Despite The Hype, Cloud Computing Sales Slow

Solution providers, however, have yet to experience the boom of brisk sales, despite the great deal of interest generated by the current wave of cloud computing hype. The lack of activity is prompting some solution providers to wonder if cloud computing's bark is bigger than its bite.

"Everybody's talking about the cloud and hyping the cloud right now," said John Ross, CTO of Kittery, Maine-based solution provider GreenPages. "They're hyping a vision."

But recent surveys and research from Gartner and other firms indicate that cloud computing is on many organizations' radar screens for 2010.

According to a recent Gartner survey, cloud computing is among the top priorities for CIOs this year as businesses look to transition from on-premise hardware and software to hosted solutions. The firm has gone so far as to predict that cloud computing will lead to roughly 20 percent of businesses ridding themselves of all physical IT assets come 2012. Additionally, Gartner said cloud computing was a $47 billion market in 2008 and will compound an annual rate of 28 percent to reach $150 billion by 2013.

A different survey, in which ReliaCloud polled 150 IT decision makers in small and large companies, found that more than 85 percent of companies identified cloud computing as a 2010 priority. Meanwhile, more than 95 percent said that cloud computing would either radically shift or have a definite impact on how technology services will be provided within their companies.

A look at those figures and logic would dictate that cloud computing sales are moving along at a rapid clip. But so far that's not necessarily the case.

"We are seeing more interest in it, but we're not seeing as much adoption yet as the market is reporting," GreenPages' Ross said.

One of the things keeping cloud computing solutions from moving faster is the technology's relative immaturity and organizations' lack of clear understanding as to the benefits of utilizing the cloud.

"A lot of enterprises don't know what they don't know about the cloud," said Peter Evans, senior vice president of marketing from Atlanta-based Internap, an Internet solutions vendor focused on content delivery networks and managed Internet services.

Still, solution providers are attacking the cloud head-on.

Champion Solutions Group recently launched its Champion Cloud Services division focusing solely on the cloud. Since launching the cloud practice in December, the Boca Raton, Fla.-based solution provider brought three clients into its cloud computing fold.

Chris Pyle, Champion CEO and president, said he considers the cloud customers a victory when so many organizations are kicking the cloud computing tires. While Pyle wouldn't share what percentage of Champion Solutions Group's business is cloud-focused, he said he's realistic that it's not going to become a revenue machine overnight.

"It's not going to be a huge piece of our business, but it's going to be a more important piece going forward," he said.

James Damoulakis, CTO of Framingham, Mass.-based GlassHouse Technologies, agreed.

"People are keeping an eye on the cloud, but I don't see a lot of activity," he said, adding that there is a great deal of interest in cloud computing as customers become increasingly dissatisfied with "business as usual" with regard to IT.

One reason cloud sales aren't as brisk as the market anticipated is large organizations like the Fortune 500 haven't found an immediate need for the cloud due to their longer IT planning and transition cycles.

"Larger organizations have entrenched and established infrastructures," he said. "The need isn't there for them yet. The effort to transition would be a challenge."

The bigger opportunity for cloud adoption right now is in small and midmarket companies that don't have the in-house IT skills and maturity to manage traditional hardware and software.

"I think the market for the cloud is in smaller organizations now," Damoulakis said, adding that it will evolve in coming years and be a better fit for larger companies. Damoulakis said the cloud is still a relatively small part of GlassHouse's overall business, but noted that it is growing quickly. In addition, virtualization services, which form the foundation of many cloud offerings, comprise a significant portion of the company's business, he said.

Because cloud computing is immature and moving apps to the cloud is a gradual process, there aren't yet enough examples or success stories in the cloud for VARs to impart onto their clients. Another hindrance slowing cloud computing adoption is the lack of a clear definition of what cloud computing is, Damoulakis said.

"Anyone can slap the cloud label on whatever their product is to get on the bandwagon," he said.

Noel Baron, founder and CEO of Goodfellaz Internet Services, a Web development company that began offering cloud services when its client-base started asking for it, said transitioning clients to the cloud takes patience, time and investigation. "You can't just dive into it," he said. The drawn out process of migrating from legacy hardware and software to the cloud could be responsible for slow sales, he said.

"A lot of my clients are on edge when thinking about the cloud," he said. "It's still not mainstream. It's still not standard. It hasn't been demystified."