Cloud dooms IT market to slow growth

 

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By Nicole Kobie

Posted on 2 Dec 2010 at 14:28

Cloud computing is casting a shadow over spending in the IT market as a whole, according to an analyst.

The UK cloud market is set to grow by 26% annually to reach £6.1 billion by 2014, according to a report by TechMarketView analyst Anthony Miller - but the rest of the IT market isn't following suit.

"We’re forcasting that the UK market in software and services is actually in decline, if you look at it in real terms and take into account inflation,” Miller told PC Pro. "We reckon it’s going to decline for at least another couple of years."

“So to say the cloud market is increasing by 26% year on year, goes to show the stark difference between what’s happening with traditional IT and what’s happening with cloud IT," he added.

The more they move to the cloud, the less they spend on IT

Indeed, Miller suggested the growth of the cloud is one factor in the decline in traditional IT software and services. "The interesting thing is, the cloud is growing faster and it’s actually contributing to the decline in the overall market, because one of the main reasons why organisations want to move to the cloud is because it’s cheaper," he said.

"So the more they move to the cloud, the less they spend on IT. It’s a simplification, but it really is the nub of the matter."

"It's why the IT market is doomed now to very slow growth, really from here to eternity, because the major trend in IT is taking money out of the market, not putting it back in," he said.

Cloudy or not?

Miller's growth predictions don't include the hosted applications market, which many include in the cloud sphere. "There’s a lot of confusion in the cloud market in what you count and what you don’t count as the cloud," he noted.

He said some describe any off-premise systems as cloud, but argues that's not quite right. "Quite frankly, vendors have been offering off-premise application hosting for many years," he said. "If you’re an enterprise and you’ve been running a big application like SAP, you could have someone host it for you, so as far as you’re concerned it’s not running on your computers or on your data centre, and it’s someone else’s problem."

That hasn't stopped hosting vendors from claiming cloud credentials. "Today many vendors will say ‘we’re running it in the cloud for you’,” he said. “It’s not really, but from the customer’s point of view, what do they care as long as it’s not on their computers.”

However, hosted application provisioning is also seeing growth, of about 6% a year, Miller said. If hosted applications and the current cloud market are combined, it's worth £5.8 billion annually already in the UK.