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Spending on cloud computing has increased nearly a quarter on 2008 

Spending on worldwide ‘cloud services’ is expected to surpass $56.3 billion in 2009,
a 21.3% increase from 2008, according to Gartner.

“Cloud computing is a broad and diverse phenomenon. Much of the growth represents a transfer of traditional IT services to the new cloud model, but there is also scope for creation of substantial new businesses and revenue streams,” says Ben Pring at the analyst group.

While much of the publicity for cloud computing currently centres on systems infrastructure delivered as a service, this is still an early-stage market, says Garner. In 2008, such services accounted for only 5.5% of the overall cloud services market and are expected to account for 6% of the market in 2009.

Infrastructure services revenue was $2.5 billion in 2008 and is forecast to reach $3.2 billion in 2009.

Cloud application services, evolving from software-as-a-service (SaaS) offerings, were almost twice as large as the market for systems infrastructure, says Gartner, and will continue to show strong growth. Not all current SaaS offerings qualify as cloud services based on scaling constraints and lack of true multi-tenancy capability.

Over the next five years, an increasing array of application functionality will become available as cloud services to supplement those from current cloud application vendors.

Today, business processes delivered as cloud services are the largest segment of the overall cloud services market, accounting for 83% of the overall market in 2008.
The segment, consisting of cloud-based advertising, e-commerce, human resources and payments processing, is forecast to grow 19.8% in 2009 to $46.6 billion.

The largest component of the overall cloud services market is cloud-based advertising. This component represented 60% of the market in 2008 with revenue of $28 billion and is forecast to reach $33 billion in 2009. This reflects the success of Google in creating a new business and delivery model for IT-based services, which is being emulated by Yahoo!, Microsoft and others, says Gartner.

Gartner believes the overall market for cloud services will surge to $150.1 billion in 2013.

Meanwhile, UK companies are apparently not yet turning to cloud-based services as a recession-busting cost-cutting measure, despite many enthusiastic headlines to the contrary.

IT consultancy firm Avanade claims that while 81% of UK respondents recognise the value of cloud computing, three quarters of those currently using proprietary IT systems say the recession has not tempted them to adopt it.

In a sobering note for those espousing the potential savings of SaaS, 60% of those already using the technology claimed the downturn had had no impact on their usage, while 13% said usage had actually decreased because of the recession.

Avanade’s UK managing director Ian Jordan said the problem “is not that UK organisations don’t believe that cloud computing can reduce upfront costs – indeed, 68% agreed it would”.

Instead, “cost alone is not enough to encourage them to launch into adoption. IT directors and business leaders will not take unnecessary risks solely to achieve cost savings.

Any change in strategy needs to show definitive evidence of the ability to improve IT performance and capacity in as secure a way as each business demands,” he said.
Avanade’s survey, conducted by Kelton Research, interviewed 502 C-level executives and IT decision-makers across 17 countries in North America, Europe and Asia-Pacific.