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The Cloud & Technology Transformation Alliance is a joint initiative of Channel Partners and The 2112 Group. CTTA's mission is to be a forum through which all members of the technology value chain – IT vendors, service providers, distributors, resellers, agents and end users ‒ can discuss the issues of next-generation technology and systems, define the value of technology in business context, create best practices for adoption and application, and provide guidance for the business community on what comes next. This blog covers some of CTTA's work. More information is at http://cttalliance.com.

Cloud Spending:The Numbers Are Big, Irrelevant

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By Lawrence M. Walsh, CEO and President, The 2112 Group

Analyst firms have released new projections on business spending on cloud services. These reports share three common characteristics: They’re all big numbers, they all focus on 2015 as the milestone year, and they all disagree. Do any of these forecasts really matter?

Anyone looking for indications on how big cloud computing is should look no further than the recent IDC report that pegs cloud spending to rise to $73 billion annually by 2015. Nearly 50 percent of that money will be spent by U.S. businesses. Businesses around the world will continue to invest in public IT cloud services at a compound annual growth rate of 27.6 percent, and the bulk of their spending will be directed toward software services. Those are impressive numbers by any measure – but they’re not the only numbers on cloud computing spending, and they’re hardly consistent with competing reports.

Gartner also is bullish on cloud computing adoption. Like IDC, Gartner believes cloud computing will be big, with nearly every Fortune 500 company having at least one business-critical application “in the cloud" by 2015. Gartner forecasts cloud spending at $112 billion annually, with the bulk being spent on private clouds and infrastructure-as-a-service.

Earlier this year In-Stat released its cloud spending forecast, where it projected a tripling of spending on software, infrastructure and platform as service offerings. By 2014, In-Stat says U.S. business spending in these three areas will top $13 billion annually.

AMI Partners has a clear outlook for cloud computing, forecasting U.S. spending on all cloud services at $49 billion by 2015 by SMB organizations alone. Factor in probable enterprise spending (usually set at 55 percent to SMBs’ 45 percent), and you’re around $110 billion annually. But that's just the U.S. numbers. Figure about double that for the global spend, and the AMI number could top $200 billion.

There are numerous other reports that project wildly increasing cloud-computing spending. It doesn’t really matter that none are in agreement or even closely relative. The point is that cloud computing spending will be a really big number in the next couple of years, and it will continue to increase. Moreover, the cloud will drive new spending on non-cloud products, such as infrastructure and endpoints, and facilitate software that enables cloud computing – particularly private clouds – to happen.

How big will the cloud be relative to overall IT spending? If you take the highest forecasts (roughly $200 billion annually by 2015 or 2016) and divide by the probable total global IT spending at that time (about $3 trillion) you get the cloud representing 6.6 percent. In raw dollars it’s significant (who wouldn’t want just a fraction of that pile of cash?), but in relative terms it’s paltry.

In the end, does it matter what the analysts say? For those doing business planning, yes, and more accurate numbers are needed for proper market analysis and sales strategy development. But as directional indicators, all the forecasts are pretty consistent that cloud computing is a real trend, it will continue to grow and dominate the IT conversation, and every business – vendor, solution provider and customer – needs a cloud strategy.

Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships, and principle blogger at Channelnomics. He’s also the executive director of the Channel Vanguard Council and moderator of the Channel Partners Cloud Convergence Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.

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