company's purchasing practices on that front.

A wide variety of business verticals have adopted as-a-service offerings, adds Daley, but these services tend to be the best match for applications involving bursty workloads. That would include retail applications at holiday times or health care applications involving the transmission of x-rays as just two examples, she says.

A merger or acquisition sometimes also moves an organization to a pay-as-you-go model, says Crawford of Verizon Business, which last month unveiled a cloud storage service. (Forrester reports that storage capacity requirements are growing 20 percent to 40 percent annually.)

Crawford continues that while the applications moving to the cloud to date have in large part been batch-based, in the future we'll see more transactional product environments being outsourced. An example of that would be a health care application through which a medical organization would access patient records in a secure and timely manner.

When that happens, Crawford says, the requirement for complete, end-to-end cloud services with SLAs will only increase.

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