What is Driving Growth of Cloud/SaaS?

Despite the occasional news report of a major cloud outage, there is no shortage of demand for SaaS offerings these days. If you pay attention to social media sites and other online communities/message boards, you likely think the majority of technology users are logged into a cloud solution on their iPad or netbook. Truthfully, there is a great deal of progress to make before we reach that point in web-application delivery (although Apple would surely want it now), but what’s fueling all this growth.

According to a recent IDC study, public IT Cloud Services is expected to grow at more than five times the rate of traditional IT offerings through 2014. Cost and flexibility are two major drivers of the demand, as confirmed in this research. While the reasons for the growth are pretty well known, the predicted rate of the expansion seems to increase on a monthly basis. I guess it really shouldn’t be, as the CompTIA Cloud/SaaS Community has been actively discussing the opportunities and working to create new industry-enhancement initiatives.

Let’s start by addressing the price benefit to IT consumers. The cost of a cloud license is typically less than that of a pure software application, which can translate into significant savings for businesses with a number of employees requiring access. When those businesses are large enough, or the software requires the processing power, onsite servers are usually required. Although the added hardware and support revenue are appreciated by solution providers, small businesses may not be so pleased with the expense. The prospect of eliminating servers and their added support and utility costs is extremely attractive, especially in markets where real estate values remain high. If a dedicated room is required, the extra floor space can add considerably to the annual leasing rate. When you sum up all of these potential expenses, it’s no wonder companies are turning to “the Cloud” for relief.

The second aspect driving demand I mentioned is flexibility. Typically, each software license requires a subscription payment each year, regardless of whether you use it or not. Each server is a capital expense, as well as the energy costs to run and cool them.  If business declines and a company reduces its workforce, none of these costs go away (with the exception of the energy costs, which could decrease if the server isn’t used). For the most part, this is a fixed cost that cuts into their annual profits.

Cloud computing, for the most part, is a variable cost to businesses. The typical model involves a monthly charge for each seat of the application. While cloud computing is frequently used interchangeably with SaaS (software as a service), infrastructure and platforms are also available via web delivery. Experts expect all three categories of the cloud to grow exponentially, with the ability to add or subtract licenses or services as needed. For example, if a company has ten employees set up on a SaaS accounting system and the workforce is reduced by two people, most contracts allow them to only pay for the required eight licenses the following month. While provider may work on different pricing models, each is typically more flexible than purchasing software, infrastructure and other business platforms.

The other aspect of flexibility involves portability. For remote employees, cloud computing typically allows each to access their work from any place, anytime. All of their information isn’t locked into one computer, proving more workplace and computer options for getting work done, and can reduce downtime significantly. If a workstation crashes, they can log into another and pick up where they left off. If there is an fire or other emergency requiring employees to leave the building, they can do the same work at home or from another location.

That demand is highlighted in CompTIA’s 3^rd Annual SMB IT Spending Trends Study, showing that nearly a third of SMBs plan to invest in Cloud/SaaS delivered technologies in 2010 in order to reduce costs and improve business efficiencies.  Driving revenue and streamlining processes is an important goal for many small businesses, and the IT channel can benefit by recognizing these key objectives.   

Interested in joining the group dedicated to advancing this emerging technology delivery process? Then join us at Breakaway for the next Cloud/SaaS Community meeting, where the group will collaborate on new and ongoing initiatives, discuss key issues, and connect with others in the industry. It’s a great place to meet industry thought leaders and share (and gain) best practices.     

While at Breakaway, don’t miss the inaugural CompTIA Cybersecurity Summit, including two panel discussions, one on security in the cloud and the other with “power players” in the cybersecurity space.  Howard Schmidt, Special Assistant to the President and Cybersecurity Coordinator, Executive Office of the President will keynote the event within an event.

Cloud computing technology provides businesses with more access and portability, at a lower cost. That’s the message providers are shouting to the world. Solution providers need to understand their clients perception of cloud computing and determine if and how it can benefit both parties. It’s coming fast, so be prepared!