Cloud Computing: 2011 Predictions

Looking ahead, CIO.com's Bernard Golden discusses ten developments he expects to see in cloud computing for service providers and enterprise users.

By Bernard Golden
Thu, December 09, 2010

CIO — It's been an incredibly interesting, exciting, and tumultuous year for cloud computing. But, as the saying goes, "you ain't seen nothin' yet." Next year will be one in which the pedal hits the metal, resulting in enormous acceleration for cloud computing. One way to look at it is that next year will see the coming to fruition of a number of trends and initiatives that were launched this year.

The end of a year often brings a chance to take a breather and think about what lies ahead. Therefore, I've put together this list of what I foresee for 2011 vis a vis cloud computing. Here are ten developments I expect to see next year, broken into two sections: one for cloud service providers, and the other for enterprise users.

Cloud Service Providers

Prediction #1: The CSP business explodes...and then implodes. CSPs will continue to pour money into building cloud computing offerings. Large companies will invest billions of dollars constructing data centers, buying machines and infrastucture, implementing software platforms, and marketing and selling cloud services. Regional and local players will likewise do the same, albeit on a smaller scale.

There will be a frenzy of activity as every colo, hosting, and managed service provider confronts the fact that their current offerings are functionally deficient compared to the agility and low cost of cloud computing. However, by the end of the year it will become obvious that being a cloud provider is a capital-intensive, highly competitive business with customer demand for transparency in pricing.

Many new entrants to the business will conclude that this is a battle they can't win and will hastily exit the business. And don't imagine those retreating will only be small, thinly capitalized companies. Sometimes large, publicly-held companies are the worst in terms of sticking with opportunities that require delayed gratification in terms of profits. I expect that late next year or early in 2012 a private equity play will emerge in rolling up CSP offerings whose owners want to offload their failed CSP initiatives.

Prediction #2: Market Segmentation via Customer Self-Selection. Many vendors and commentators feel that the SMB market is a natural for IaaS computing because of their lack of large, highly skilled IT staffs. Sometime next year everyone will realize that removing tin still leaves plenty of challenging IT problems, and cloud computing delivers a few new problems besides. Once that realization sinks in, everyone will agree that SMBs are a natural fit for SaaS and that only larger companies should imagine themselves as IaaS users. Consequently, SaaS providers will gain an even higher profile as adoption rates increase. However, SaaS will by no means be only an SMB phenomenon — far from it. SaaS will become the default choice for organizations of all sizes that wish to squeeze costs on non-core applications.

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