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4/2/2010
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IT Spending On Cloud Ratcheting Up

A Sandhill Group survey shows enterprise interest in -- and IT spending on -- cloud computing accelerating over the next three years.

Market research for the venture capital firm, the Sand Hill Group, has concluded that cloud computing represents one of the largest new investment opportunities on the horizon.

In a 90-page report, M.R. Rangaswami and Kamesh Pemmaraju cite a CIO who said that spending on cloud computing will reach 40% of his IT budget in the next three years and 70% in five years.

In an interview, Rangaswami said the comment came from "the CIO of a major software company that we interviewed, not prone to making exaggerated comments." He defended it as in line with other less dramatic but assertive comments from the survey. Rangaswami conceded that IT spending today "is not a whole lot. Sixty-eight percent of respondents said 0%-3%."

But the survey also shows that in three years, 16% expect to spend 30% or more of the budget on cloud computing; 8% will spend 21-30% of the IT budget; 22% will spend 11-20% of the budget; and 24% will spend 7-10% of the budget. Those expecting to spend 7% or more make up 80% of the sample, he said.

Based on those figures, Rangaswami projected that large enterprises with 10,000 to 15,000 applications are considering moving 2,000-3,000 applications to the cloud over the next three years or obtaining them there as software as a service.

Rangaswami aired the report's conclusion at last month's Cloud Connect Conference and asked IBM's VP of Cloud Services Ric Telford what he thought: "I have no problem with those numbers (40% in three years; 70% in five) as long as you include the caveat, it could be any one of five delivery models."

Software-as-a-service, infrastructure-as-a-service, and platform-as-a-service are three delivery models often used in talking about cloud computing. Telford didn't specify two additional ones, although analysts also refer to "public" and "private" cloud forms.

Telford went on to say, "In five years, I would say we won't even be using the term 'cloud.' It will just be the norm. It will be the way we do IT."

In the interview Rangaswami said the Sand Hill Group commissioned two Web-based surveys with 511 respondents, followed by 40 interviews to reach its findings. Twenty-two of the interviews were with systems architects, VPs of IT or CIOs at small, mid-sized and large companies. The quantitative Web surveys were conducted by McKinsey & Co. and TechWeb, a UBM company which publishes InformationWeek.

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