Managed Cloud Service Provider Deployment Plans

 As more multinational business executives and IT managers consider embracing managed cloud service offerings, many are wondering how the service provider landscape is evolving -- and where providers plan to differentiate their capabilities.

Much of the initial market insight focused on the key emerging trends, but now we're starting to see more detailed analysis.

A new market study by Infonetics Research details operator plans for managed cloud services -- including their strategies and approaches to offering services, how services will be delivered now and in the future, and top applications of each type of cloud service including: Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS).

Their latest worldwide study resulted in the report entitled "Cloud Service Strategies: Global Service Provider Survey," where Infonetics analysts interviewed 20 incumbent telco, competitive, data center operators, and cable operators that offer cloud services -- now, or they plan to by 2013.

Investing in New Service Delivery Platforms

"Service providers around the world have embraced the cloud concept in earnest and are heavily investing in new services and service delivery platforms based on their particular areas of expertise. Internet content providers are leading with SaaS, data center and co-location operators are adding IaaS to their product portfolios and investing in additional infrastructure facilities, and traditional telcos are building on their existing networks and adding a range of services," said Sam Barnett, Infonetics Research's directing analyst for data center and cloud.

Highlights from the Cloud Service Survey Include:

• 70 percent of respondent operators are investing in cloud services in anticipation of demand.
• The top operator strategies for offering cloud services are bundling cloud services with network connectivity services and offering cloud services over Ethernet or IP VPN services.
• Many of the smaller data center providers participating in Infonetics' survey plan to keep their business uncomplicated by moving from simple collocation support offerings to IaaS via the addition of computer and storage hardware, rather than getting into the complexities of offering OS software platforms.
• 95 percent of respondent operators offer IaaS now.
• More sophisticated offerings like platform as a service, or PaaS (formed by the addition of server operating systems such as Windows, Linux, and Unix) and software as a service, or SaaS (such as e-mail and security services offered by telcos and ICPs like Google) are currently offered by fewer operators, but will grow significantly by 2013.

All the Infonetics survey respondents are knowledgeable purchase decision-makers at service providers in EMEA (Europe, Middle East, Africa), Asia Pacific, and North America that together represent 20 percent of the world's telecom carrier revenue and 21 percent of the world's telecommunications service provider capital expenditure (capex).

Five Predictions for Managed Cloud Services in 2012

The proof-positive business impact from managed cloud services deployment, including the numerous associated productivity benefits and anticipated cost-savings, have pushed cloud computing well into the mainstream during 2011.

As we move into 2012, International Data Corporation (IDC) predicts that this evolution will continue as more users test the growing capabilities of the public cloud services that are already available.

However, by 2015, IDC envisions a very different scenario -- one where cloud services will become commonplace, thereby forcing significant changes in the ongoing adoption of progressive business technology practices throughout legacy IT organizations.

"In the next 24 months, the 'cloud' as a marketing label will cease to exist, as the success of cloud services will mean that it will permeate the sourcing strategies of the CIO and business unit manager alike," says Chris Morris, Lead Analyst for Cloud Services at IDC Asia/Pacific.

He adds, "The use of externally sourced business and IT services from the cloud will form the basis of what we see as the Outsourcing 3.0 period, and will provide an extensive portfolio of services from which innovative solutions can be constructed."

How Cloud Drives the Next Wave of Outsourcing

With Outsourcing 3.0, the cloud will metamorphose into a universal service catalog of individual cloud services. This will begin to replace both traditional information technology outsourcing (ITO) and business process outsourcing (BPO) engagements as well as on-premises infrastructure.

IDC believes that in an Outsourcing 3.0 scenario, the sourcing of business and IT services from multiple external suppliers will result in a major challenge for the enterprise CIO. They will become a service broker and aggregator, involved in sourcing, integrating and managing the services -- on behalf of their business units.

Drawing from the latest research and internal brainstorming sessions amongst IDC's regional and country analysts, the following are five cloud predictions for 2012.

These key points represent major trends with either the most significant financial impact or long-term market impact across the Asia-Pacific region, according to the IDC assessment.

1. Less than Half of End-Users across APEJ will complete their Private Cloud Projects by 2014
2. Making 2 + 2 = 1: Cloud Service Orchestration Services Lead the Drive to Outsourcing 3.0
3. Infrastructure as a Service (IaaS) will become Verticalized by 2013
4. By the end of 2012, 90% of Telecom Service Providers (SPs) in the APEJ region will have brought a broad portfolio of Cloud Services to market; but, by end of 2013, their Portfolios will become Specialized as they redefine their preferred role in the Cloud Ecosystem and target specific markets
5. Cloud SP (CSPs) strategies based on Aggregation and Resale of IT and business services will Fail to meet Profitability Goals by 2013 unless they can efficiently and effectively Manage, Support and Bill Services from Multiple Service Providers

Business Objectives Drive the Shift to Cloud Services

Adoption of cloud computing services continues to accelerate as organizations move from limited deployments to comprehensive solutions, according to the latest market study by CompTIA, the non-profit trade association for the information technology (IT) industry.

More than half (56 percent) of the organizations surveyed for the CompTIA study said their investment in cloud computing will increase by 10 percent or more over the next 12 months.

“This additional investment will likely be accompanied by greater complexity in the overall cloud strategy, such as moving to a hybrid cloud model or adopting more advanced services beyond Software as a Service (SaaS),” said Seth Robinson, director, technology analysis, CompTIA. ”Organizations may begin exploring options such as Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), which will allow them to experiment with custom application development.”

IT departments are often a key driver behind the transition to managed cloud services, but the CompTIA study suggests individual business unit leaders within an organization are equally or perhaps more likely to now seek out the benefits of a cloud service deployment.

About one in five (21 percent) companies surveyed said that line of business leaders championed the transition to a cloud solution -- independently of their IT department.

“Most SaaS applications are easily accessible through the Internet, making it relatively easy for business employees to use them without involving the IT staff,” Robinson said. “But there are risks in this approach, as lines of business often do not have the same awareness of security and reliability as the IT department.”

Demand for Procurement and Implementation Guidance

That being said, apparently the results from the study provided no specific evidence of where CIOs or other IT managers demonstrated security breaches -- as a result of business leaders leading the shift to managed cloud services.

However, the CompTIA study findings did indicate that there's growing interest throughout these organizations to invest more in cloud computing education and thereby learn about the technology deployment considerations.

Although the mainstream business manager's understanding of cloud computing has improved over the past year, many users continue to have questions regarding details of cloud service implementation.

The 2010 CompTIA cloud computing study found that 60 percent of end users desired a clearer definition of cloud computing. In 2011, that number increased to 66 percent.

Areas where users want more clarity include the types of cloud computing offerings (Software as a Service, Platform as a Service and Infrastructure as a Service) and the types of deployment models (public cloud, private cloud or hybrid cloud services).

Attainment of Business Objectives Drives the Shift to Cloud

Organizations that have invested the time to learn about -- or are experimenting with -- cloud solutions indicate they have a higher level of comfort with cloud computing offerings. Approximately 72 percent of these organizations feel more positive about cloud computing now than they did one year ago. Another 25 percent of survey respondents report no change in their perception.

“For those who feel more positively about the cloud than they did a year ago, the primary reasons are the technical benefits and the ability to achieve other business objectives,” Robinson noted. “This finding is in line with data from other CompTIA surveys, where the primary advantage of cloud computing appears to be increased capability, not cost savings."

Note: the survey included 500 IT business professionals and other key decision makers within the U.S. market.

Healthcare IT Spending on Cloud to Surpass $1 Billion

The healthcare and social services vertical marketplace is extensive. It includes companies that provide medical care and social assistance for individuals -- which includes ambulatory healthcare services, hospitals, nursing and residential care facilities, and social assistance services.

Healthcare has been a growth vertical in U.S. business markets.

According to the latest market study by In-Stat, research supports a forecast of continued growth, with healthcare spending $518 million on Infrastructure as a Service (IaaS) in 2015.

Overall telecom spending by the healthcare and social services vertical was just under $16 billion in 2010.

Wireless communications is the largest of the product categories, comprising about 40 percent of telecom spending in the healthcare and social services vertical. Cloud computing and managed services is the fasting growing component.

Wireline data and wireline voice comprise the remainder of the telecom spend.

Increased Demand for Managed Cloud Offerings

"The healthcare vertical segment, across all sizes of business, and across nearly all product groups, is fast becoming the most robust business vertical segment in U.S. business markets," says Greg Potter, Analyst at In-Stat.

Demand for cloud computing services in particular has exploded and In-Stat believes there's nothing that would indicate the trend won’t continue -- at least through 2015.

Additional insights from the In-Stat study include:

• Small businesses with 20 to 99 employees will be the fastest growing size segment in healthcare, growing over 35 percent from 2010 to 2015.
• Enterprise wireless spending in healthcare will increase roughly 12 percent from 2010 to 2011.
• Healthcare public cloud computing spending will surpass $1 billion in 2013.

The Top Five Vertical Markets for IaaS Offerings

The cloud computing phenomenon now includes a set of services and technologies that enable the delivery of on-demand computing services over the Internet in real-time, allowing end-users instant access to data and applications from any device with online access.

Although still in its infancy, gaining traction has not been a problem. According to the latest market study by In-Stat, Infrastructure as a Service (IaaS) is set to grow to roughly $4 billion by 2015.

"Growth is expected in all public cloud service segments," says Greg Potter, Analyst at In-Stat.

Many Software-as-a-Service (SaaS) applications have been around for a long time, but now with the advent of entire platforms for these applications they're gaining the necessary visibility among businesses to reach renewed momentum in the marketplace.

Infrastructure-as-a-Service (SaaS) is also gaining increased traction, especially in the small business market.

In-Stat's latest market study includes the following insights:

• SaaS (software as a service) is poised to grow 142 percent between 2010 and 2015.
• Overall public cloud computing (IaaS, SaaS, and PaaS) is set to grow 153 percent from 2010 to 2015.
• Small business (5 to 99 employees) is the fastest growing size segment growing from $2.5 billion by 2010 to $6.6 billion by 2015.
• Small business account for over half of the market in SaaS and IaaS.

According to the In-Stat assessment, the top five vertical markets for IaaS offerings, in terms of 2011 market revenue, will be hospitality and food, healthcare and social services, and retail trade. The bottom 5 verticals will be mining, forestry, fishing, and agricultural services and utilities.