What do you make of all this cloud talk?

Dave Turner, head of marketing at CODA [disclosure: CODA is a sponsor and client] turns up the heat on uber analyst group Gartner, characterizing their assessment of growth in the cloud computing market as ‘wide of the mark.‘ That’s a strong statement which Dave justifies by saying that:

In the report Gartner appears to make the mistake of lumping together the whole SaaS market. In CODA’s view, the take-up of SaaS in small, medium and large organizations is proceeding at different rates – smaller organizations are using SaaS more extensively then larger ones. The speed of take-up is also different depending on industry – for example, services, consulting, media and high-tech are moving ahead faster than others.

It’s not an unreasonable assertion. For instance, earlier today, I reported on the earnings of RightNow, a CRM provider that focuses on customer retention and call centre activities. It had a blow out quarter to 31st December, 2008, noting record bookings. Even so, it is forecasting modest growth in 2009. Its customers are typically mid-sized enterprises.

My colleague Oliver Marks on the other hand reports that three executives at Salesforce.com have been shown the door, including the person leading enterprise sales. Salesforce.com is the platform provider for CODA. Read into that what you will but some of my colleagues believe that on-demand computing, which is ‘cloud’ based, is no more immune to the cold wind of economic recession than its on-premise bretheren. Yet other colleagues tell me Salesforce is still hiring. Confused? Let’s see what their numbers deliver. Either way, we already know the spending at the enterprise level is under sever pressure.

At the low end of the apps market, almost all the players I come across are doing well in that they are growing rapidly. That’s not saying much because they’re all coming from a near zero base. Tip – when you hear a vendor say they’re growing 10% per month, ask what the base figure is.

Where I do take issue with Dave is in his assertion that:

I don’t believe that corporate scepticism towards cloud computing stems from issues with platform technology. Cloud-to-cloud linking is already a fundamental requirement for SaaS applications. What the market is still lacking is good applications, particularly in critical areas of business like accounting.

There’s a raft of accounting applications out there at the low end of the market, some for the mid-range and nothing of any substance at the top end. That could be a reflection of growth as Dave detects but it’s actually more than that. The top end on-premise vendors like SAP, Oracle and to an increasing extent Microsoft, have done a very good job of putting a lock on customers. As they deepen their relationship, customers become ever more dependent on their supplier of choice to the point where they become strategic. They become in effect, the mainframes of the apps world. That makes them very difficult to ’shift.’ It also means there is likely no real accounting market at the top end for saas – at least in the medium term.

At the same time, there are genuine technical questions, especially for those running Microsoft shops. Microsoft’s cloud story is not that well articulated and I have been in meetings where the company has no answer to deployment testing issues.

All of this means that while the trend towards cloud computing is inexorable, it is lumpy. Having said that, I agree with Dave that in a recession bound economy, the economics of cloud computing start to make a LOT of sense at all levels of the computing food chain. If you are advising clients on technology strategies, ensure you have a good understanding of the issues and which pain points can be readily addressed. There is money to be saved now and clients will welcome anyone coming through the door with that as a credible storyline.

In the meantime, check out the miscellany of other stories on this topic listed below. They’ve all got something valuable to add to your understanding.

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• Cloud confusion (enterpriseirregulars.com)
• Salesforce.com outage exposes cloud’s dark linings (theregister.co.uk)
• Enterprise Software is Not Dead Yet (ventureblog.com)
• Cloud Computing: The Last Definition You’ll Ever Need (devcentral.f5.com)
• Technology Spend – A Repeat of 2001? (myventurepad.com)
• Nebulous cloud computing (news.cnet.com)
• Will the downturn accelerate cloud computing? (infoworld.com)

Tagged as: Cloud computing, CODA, Gartner, Microsoft, Salesforce.com, Software as a service