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June 9, 2009
Market Overview Of Current Cloud Service
Offerings From Global IT Providers
This is the first document in the “Cloud IT Services Market Overview — Real Enterprise Value
Or Just Vapor?” series.
by Paul Roehrig, Ph.D.
with Christine Ferrusi Ross, James Staten, Philipp Karcher, and Antonin Shanahan
© 2009, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available
resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar,
and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To
purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com.
2 Market Overview Of Current Cloud Service Offerings From Global IT Providers
For Sourcing & Vendor Management Professionals
Because this is an emerging services technology, some core characteristics — standardized, billing
based on consumption, scalability, and access — can help define what the cloud services model
means for enterprise clients (see Figure 1).
Cloud service
characteristics Details
Standardized • Cloud services are based on a level of standardization for technology components.
IT-based capability • The underlying logic is that a significant amount of IT client demand has more
similarities than differences, and this is key to economies of scale for many common
technology requirements (processing power, storage, core applications, development
platforms, etc.).
Consumption • Most cloud services models charge by actual use of the resources in CPU hours,
billing gigabits (Gbs) consumed, gigabits per second (Gbps) transferred, email accounts, etc.,
rather than only by number of servers, tickets, or authorized users.
• The pay-for-play economics, often with shorter contract durations, can be very
attractive to clients.
Scalable • Scalability and resilience are key design components of cloud services.
• More of the delivery cost risk is on the service provider, but clients have more
flexibility (within reasonable commercial limits) for increasing and decreasing
demand while continuing to pay only for what is used (along with provider margins
and some delivery cost spread across all clients).
Web-based • Many cloud services use a standard Web browser to control demand and implement
accessibility and services without any unusual software add-ons or specific OS requirements.
flexibility • Clients can provision and manage services without significant involvement by the
provider.
Over the past few years, several providers have claimed utility or on-demand service capability, but
in most cases the core service delivery processes have not changed. True cloud service offerings
aren’t just “plugging stuff in when clients ask for it.” Cloud IT services are much more akin to a real
utility offering and that requires some latent capacity that is relatively easily turned on and off.
Consider your mobile phone as an example. Purists will claim that it’s an oversimplification, but
each individual service — voice, text messaging, roaming, Web access, and even the appliance — is
standardized and scalable (within limits). And you also have consumption billing (usually as
minutes or some data transfer volumetric) with a time-based contract and you can make changes to
your plan via the Web.2
Now imagine this same model for your enterprise technology environment. In a cloud services
model, nearly everything can be converted to a “service.” Web services, individual software
applications (as software-as-a-service [SaaS]), platforms for application development (PaaS),
and centralized or distributed computing power (as infrastructure-as-a-service [IaaS]) are all
reconstituted as easily scalable services with consumption-based pricing. There are several general
types of cloud services, described below using some commonly recognized examples.
· Web-based service offerings. These solutions include rich Internet applications — many of
which are delivered via the Web — similar to Flickr, Microsoft Office Live, MySpace.com, Zillow,
and so on. Although included here in the interest of clarity, most service IT providers are not in
the business of providing Web-based services, but many are aligning to help clients implement
these offerings.
· Infrastructure-as-a-service. IaaS includes both full infrastructures on which clients can deploy
applications (like Amazon Elastic Compute Cloud) as well as separate infrastructure services
(e.g., virtual computing capacity, virtualized hosting, utility storage, etc.).
· IT dilettantes squander resources. For decades now almost all public and private IT decision-
makers have had to make IT work on its own by building up complex and expensive IT shops.
The result is that many firms have become IT dilettantes, with huge amounts of capital and
hordes of people dedicated to IT work that fails to drive equity generation, mission achievement,
or brand differentiation. Current global economic pressures are forcing decision-makers to re-
examine the ROI of outsourcing and disruptive technologies like cloud services.6
· Cloud services have a compelling value proposition over traditional outsourcing. Cloud
services cost less than traditional outsourced services — in some cases a lot less. According
to the providers surveyed, the amount of savings depends on the type of service offered, but a
general rule of thumb is between 20% and 50%. Some providers claim savings even higher — up
to 70% or even 80% in some cases.
Interested/considering 22%
30%
Piloting 10%
8%
Implementing/implemented 10%
6% Organization size:
Expand/upgrade existing Very large*
5% (5,000-19,000 employees)
implementation 6%
Global 2000†
Decreasing 1% (20,000 or more employees)
3%
Removing 0%
1%
Interested/considering 30%
21%
Piloting 12%
16%
Implementing/implemented 9%
16% Organization size:
Expand/upgrade existing Very large‡
5% (5,000-19,000 employees)
implementation 9%
Global 2000§
Decreasing 1% (20,000 or more employees)
0%
Removing 0%
0%
Source: Enterprise And SMB Software Survey, North America And Europe, Q4 2008
54681 Source: Forrester Research, Inc.
Already implemented 4%
Already implemented 5%
· Providers enable, but generally don’t deliver, software platform-as-a-service. Most of the
IT service providers don’t really play in this space — IBM is the big exception, and Wipro is
moving fast in this space — but many firms do offer consulting and development support to
help clients leverage platforms provided by other firms.
· Infrastructure-as-a-service. Most of the IT providers profiled below either have existing IaaS
offerings or are well on the way to developing as-a-service offerings for processing, storage,
backup, networking, desktop, and so on.
IT Providers Are Beginning To Enable And Deliver SaaS And IaaS Services
It is still early days for real enterprise-level commercial cloud services offerings by IT providers.
Most providers have only a handful of offerings to enable cloud services for clients or to directly
deliver services. Clients also need to be skeptical about some claims made by providers about cloud
services. There are critical differences between managed services repackaged as cloud offerings and
true scalable, flexible, easily accessible, utility services. Differentiating between marketing slideware
and reality for clients is difficult — particularly because this is an emerging capability — but there
are some things that clients can assess to help understand provider’s current capabilities.
· Differentiate between enabling and delivering cloud services. Most of the providers Forrester
reviewed either enable cloud services for clients via consulting, deliver cloud services (which
can include aggregating services from other providers), or both. Clients should be clear about
whether a particular service provider is implementing, managing, or delivering the services
provided by external cloud providers or their own internal capability.
· Demonstrate latent capacity. Every true utility has some latent capacity. If you plug a new
appliance into your home, the expectation is that there is almost always enough electrical
power to make it work. It’s now the same with salesforce.com or Amazon Elastic Compute, and
providers should be able to demonstrate at least some level of latent capacity if they are claiming
they can deliver — not just enable — cloud services.
· Demonstrate a commercial client base. This is a relatively new business space for the big IT
service providers, so most of them have dozens — rather than hundreds — of clients. Some
providers are a bit too enthusiastic about claiming that internally used capabilities are equivalent
to commercially offered enterprise services, but there is real evidence of a growing install base of
commercial clients.
The service providers that we review here claim some significant differences in their current cloud
services offerings for enterprise clients (see Figure 3).
Although cloud-based services have yet to gain as much traction as traditional models for enterprise
clients, these offerings are resonating with early-adopter clients and may be starting to disseminate
into the early majority of clients (see Figure 4).
Service
provider Software-as-a-service Infrastructure-as-a-service
Dell • Builds SaaS functionality into many services • Technology foundation for other public and
offerings for enterprise clients including private cloud providers via its Data Center
device management, data center Solutions (DCS) group to help clients create
management, managed storage, and private cloud facilities.
disaster recovery. • Customers include Microsoft, Facebook,
• IP developed organically and via Lawrence Livermore National Labs, and
acquisitions (MessageOne, Silverback, others.
Everdream, and ASAP). • Dell also delivers some cloud IaaS services
via its MessageOne offerings including data
storage, mail and messaging, archiving, and
disaster recovery services.
HP/EDS • SaaS-enabled business process outsourcing • Offers Adaptive Infrastructure as a Service
services for processes such as billing and (AIS) to a small install base of clients.
clearing services, card processing services, • AIS provides access to IT as a service on a
credit services, etc. subscription basis and is delivered based
• Provides Cloud Assure, a SaaS offering heavily on automated processes and
designed to help IT organizations monitor procedures running in HP’s “next-generation”
the security and performance of cloud data centers.
services.
IBM • Partnering with Amazon Web Services to • In the early stages of trying to create a true
help clients create SaaS offerings. infrastructure utility to clients.
• Delivering SaaS applications directly to end • Offering a dedicated environment
customers (including offerings for Lotus (including a choice of data center, servers,
applications and security/compliance). storage, and network).
• Providing consulting support to help SaaS • Also offering a more variable use model on
provider firms design, build, deliver, and IBM’s dedicated Computing on Demand
market their own SaaS offerings (including infrastructure (nearly 15,000 CPUs in
supporting 3,000 SaaS partners to build and New York, London, and Tokyo).
deliver their own SaaS offerings). • Has a cloud storage offering (scale out file
• Enabling end user clients to integrate or services).
build proprietary SaaS/cloud services into • Among the few major IT service providers to
their businesses (including separate move into the PaaS space for clients.
practices for salesforce.com and
SuccessFactors).
Siemens IT • Has a SaaS solution for networked device • Offers virtual enterprise computing that runs
Solutions monitoring for clients that want to remotely on its global network of automated data
and maintain networked devices (including centers.
Services non-IT elements such as a turbine or • Has a managed server utility offering that is
computer tomograph). billed based on consumption, and it has a
• Has several SaaS offerings (e.g., global consumption-based managed storage
document management, an SAP solution for offering.
business travel reservations, multiple
Microsoft-based offerings that enable
collaboration, workflow management, and
communication).
Service
provider Software-as-a-service Infrastructure-as-a-service
TCS • Targeting SaaS offerings at small and Does not have a commoditized commercial
medium-size business in five verticals standalone IaaS offering (but is exploring
(manufacturing, retail, healthcare, education, some services with a few clients).
and professional services).
• Current SaaS solutions consist of Web-based
shared services including CRM, finance and
accounting, several HR functions, and some
end user productivity applications.
Wipro • Delivers application development and Still building out an IaaS service offering
management services associated with (but services now developed to manage
third-party PaaS platforms such as Force.com virtualization technologies, provide
and Microsoft Azure. self-service/on-demand pro-visioning, and
• Has a custom platform for SaaS enablement automated workload management).
and delivering the SaaS service.
• Current SaaS offerings include messaging
and collaboration, document management,
mortgage processing, and claims
management.
• Provides consulting, implementation, and
support services on enterprise cloud
strategy.
Service
provider Existing client profile
Accenture • Worked with more than 70 clients, implementing more than 125+ SaaS projects delivered in
a variety of industry segments and in several functional areas — including sales,
marketing, human resources, etc.
• Accenture and Avanade are working with clients such as Aviva, Royal Mail, Payless Shoes, and
W.H. Smith to implement Microsoft Business Productivity Online Suite.
• Navitaire, a wholly owned subsidiary of Accenture, provides enterprise SaaS applications for
the travel and transportation industry.
• Offers tools and other assets to help clients’ IaaS services but does not have existing clients in
this space.
Atos Origin • Atos Worldline Transaction as a Service manages 20 billion transactions a year for 300 major
accounts and 100,000 midsize companies.
• Has 72 SMB clients of workplace services and 30 customers of services such as Oracle and
SAP Adaptive services.
• Multiple enterprise IaaS clients; storage on demand has about 80 corporate customers;
20 enterprise clients receive utility-based computing.
Capgemini Did not provide client information.
Cognizant Cognizant does not have a current cloud services client base.
CSC • CSC has hundreds of software-as-a-service clients, many of whom receive financial
services solutions.
• Hundreds of Infrastructure-as-a-service clients are receiving desktop-as-a-service, testing-as-a-
service, storage-/compute-as-a-service, etc.
Dell • About 5,000 clients are receiving SaaS services such as distributed device management,
data center management, storage, and business continuity/disaster recovery.
• About 50 clients are now receiving IaaS services.
HP/EDS • HP does not disclose specific customer client information, but claims that its SaaS business is
considered to be one of the top 10 in the world based on revenue.
• A few clients are now piloting some IaaS offerings.
IBM IBM has more than 3,000 SaaS independent software vendor clients. It also has multiple
specialty partner application areas such as BPM, compliance, asset management and CRM,
each with several dozen clients.
Siemens IT • About 120 clients are receiving SaaS services now, primarily SharePoint and messaging
Solutions services. About 100 of those clients are leveraging a document management SaaS service.
and • Three clients are receiving virtualized computing capacity, virtualized hosting, and utility
Services storage.
TCS Piloting an IT-as-a-service offering with some clients.
Wipro • About 46 clients are receiving salesforce.com implementation and business process solution
such as document management, carbon management, and claims management.
• About 20 clients are receiving Infrastructure-as-a-service solutions (primarily enablement)
support.
R ecomme n d a tio n s
· Don’t consider cloud services as all-or-nothing. Even if the full enterprise may not be
ready for cloud services (or vice versa), clever enterprise decision-makers will start exploring
service options now and consider cloud utility services for parts of the organization where
they make the most business sense. This will help build a foundation for the future.8
· Evaluate partnership ecosystems (and pay attention to Microsoft). Size matters when
building out true commodity services — and IBM stands out in this regard. But mass alone is
not enough, and providers are all working to build technical and business alliances to mature
their offerings. Clients should assess provider partner strategies when making sourcing
decisions. One key alliance partner is — and should be — Microsoft. Enabling cloud services
requires software to make it work, and Microsoft has been aggressively creating IP and tools
that will likely be necessary to make cloud services a scalable reality.
· Keep your attention on traditional outsourcing models. Cloud services delivered by IT
service providers are certainly not magic bullets for enterprise clients. Issues of technology
maturity, security, legacy systems, licensing, data ownership, and weak or absent standards
are still significant today. Rapid changes in this space mean that IT services clients should
consider cloud options now and in the future, but traditional service models will remain.
AL T E R NA T I V E V I E W
Supplemental MATERIAL
Companies Interviewed For This Document
Accenture HP
Atos Origin IBM
Capgemini Siemens IT Solutions and Services
Cognizant Technology Solutions Tata Consultancy Services
CSC Wipro
Dell
Endnotes
1
Many market observers have offered up definitions of cloud and cloud computing — to no avail. Every
party wants to adapt the definition to their own needs. But it is possible to describe the scope of things
referred to as cloud and offer a useful segmentation of them. See the August 28, 2008, “Future View: The
New Tech Ecosystems Of Cloud, Cloud Services, And Cloud Computing” report.
2
CFOs will be interested in the pay-as-you-go economics of cloud computing because it can help keep cash
in the bank longer and be more closely aligned to actual demand — so less overpaying. See the October 29,
2008, “Talking To Your CFO About Cloud Computing” report.
3
The term “PaaS” describes many different approaches, each of which has a particular “sweet spot” among
application scenarios. For example, some firms deliver software components over the Internet that cloud
services developers can integrate via service-oriented architectures (SOAs), but these are not complete
development platforms. BigTable, Simple Queueing Service, and GoogleCheckOut are all examples. See the
February 10, 2009, “Platform-As-A-Service Is Here; Can It Help You?” report.
4
Forrester believes that for a service to be ready for enterprises to consume, it must pass from the early-
adopter phase (few enterprises are using it, and most deployments are experimentation and non-business-
critical projects) to early majority. Evidence of being at this stage comes from a sufficient volume of direct
enterprise customer references using the service for business-critical purposes, indicating that the service
has matured to the point of consideration for IT approval. See the March 7, 2008, “Is Cloud Computing
Ready For The Enterprise?” report.
5
“Cloud services” may be all the rage as a blog topic, but it’s still not on the radar for most enterprise IT
clients. The primary inquiry topics have been: 1) What is cloud computing? 2) How and when should
we use cloud offerings? Can we build our own?; and 3) How big will cloud be and what are the emerging
strategies? See the August 28, 2008, “Inquiry Insights: Cloud Computing, Q3 2008” report.
6
Since the late 1990s, technology-enabled work has been woven into the fabric of global commerce. In trying
to adapt, far too many firms have become IT dilettantes, with huge amounts of capital and hordes of people
dedicated to IT work that fails to drive equity generation, mission achievement, or brand differentiation.
Staying in the low-value IT transaction business without good reason is perhaps the biggest waste of time
and resources since the invention of solitaire. See the October 9, 2008, “New Market Pressures Will Drive
Next-Generation IT Services Outsourcing” report.
7
While degrees of scalability, availability, disaster recovery, monitoring, and compliance are still open
issues on many clouds, the core basis of these infrastructures has been addressed. And as more enterprises
leverage clouds, IT infrastructure and operations professionals are telling the cloud platform providers what
remaining issues need to be addressed to garner more of their business, which is hardening and maturing
the cloud platforms rapidly. See the December 10, 2008, “Should Your Windows Apps Move To The Cloud?”
report.
8
Many industry participants, including Forrester, have advocated one ideal IT infrastructure architecture
that every enterprise should work toward, but this won’t be a reality any time soon. See the December 24,
2007, “There Are Three IT Architectures, Not One” report.
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