We use cookies and other similar technologies (Cookies) to enhance your experience and to provide you with relevant content and ads. By using our website, you are agreeing to the use of Cookies. You can change your settings at any time. Cookie Policy.

The Connected Web

Phil Wainewright

Will the Cloud Bubble Burst in 2009?

Vote 0 Votes

Listen to my interview with top industry analyst Bill McNee, CEO of Saugatuck Technology, which specializes in examining the direction and impact of emerging IT trends such as the ones covered here on The Connected Web. In fact, just last week I blogged about a new ISV Cookbook published by Saugatuck that gives advice to ISVs looking to transition to SaaS.

In this podcast, discover why Saugatuck expects enterprises to continue buying into SaaS, cloud and social computing during 2009, and learn about some of the challenges to watch out for as they do so.

Listen to or download the 10:21 minute podcast below:

Download file


PW: Now Bill, Saugatuck really specializes in looking at the impact of emerging technologies and trends in IT and how vendors and enterprises should adapt to that. I know that you've just done some work and identified a number of disruptive technologies that are coming along which you think are going to have a big impact in 2009. Even though we're going into a downturn and some people would say, well, actually, this is the kind of time when I don't want to start getting into all this new stuff because I need to stick to what is safe and what I know.

BM: Well, I think that's really true, Phil. We did recently publish a number of pieces at year-end; a couple of different premium Strategic Perspectives through our subscription research service. And then, also a summary research alert that our listeners can go to our website to gain access to. It's free for those that want to register. It's entitled Top Ten Disruptive Technologies and CIO Issues for 2009 [PDF, registration required — click here first if not yet registered].

We do identify a number of technologies including software-as-a-service, cloud computing, virtualization, open source, social computing as key technologies to watch in 2009. I think the scenario that we're painting is that many of these technologies are not only emerging technologies that are helping to reshape enterprise IT but, likewise, have a very beneficial cost component to them that helps drive inefficiencies out of enterprise IT budgets. And at a time when IT budgets will be under pressure moving from [a] capital- to an expense-oriented model, in particular as it relates to software-as-a-service, will be clearly something that the business end users — whether corporate or business unit driven — will be focusing on.

Right, so what you're saying is that although there's risk in embracing some of these new technologies, the reward of lower cost and greater efficiency is going to outweigh the risk?

Yeah, in many ways, many of these new technologies aren't all that risky anymore. I mean virtualization is way down the path and has proven itself as a very, very important way — whether it's server virtualization, whether it's desktop virtualization — to really get more bang for the buck, and to reduce the footprint, and a number of other key costs and computing benefits. Likewise, software-as-a-service, in our opinion, has moved beyond the 'try me' phase, what we refer to as 'SaaS 1.0'. We've developed a three- and four-phase wave adoption model, as you're aware of in our research, Phil, and we're --

Yeah, sure.

— well down the road into Wave 2, which is a wave of integration; and moving toward even much more sophisticated adoption of business solution functionality in our Wave 3 model. So we're predicting that by the end of this decade, we're going to be seeing 60, 70% of enterprises worldwide have adopted SAAS as a concept. And in many ways migrating from the fringes to the core in terms of key business processes that are being addressed, whether it's HR, whether — it's not just CRM, I guess, is the key message. It's the other key business processes as well.

Right, but I think — I mean you touched on integration being an important part of that wave 2 and I think that's the thing. As long as it was around the fringe then it was okay to adopt it. But as you got more and more of these services, you need to start to actually get them to operate together. And I think SAAS has been around for a few years, people have got their heads around it. I think cloud is a lot less well defined; you might call it nebulous. (I've been longing to use that pun!). And social networking even more so. So I'm not sure that CIOs necessarily understand or have worked out how they can really deploy those technologies in a way that's manageable and controllable.

Well, I think that's very true. If we break those five technologies down into different buckets, right. Open source is way down the road, it's been embedded. In many ways, the biggest impact around open source is the shift from this open source community model to open source being embedded into proprietary software. Open source has now become ubiquitous in many regards. So in many cases the risk here for CIOs and IT business users is really even understanding the level of open source and they're shocked [at it] but they're probably not even aware of [it].

Software-as-a-service as you said, is well down the road to being understood, I think. It's not so much a risky business proposition — and most users today don't even necessarily think of software-as-a-service as a unique differentiating benefit. They're comparing — and mixing and matching — on-premise and SAAS, and they're just really looking for the best business solution to their problem, whether it be on-premise or through a SAAS solution. Virtualization as I mentioned as well and so on.

The two technologies that are least furthest along in this evolutionary curve [are cloud computing and] enterprise social computing. And I do believe there's going to be a massive shakeout [in social computing], and clearly [there's] a challenge in understanding the return on investment associated with the deployments that we've seen thus far.

So that — I think we're still pretty early in the cycle — but it is something we recommend that our listeners today pay attention to, as there's some very interesting things [happening] — in particular, at the intersection of enterprise social computing, software-as-a-service, and other key technologies.

Cloud computing, I think, is a dominant long-term trend and we are talking about a broad definition of cloud computing. In many ways, software-as-a-service is a component of a broader vision of the cloud ecosystem that we've defined and I encourage the listeners to go to our website, [where] there's a number of pieces of research, including one entitled Harnessing the Cloud [PDF, subscription required] that I point them to, that defines this five-level cloud ecosystem.

But I want to caution users as well that we are early in the cycle here and I hope that we are — we've been doing a number of interviews with our premium subscription client members, and some are vendors, and some are early adopters, and aggressive early adopters. And one of them made a very important point in that — this is a multi-billion dollar company and this is the architecture team at — trying to grapple with — the intersection of SAAS, open source, and cloud. And they are really trying to figure out, how do they operationalize cloud computing when it's very early in the cycle?

I think this is a key challenge and I hope we are not at the peak of inflated expectations, using my former colleagues at Gartner Group — using their vernacular. We may very well — in terms of where we're at in the cycle of cloud computing's evolution — I think we may very well fall into the trough of disillusionment very quickly. That doesn't mean that the trend toward cloud computing is not a long-term one. Whether it's an internal cloud, whether it's a private cloud, this is clearly a trend and we are forecasting in fact, within five years, that as much as 20% of [new] workloads that would've been [traditionally deployed and] run behind the firewall is now — will be now — deployed in a cloud computing environment.

Yeah, I think that people have unreal expectations on any new technology — and particularly cloud because it's such an amorphous term, you can almost make it mean what you like. I think people have got to realize that there are a lot of operational and governance issues around deploying cloud and making it work effectively. And if you don't take those into account, I think you're going to be disappointed.

So I agree with you that I think that we may see a bit of a burst bubble around cloud expectations. But I think at the same time, cloud is delivering on a lot of promises — a lot of technology work that's been done in areas like SOA and virtualization — over many, many years. To some extent, it's the fruition of those earlier hype waves. And so, I think that we're going to see a lot of valuable work being done as well.

No, I would agree. I've been an industry analyst for 20+ years and I'm never shocked by the need for our industry to reinvent itself and come up with new terms that describe what in many ways is always an evolution, not a revolution. And in many ways, I agree with you, cloud is some new terminology that has caught the minds and ears of enterprise IT buyers and it is a — what would be the right word — a consolidating theme around which many of these underlying technology advancements are coming to fruition.

Right. So let's hope we have some positive stories coming out this year as well as the, I guess, inevitably there will be some negative stories. There will be some companies that will find it a difficult year, but hopefully others will find it a successful one.

Yeah, I think the key though in cloud computing, in particular, is really around — standards need to be created. We're still really in our infancy and the standards are still evolving. And selecting a cloud provider really in many ways is a long-term commitment. So how do you balance where we're at in the early stages with some of these longer-term commitment needs?

So in that regard, I think that traditional large enterprise customers will probably seek out more traditional providers who will be migrating to the right cloud services as well. Whether that's HP, whether that's IBM, whether it's even a Dell migrating to provide cloud services. Versus smaller enterprises that will look to next-generation providers — small to mid-size enterprises — more along the lines of the Googles and the Amazons of the world that have helped really in many ways move forward this agenda as quickly as it has.

Right. Well, certainly a lot to watch out for in the coming year.

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

Phil Wainewright specializes in on-demand services View more

Recently Commented On

Recent Webinars


    Monthly Archives