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By Michael Heric and Abdulrahman Addas, partners at Bain New York / Abu Dhabi
But the market is in transition. Companies that have waited on the side-lines are now entering the marketplace. Compared with the earliest adopters, later entrants have a much wider range of business needs, IT priorities and views on cloud computing. That's why the most effective providers are developing targeted offerings, marketing messages and sales approaches to address the emerging customer landscape.
Thanks to the cloud, businesses are using and administering their IT infrastructure more efficiently. The economics of cloud computing have also become more attractive. In the next three years, we see a 30% to 40% price advantage opening up between the costs of deploying a public cloud and an on-premise server.
As providers create real value for customers, some players have at last begun to turn a profit. In response, customers now have confidence that emerging providers will be around for the long term, and buyers are more comfortable placing critical systems in their hands. The result: We expect business spending on cloud computing to grow fivefold by 2020, expanding from $30 billion to $150 billion, according to some estimates, and accounting for one-fifth of all growth in technology industry profits over this period.
Substantial barriers to cloud adoption remain
Of course, the field still faces many challenges. From security concerns to high-profile outages, substantial barriers to customer adoption remain. Even under the most optimistic growth projections, cloud computing will not displace existing technologies any time soon. Cloud services will represent less than 10% of total enterprise technology spending by 2020, for instance.
But the customers that have fuelled growth to date will not be the same as those that fuel growth in the future. Over the next three years, nearly 65% of the growth will come from companies that make little or no use of the cloud today. Industries like retail, transportation, industrials and financial services will demand more private and hybrid cloud offerings.
To help providers navigate their way through this market transition, Bain surveyed nearly 500 North American CIOs and IT decision makers and spoke with more than 25 cloud providers. Through this research, we identified five clusters of companies with common approaches to cloud computing. The key to sustainable and profitable growth over the coming years will be to develop focused offerings that are better tailored to these customers.
The five customer types in cloud computing
Transformational: These early adopters already use cloud computing heavily, with on average of more than 40% of their IT environments relying on cloud models.
Heterogeneous: These companies have an exceptionally diverse mix of legacy systems and newer technologies. While they have on average just 13% of their environment in the cloud today, that share is poised to rapidly expand to more than 40% by 2013.
Safety-conscious: These companies are particularly concerned with the security and reliability of their IT environments. They understand the value proposition, but are willing to compromise to ensure that their environment is secure. Private cloud and hybrid public-private cloud models have the most appeal.
Price-conscious: These bottom-line focused companies purchase cloud technologies and services primarily for the cost savings.
Slow and steady: These companies, for a range of reasons, are not yet ready to adopt cloud computing in a meaningful way, although they express interest in exploring offerings if a provider can slowly and steadily take them down the migration path.
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