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2009 Cloud and SaaS Predictions

2008 delivered a new level of SaaS and cloud-based product offerings and began to introduce new found competition - a clear sign that cloud computing is maturing. Amazon, EMC with VMware, IBM, Google, Microsoft, Salesforce.com, NetSuite and many other recognized vendors delivered or advanced on-demand, subscription-based computing solutions.

While existing product advancements continue, new innovations suggest the market is still up for grabs. Google's Platform-as-a-Service (PAAS, a term first coined by Salesforce.com) App Engine is still in preview mode, Microsoft's Azure Platform Services are only available in press releases, and Oracle and SAP continue to watch from the sidelines - in what many believe is a doomed bury your head in the sand approach and hope it all goes away. While these enterprise resource planning titans have much to lose as SaaS ERP systems erode their on-premise market share, it is clearly only a matter of time before they are forced to deliver their own on-demand ERP solutions. When this occurs, SaaS business software systems will have reached a new milestone.

So where does the SaaS and cloud computing industry go from here? Despite the downward economic climate, new cloud companies and solutions will continue to emerge - possibly at an increased rate. Combining a mix of industry trends and guess work yields the following predictions.

1. While on-premise software and hardware will become stagnant, SaaS and cloud solutions will exceed 22% market growth. For some interesting comparison points, Amazon's non retail business, which includes Amazon Web Services, increased 45% in the third quarter of 2008, while Salesforce.com's revenue in the third quarter increased 43%. While not recession proof, Cloud and SaaS services will be considered recession resistant and continue to attract budget-constrained IT groups searching for ways to acquire new applications without capital expenditures.

2. Google will not penetrate the enterprise. The Google App Engine is a new alternative for web developers looking to create and deploy Web applications. However, adoption will be limited to start-ups, Web 2.0 technology companies and various small businesses. Google Docs (SaaS) and Google App Engine (PaaS) will slowly but steadily gain enterprise converts, however, large scale enterprise adoption will not be achieved with the current product and service portfolio.

3. Service outages will continue, however, be less disruptive. Amazon's Simple Storage Service (S3) crashed for two hours last February and then for eight hours last July. Salesforce.com has a history of outages, however, the impacts are becoming less significant. As cloud computing scales, added workload will increase periodic failures. As failures bring unwanted media attention, customer churn and financial losses, vendors will learn from them and increase redundancy, reliability and system fault tolerance. Ultimately, SaaS and cloud computing will prove far more stable than comparable on premise services and applications.

4. Enterprises embrace the cloud. Despite some misguided perceptions that SaaS is targeted to the SMB (small and midsize) market, 2009 will clearly show that even the largest companies aggressively adopt SaaS solutions. The SaaS value proposition is in no way unique to SMB.

5. Microsoft will advance slowly. 2008 was the year that Microsoft raised the curtain on its cloud computing strategy. In 2009 Microsoft will begin to show more than marketing hype and press releases. We expect to see preview releases of the Windows Azure cloud operating system and the related Windows Azure Platform Services by the end of 2009.

6. Enterprise IT tools and utilities will round out the SaaS and cloud infrastructures. Amazon's Elastic Computing Cloud only became generally available near the end of 2008 and 2009 promises to deliver much-needed EC2 management tools. Amazon has promised EC2 management, monitoring, load-balancing, and auto scaling tools due early 2009. IBM's Tivoli division plans to add cloud management to its Tivoli Service Request Manager, Provisioning Manager, and Monitoring products. Expect a wide variety of tools and technologies in the current year.

7. Cloud start-ups will buck the trend. Venture capital and private equity may be drying up, but cloud computing startups will be the exception.

8. New public-private clouds. IT groups will create public-private shared clouds. New tools that better promote virtualization, clustering and complete platforms such as Elastras Cloud Server will more easily integrate and mashup complementary solutions over disparate networks.

9. SaaS information security questions take a back seat. The depth of information security provided by SaaS and cloud service providers is as good or better than what most IT departments can provide internally. Further, these vendors are routinely audited and certified by the AICPA (SAS 70) ISO (27001), NIST (C&A) and other recognized bodies.

10. Oracle embraces the cloud. Larry Ellison loves to disparage SaaS and poke holes at cloud computing, but he's also no dummy. Having watched Salesforce.com and NetSuite thrive with the SaaS model, he now sees Salesforce.com and other startup vendors increase the stakes with PaaS and platform solutions that give web developers everything they need to create and manage applications in the cloud. Additionally, Oracle's namesake database is available as an option on Amazon's EC2, and the database giant itself offers some levels of hosted applications. Watch for Oracle to acquire either Salesforce.com or NetSuite (which Ellison himself already owns 75% of the company).

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January 30, 2009 in SaaS | Permalink | Comments (0) | TrackBack (0)

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This blog is focused on hosted, on-demand or software as a service (collectively SAAS) business solutions. To qualify as a SaaS solution, the service should be offered on a subscription (pay as you go) purchase price, housed in a multi-tenant data center and delivered remotely over the Web to web browsers. Business applications include about any front office or back office business system. Frequently cited business applications include Customer Relationship Management (CRM) systems, Sales Force Automation (SFA) systems, Enterprise Resource Planning(ERP) systems, Supply Chain Management (SCM) systems, Manufacturing Systems and Human Resource (HR) systems.