Analysis

Global study: Hybrid model rules as cloud heats up, SaaS adoption blazing

Dana Gardner By: Dana Gardner, Principal Analyst, Interarbor Solutions
Published: 23rd October 2009
Copyright Interarbor Solutions © 2009
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“Cloud” is the game and “hybrid” is the name. A recent global study has encouraging news for cloud-computing enthusiasts, revealing a sharp uptick in the adoption, as well as consideration, of cloud computing. The same study also indicates that those who are adopting cloud aren’t going whole hog, but are taking a hybrid approach—mixing external and internal clouds.

The study, commissioned by global IT consultancy Avanade, showed a surprising increase in the interest in cloud computing, even from a similar study conducted in January of this year. In January, 54 percent of respondents said they had no plans to adopt cloud computing. By September, that percentage had shrunk to 37 percent.

At the same time, the percentage of companies planning or testing cloud computing increased three-fold, going from 3 percent of respondents to 10 percent.

What’s significant in the report is that less than 5 percent of companies are using an all-cloud model. The rest are relying on a hybrid approach, and report security concerns as the chief factor for being cautious.

Nine months ago, 61 percent of respondents indicated that they were using only internal IT systems and today, that number has dropped to 41 percent. At the same time, those using a combined approach on a global level have increased to 54 percent from 33 percent nine months earlier.

The report says it not clear whether the hybrid model will lead to a pure-play adoption at some point.

SaaS is taking off
One aspect of cloud computing that’s finding wide adoption is software as a service (SaaS), with more than half of the respondents worldwide—and 68 percent in the US—reporting that they have adopted SaaS at some level. Despite extremely high satisfaction—more than 90 percent—reliability is still an issue. About 30 percent of respondents said they had lost more than a day of business due to a service outage.

Still, the reliability concerns haven’t dampened users’ enthusiasm for SaaS, and 62 percent of respondents reported that they had plans to move into more SaaS within the next year. However, similar to their experience with cloud, users tend to deliver SaaS applications internally, rather than from the third-party provider.

On a global basis, those who deliver SaaS applications internally outnumber those who used a third party by a ratio of 2 to 1. In the US, that increases to 4 to 1. Also, those who do use SaaS often rely on multiple providers, with one third using three or more providers. This leads the report to conclude that there is opportunity in the SaaS market.

Other conclusions from the report:

  • Cloud will continue to make significant inroads for the next year, although there won’t be a migration to a full cloud environment.
  • The gap is closing between companies with plans to adopt and those without. Avenade sees those curves intersecting in 2011 or 2012.
  • Despite the widespread adoption of cloud, there will be some applications that should remain on-premises.
  • SaaS adoption will continue to spread and is spreading faster than other technologies have in the past.

The study was conducted by Kelton Research and surveyed 500 C-level and IT executives worldwide.

BriefingsDirect contributor Carlton Vogt provided editorial assistance and research on this post.

Reader Comments

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25th October 2009: 'Chris Boorman' said:

This is to be expected. Performance is good (often better than on-premise); reliability is good (often better than on-premise); security is good (often better than on-premise); Perception is good (we all rely on cloud for personal email and many other aspects of our personal lives).

Different enterprises will deploy cloud applications at varying speeds - often starting with "non-core" or "context" applications, as opposed to "core" or "critical" applications.

As they move, enterprises must remain in control of their data assets - now it is even more important than ever to look at the data integration cloud approach and remain in control.

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26th October 2009: 'Dale Vile' said:

Actually, it's not just data integration, but good old fashioned application integration. Few corporate systems operate in isolation and as you increase your use of hosted application services, the number of integration points between the various service provider and on premise domains grows pretty quickly.

This leads to some interesting questions around who is responsible for those interfaces, e.g. keeping them up to date as things change on either side, and troubleshooting when they break. And the fun really starts when you need to get different service providers integrating with each other to solve your needs. Again, questions around responsibility and accountability arise beyond the technical integration dimension, though when you are now talking about 3rd party to 4th party to 5th party and so on, life quickly gets very complicated and risky.

The point is, going back to the research in the above article, that there was never any question of anything other than the hybrid approach being the answer (I have been writing this for years), but the reality is that while it is easy to get going with initial SaaS deployments of a more selective and modest nature, scaling up your commitment to deal with a broader set of requirements through SaaS is actually very hard and risky.

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26th October 2009: 'Dale Vile' said:

Would be interested in how activity breaks down by organisation size. The use of SaaS by large organisations is nothing new. We were tracking over 60% adoption as long as a couple of years ago in UK organisations with greater than 10,000 employees. The percentage dropped off significantly below this, however, and more recent studies we have conducted suggest that mid-market and SMB penetration is still pretty modest.

As a general word of caution, it is wise not to get too carried away with headline stats, though. SaaS is still a pretty niche part of the equation, and tends to be used for relatively discrete requirements that involve little integration with the rest of the IT landscape. And we are still picking up a lot of caution around any use of SaaS for large scale and/or business critical applications.

Of course there are exceptions and we need to be careful not to generalise (either as evangelists or sceptics). We find, for example, that it tends to be the more progressive organisations (with well-rub IT departments) that adopt SaaS more aggressively, with those having more of a 'fortress IT' mindset still being very sceptical.

If anyone is interested in more of a behavioural/contextual treatment, i.e. understanding what's going on behind the kind of headlines reported in this article, check out the Freeform report here:

http://www.freeformdynamics.com/fullarticle.asp?aid=318

It is 18 months old now, but as I said, the basic principles still hold true and are consistent with more recent data. I guess we should update it at some point, but not sure what we would say differently :-)

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