Five Predictions for Managed Cloud Services in 2012

The proof-positive business impact from managed cloud services deployment, including the numerous associated productivity benefits and anticipated cost-savings, have pushed cloud computing well into the mainstream during 2011.

As we move into 2012, International Data Corporation (IDC) predicts that this evolution will continue as more users test the growing capabilities of the public cloud services that are already available.

However, by 2015, IDC envisions a very different scenario -- one where cloud services will become commonplace, thereby forcing significant changes in the ongoing adoption of progressive business technology practices throughout legacy IT organizations.

"In the next 24 months, the 'cloud' as a marketing label will cease to exist, as the success of cloud services will mean that it will permeate the sourcing strategies of the CIO and business unit manager alike," says Chris Morris, Lead Analyst for Cloud Services at IDC Asia/Pacific.

He adds, "The use of externally sourced business and IT services from the cloud will form the basis of what we see as the Outsourcing 3.0 period, and will provide an extensive portfolio of services from which innovative solutions can be constructed."

How Cloud Drives the Next Wave of Outsourcing

With Outsourcing 3.0, the cloud will metamorphose into a universal service catalog of individual cloud services. This will begin to replace both traditional information technology outsourcing (ITO) and business process outsourcing (BPO) engagements as well as on-premises infrastructure.

IDC believes that in an Outsourcing 3.0 scenario, the sourcing of business and IT services from multiple external suppliers will result in a major challenge for the enterprise CIO. They will become a service broker and aggregator, involved in sourcing, integrating and managing the services -- on behalf of their business units.

Drawing from the latest research and internal brainstorming sessions amongst IDC's regional and country analysts, the following are five cloud predictions for 2012.

These key points represent major trends with either the most significant financial impact or long-term market impact across the Asia-Pacific region, according to the IDC assessment.

1. Less than Half of End-Users across APEJ will complete their Private Cloud Projects by 2014
2. Making 2 + 2 = 1: Cloud Service Orchestration Services Lead the Drive to Outsourcing 3.0
3. Infrastructure as a Service (IaaS) will become Verticalized by 2013
4. By the end of 2012, 90% of Telecom Service Providers (SPs) in the APEJ region will have brought a broad portfolio of Cloud Services to market; but, by end of 2013, their Portfolios will become Specialized as they redefine their preferred role in the Cloud Ecosystem and target specific markets
5. Cloud SP (CSPs) strategies based on Aggregation and Resale of IT and business services will Fail to meet Profitability Goals by 2013 unless they can efficiently and effectively Manage, Support and Bill Services from Multiple Service Providers

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Cloud Services are Instrumental to IT Transformation

According to the latest market study by International Data Corporation (IDC), cloud computing will continue to reshape the business technology landscape over the next five years -- as spending on public cloud services expands at a CAGR of 27.6 percent, from $21.5 billion in 2010 to $72.9 billion in 2015.

That said, apparently the trend and resulting impact of cloud services will extend well beyond information technology (IT) spending. Managed cloud services are a critical component in a much larger transformation that IDC expects will be instrumental in driving IT industry growth for the next 25 years.

"Cloud services are interconnected with and accelerated by other disruptive technologies, including mobile devices, wireless networks, big data analytics, and social networking," said Frank Gens, senior vice president and chief analyst at IDC.

This collective group of technologies are merging into the industry's third major platform for long-term growth. Similar to the mainframe and PC eras, managed cloud services promises to radically expand the applications of IT infrastructure, resulting in a variety of unified service delivery solutions.

As a critical component to the third platform, cloud services represent a strategic growth area for traditional managed IT services and broadband service providers.

A Pathway Through the Disruptive Transformation

With spending for public IT cloud services growing at more than four times the rate of the worldwide IT market as whole, IDC expects one of every seven dollars spent on packaged software, servers, and storage offerings in 2015 will be related to the public cloud model.

Moreover, the eventual winners of the ongoing competition within the managed cloud service delivery marketplace will likely be the new business productivity trend leaders.

Highlights from IDC's latest market study include:

• In 2015, public cloud services will account for 46 percent of net new growth in overall IT spending in five key product categories -- applications, application development and deployment, systems infrastructure software, basic storage, and servers.
• Software-oriented cloud services (SaaS) will account for roughly three quarters of all spending on public cloud IT services throughout the forecast. This includes all three software-oriented cloud categories, not just applications. Spending on hardware-oriented cloud services (servers and storage) will be largely driven by SaaS providers building out their infrastructure.
• The United States will dominate overall spending throughout the forecast period, with nearly 50 percent of all public IT cloud services revenues coming from the U.S. in 2015. But regions outside the U.S. will show much stronger growth as cloud services adoption accelerates.
• In particular, IDC found that there are more cloud services vendors and greater end user spending in Asia-Pacific and Western Europe than previously thought.
• IDC defines public IT cloud services as those offerings designed for, and commercially offered to, a largely unrestricted marketplace of potential users. The forecast does not include revenue from private cloud deployments, which are dedicated to a specific customer.
•  While private clouds provide businesses with the ability to specify access limitations and the level of resource dedication beyond what is currently available in public cloud offerings, IDC's expectation is that public clouds will mature and eventually incorporate many of the capabilities  -- particularly security and availability -- that make private clouds a more attractive option today.

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Cloud Services Adoption in Asia-Pacific

It's the time of year when most business technology market research and consulting companies release their predictions for the new year. In its annual outlook for 2010, IDC predicts the Information and Communications Technology (ICT) spending and growth in the Asia-Pacific excluding Japan (APEJ) region will reach $184 billion -- with a 7.7% growth over this year.

IDC predicts most growth will come from India and China, although all countries are expected to experience varying degrees of growth.

"While budgets are still tight, and the buying patterns may have changed irrevocably from what the ICT industry has been accustomed to, the fact remains that there is cautious optimism in the market with some interesting pockets of surprising growth," said Simon Piff, Head of IDC's Asia-Pacific Predictions Committee for 2010.

The net result of the economic slowdown has been an overarching change in how and why companies make new business technology investments.

Proven Technologies Ready for Adoption
IDC foresees projects that generate immediate ROI and tangible improvements in managerial and operational efficiencies will continue to be the ones that garner quick executive buy-in.

The key enabling technologies for 2010 are not necessarily new, as much as they are a more mature and robust implementation of proven solutions that have been available for a while.

Cloud Computing, last year's emerging focus area, will move from being merely a buzzword to a deployment reality -- as service providers address the challenges of providing managed cloud services and organizations realize the flexibility that these solutions can provide.

In fact, cloud services ranks number one on the “Top Ten key IDC predictions that will shape the ICT industry in APEJ in 2010.”

The Maturing of Cloud Services
According to IDC's assessment, service level agreement (SLA) options will improve. They believe that the combination of five-nines performance guarantees -- plus robust business continuity and disaster recovery (BCDR) capabilities -- will be the compelling new adoption momentum that accelerates cloud service growth.

In 2010, the large organizations that are ready to deploy managed cloud services will do so, demanding the same SLAs with BCDR capabilities.

IDC's annual predictions for ICT includes the latest research results from their 1000+ analysts. This insight was followed by an extensive regional review to weigh in on key industry events, typical user characteristics, vendor strategies and economic measures, that help define the technology trends which would impact and drive the ICT market in the Asia-Pacific region for 2010.

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