Cloud to suck money out of market, report says
A recent survey suggests that CIOs are loosening the purse strings on IT spending. IT vendors may want to hold off their celebrations, though, because much of the spending appears to be headed for deflationary forces like cloud computing, virtualization, and their kissing cousin, open source.
An economic rebound never looked so dire.
That's unless you're an IT buyer, of course, suggests a new report from Goldman Sachs. In this week's report, titled "A Paradigm Shift for IT: The Cloud," Goldman Sachs said it expects that pent-up IT dollars will flow in the short term to building out next-generation data centers (e.g., cloud computing). But in the long term, less money is expected to find its way into fewer wallets:
After the initial build-out, Cloud Computing could drive some headwinds for the IT industry, as a result of two factors. First, we see virtualization as a deflationary technology. Second, we see IT spending consolidating in the hands of fewer buyers--the Cloud providers, hosting vendors, and large enterprises. These factors will likely dampen IT spending growth due to greater utilization and buyer pricing power.
Even short-term build-outs may prove disappointing, however, as Goldman Sachs expects large enterprises to grow existing virtualization and automation technology adoption in the rollout of private clouds, shifting slowly to an embrace of public clouds over time. The chart below gives some idea as to when cloud computing will hit its stride:
Who wins in this scenario?
According to the report, Red Hat stands to benefit from the cloud-computing craze. ("Red Hat is well positioned for the emerging Cloud Computing ecosystem, largely due to its open source background and current ubiquitous deployments in data centers, including enterprises, as well as in Cloud providers such as Amazon," the report states.)
But the real beneficiaries will be...the same old crew. "[K]ey suppliers for internal Clouds are likely to be those that have the most complete portfolio of hardware, software, and services," including IBM, Hewlett-Packard, Cisco Systems, EMC, and Oracle.
New boss...same as the old boss.
The other beneficiaries are the start-ups that provide critical components of cloud computing, with an emphasis on management tools. Here we may see open-source companies benefit, including Reductive Labs (Puppet project), Cloudera, and the two rising private cloud companies, VMOps and Eucalyptus, among others.
While open source doesn't factor heavily into this particular Goldman Sachs analysis, the firm has before called out open source's role in wringing more value out of fewer IT dollars. Open source is a primary driver of the global reset in IT spending expectations.
With less money flowing into the pockets of fewer vendors, we can expect to see both increased consolidation and fierce competition for the IT spending that remains. Those vendors that can help CIOs do more with less stand to benefit from this shift to low-cost, high-value computing.
And those that can't? Well, let's just say they may pine for the good old days of the global recession.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
OTOH, honestly, you find out very quickly that most "do more with less" sales pitches are not much more than mere promises, and that the 'less' certainly isn't cost savings (esp. after the invoice shows up for licensing/support/etc)...
I suspect that we'll be seeing a lot of sales critters misuse the phrases "cloud" and "open source" in the months to come (and as you may well know, many of them have already...)
OTOH, not all codemonkey applicants have recent source code if they don't contribute to open source... NDAs tend to get in the way of that. Contributing to an open-source project helps get around that little hurdle.
But you can ask that, and they might even provide it... TiVO can do this right now (because their patents won't let you actually do anything with it).
Marketing people always bring a strange image to my mind, I conceptualize them as a bunch of people smiling while they eat poo and tell me how good it is. They also give me the same creepy feeling as Killer Clowns from Outer Space.
They seem so detached from reality.
- by jeffromiller November 17, 2009 2:21 PM PST
- "A Paradigm Shift for IT: The Cloud" - couldn't this report have been written in the early 90's as "A Paradigm Shift for IT: The Internet"? Same thing. Besides the use of the word Paradigm, which I highly discourage, us IT folks love to put new names on the same thing - e.g. refering to the use of the Internet as "The Cloud"...good times...How about "Web 2.0"! Or, remember the term "Client/Server"? That was a fun one too...
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