2014 Looks Bright for Cloud Services

Despite recent revelations regarding the NSA’s extensive surveillance of email messages, Internet traffic and mobile communications, no one expects people or businesses to discard these essential habits and tools. In fact, I believe cloud-based alternatives to traditional, on-premise software and systems will continue to expand in 2014, as providers offer more deployment choices.

The skepticism surrounding the “cloud” terminology among some IT and corporate decision-makers is increasingly being converted into measurable business benefits by organizations that have adopted Software as a Service, Infrastructure as a Service and Platform as a Service solutions.

As a result, fewer corporate executives are wondering what the cloud is or why they should consider cloud-based services. Instead, they are now examining where, when and how they should take advantage of these on-demand alternatives.

In response to these trends, every market researcher is predicting significant growth for public, private and hybrid cloud services. I expect their forecasts to fall short of the actual adoption we’ll see over the next three to five years, particularly in 2014. I believe cloud services will experience greater-than-expected growth because cloud providers can now offer a wider assortment of deployment alternatives. Greater choices will appeal to a broader audience of corporate decision-makers who have been reluctant to join the cloud movement.

The Superpod Approach

The most important example of this technological development is the alliance between Salesforce.com and HP that was announced at this year’s Dreamforce conference. Under the new partnership, enterprises will be able to acquire Salesforce’s CRM solution via a dedicated instance on HP servers known as a “Superpod.”

This approach has been secretly made available to Salesforce’s largest customers on a custom basis for a number of years, but the company has vehemently denied these deployments and publicly derided this approach because it wasn’t sure how to scale it in an economical fashion. Salesforce.com’s CEO, Marc Benioff, even ridiculed his mentor, Larry Ellison, when Oracle unveiled a “cloud in a box.”

When I heard the news, I couldn’t stop smiling because I’d taken a fair amount of abuse from my Salesforce friends and zealot industry analysts who said my idea of location-independent cloud services, which I proposed in 2009, wasn’t technically or financially feasible. Fortunately, there were enough examples of SaaS appliances to reassure me that it was only a matter of time before we’d see this approach become more readily accepted. It appears that time has finally come.

Now that Salesforce.com has embraced this approach, the last barrier to enterprise adoption of SaaS and other cloud services has been broken. IT and other corporate decision-makers who feared using public cloud services can now take advantage of a growing assortment of private and hybrid cloud services delivered via dedicated systems and software.

The Internet of Things

While these services may not boast the greatest up-front operating margins from a cloud service provider perspective, they will exponentially expand their addressable market opportunity. This will not only create greater revenue opportunities but also produce higher long-term profits from customers willing to pay premium prices for more flexible, reliable and secure cloud services from strategic sources.

The success of Veeva’s recent IPO also indicates the growing interest in SaaS/cloud solutions specifically designed for particular vertical market problems. Once again, I may have been ahead of the curve with my prediction three years ago in this space that vertical market solutions were about to explode, but you can expect more industry-specific cloud solutions emerging in the coming year.

Another trend that will enlarge the market opportunities in the cloud is the realization of the promise of the Internet of Things. Tying together devices and capturing data about their movement has been the domain of only the most forward-minded companies in the past. Now, a combination of rapid technological development and more economical business models made possible by cloud analytics will make this idea more mainstream in 2014.