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The cloud market and where it is going

The cloud market has developed steadily over the last two or three years, and companies that have yet to enter it will have to weigh up their options as it changes further.

This whitepaper looks at where the market is at present and how companies can plan for the future.

According to analyst Gartner, European cloud adoption rates will trail the US by at least two years, as a result of privacy rules and financial issues.

European cloud adoption

Gartner says that although interest in the cloud is "high" in Europe, the diversity of Europe’s 44 different nations will result in slower cloud adoption in the region.

It said privacy rules, multi-country business processes, a deep euro currency crisis and a lingering recession will conspire to delay cloud computing adoption in Europe by at least two years when compared to the US.

Gartner analyst Paolo Malinverno says, "Cloud computing values are valid all over the world, and the same is true for some of the risks and costs."

"However, some of cloud computing’s potential risks and costs - namely security, transparency and integration - which are generally applicable worldwide, take on a different meaning in Europe.”

Cloud data concerns among users

Gartner said companies in Europe frequently express their concern that the existence of the US Patriot Act of 2001 makes it undesirable or even illegal for them to use cloud service providers that are located or incorporated in the US - where many of them are. This is on the basis that US government agencies might, under some circumstances, be able to "look into their data".

This was highlighted by the recent National Security Agency (NSA) Prism spying scandal, although security agencies in other countries have also been implicated, including the UK's national spying centre GCHQ.

Gartner said Europe's cloud diversity issues are also compounded when it comes to regulations and business practices, with some in one country incompatible or undesirable in another.

The slowness of the European Union in drawing up business and technology rules were another delaying factor in cloud take-up, said Gartner.

The march of the cloud

Despite the difficulties though, Gartner said the advance of the cloud would ultimately not be stopped. Gartner analyst David Mitchell Smith says, "While these inhibitors will certainly slow down cloud adoption in Europe they will not stop it, the potential benefits of cloud are too attractive and the interest in its efficiency and agility are too strong to stall it for long."

The overall UK technology market will have to wait until next year to show any real growth, said analyst Forrester, with the UK market set to rise only 0.5 per cent in 2013 to £73.4 billion, potentially stalling current cloud adoption rates, according to the analyst.

Next year though, says Forrester, the UK IT market is set to grow by 4.6 percent. Forrester analyst Andrew Bartels says, "Next year will be better, with all categories except IT outsourcing experiencing positive growth and total ICT purchases growing by 4.6 per cent."

Forrester's Forrsights data for total UK ICT budget shows that on average UK firms in 2013 plan to spend 31 per cent of their budget on IT staff, 15 percent on software, plus 5 per cent on various as-a-service offerings, which includes cloud-based applications like software-as-as-service, platform-as-a-service and infrastructure-as-a-service.

Another 16 per cent will go on hardware, 11 per cent on telecommunications, 11 per cent on third-party IT services, and 8 per cent on contractors, all of which will have some expenditure linked to cloud deployments.

Despite the hype though, only one-third of UK firms are using or planning to use cloud computing, according to Forrester, which shows that most companies are still holding their powder dry when it comes to the cloud.

Cloud productivity systems

Gartner also says only a tiny proportion of firms globally have moved towards cloud email or cloud office systems.

There have been a steady flow of headlines about large organisations adopting cloud-based productivity suites like Google Apps and Microsoft's Office 365, but Gartner has put the market into perspective.

The analyst says there are currently about 50 million enterprise users of cloud office systems, which represent only 8 per cent of overall office system users worldwide (excluding China and India).

But Gartner predicts there will be a major shift towards cloud office systems "by the first half of 2015", and reaching "33 per cent penetration by 2017".

"Despite the hype surrounding migration to the cloud, big differences in movement rates continue, depending on organisations' size, industry, geography and specific requirements," says Gartner analyst Tom Austin.

He says,"While 8 per cent of business people were using cloud office systems at the start of 2013, we estimate this number will grow to 695 million users by 2022, to represent 60 per cent."

Gartner says the explosion in the number of mobile devices now carried by business users could drive some organisations to cloud office systems, as they can reduce the IT burden of software installation, maintenance and upgrades of locally installed office software.

Getting off the cloud hype cycle

Gartner’s recent inclusion of cloud computing in its annual Hype Cycle for Emerging Technologies drew fire from some industry players though. According to the Cloud Industry Forum (CIF), whose members include cloud service providers, the inclusion of cloud computing in the Hype Cycle "risks confusing the market" and "fundamentally misrepresents the state of the cloud industry today".

Gartner’s Hype Cycle for Emerging Technologies charts the perception of new and maturing technologies, taking into account uptake, general acceptance and business benefit.

In its latest report, the analyst house suggests that cloud computing has passed the so-called "Peak of Inflated Expectations", and is now firmly in the next stage, the "Trough of Disillusionment", characterised by "public disillusionment".

Responding to the report, Andy Burton, founder of the CIF, says that Gartner’s "clumsy placement" of cloud computing on the Hype Cycle "gives little accurate indication of market maturity and the tremendous acceptance of the cloud here in the UK market".

The cloud industry hits back

“Gartner at least concedes that 'one dot on a Hype Cycle cannot adequately represent all that is cloud computing', he says, "so one has to question the logic of including it as a singular entity when in reality it is adopted in many and various forms".

Burton says, “To say that the cloud is deep in a trough of disillusionment is plainly false here in the UK.

"Cloud services are now largely proven as offering viable IT deployment models regardless of organisational size, vertical or application area, and as such will continue to improve in both capability and adoption."

Burton adds, "Our latest research shows that all cloud indicators in the UK are immensely positive - adoption rates stand at an all-time high and are set to increase further still, and satisfaction rates are strong."

Cloud take-up barriers

The CIF concedes however that a challenge that the cloud industry faces is one of common definitions and consistent market education. It says misinformation is the biggest issue that surrounds cloud-based IT at this time.

The liberal application of the term "cloud", it says, only serves to dilute its meaning and confuses the market, which in turn can inhibit "legitimate and credible" CSPs (cloud service providers).

To tackle this, the CIF has been campaigning for the introduction of independent industry-wide standardised definitions of cloud services, to provide end users with clarity and to encourage the adoption of best practice among CSPs.

One thing that is certain about the cloud market though is that there is still plenty of growth to come, as the benefits of cloud adoption are still undisputed.