High IaaS adoption rate in the US

Infrastructure-as-a-Service: Closer to the notion of "IT on tap" than ever before
Other than in the Software-as-a-Service (SaaS) space, where public cloud offerings dominate the market, private IaaS (outsourced private clouds) still account for the lion’s share of the IaaS market

(03.12.12) - IT infrastructure delivered as a service from the cloud (Infrastructure-as-a-Service = IaaS) has evolved beyond marketing hype to a serious and established means of IT provisioning. Driven by the success of the public cloud approach, and the standardization of pricing models, the private cloud concept sees huge demand. While the US market is leading in acceptance of IaaS, a number of unanswered questions today limit adoption especially in Central European countries.

According to PAC, in 2011 almost 21 billion Euros were invested in external ("public” or "hosted private”) infrastructure cloud services at a worldwide level. In 2012, this spending will reach almost 30 billion, and more than 70 billion Euros by 2016.

In a recently released report on the status quo and development of the global Infrastructure as a Service market, the research and consulting firm Pierre Audoin Consultants (PAC) gives insight into the adoption, barriers and future dynamics of IaaS.

PAC studies indicate a huge growth in all areas of IaaS, be it public or private, stand-alone or as part of hosting or other, more comprehensive outsourcing contracts. Other than in the Software-as-a-Service (SaaS) space, where public cloud offerings dominate the market, private IaaS (outsourced private clouds) still account for the lion’s share of the IaaS market. Outsourced private cloud services are near to conventional outsourcing/ outtasking. Often, existing outsourcing contracts have been transformed into cloud contracts, or (at least) outsourcing contracts with significant cloud elements. While storage has been predominant on the public IaaS market - and is expected to remain so in the coming years -, in the private IaaS market computing is the bigger part, not least through the "cloudification” of traditional data center services and hosting models during the last years.

"Traditional IT services have been widely based on complexity and heterogeneity, while "cloud” stands for standard and ease of use. This is why practically all suppliers are currently trying to determine their future positioning along the cloud value chain, aiming to defend existing business, and looking to tap new revenue streams. There will be a new competitive landscape as well as new cooperation models emerging from the cloud trend,” explains Karsten Leclerque, Principal Consultant Outsourcing & Cloud at Pierre Audoin Consultants (PAC).

The US market is the most advanced in the deployment and acceptance of IaaS alternatives to on-premise hardware. Within Europe, the UK is the most advanced country in accepting IaaS. "This is especially true for public cloud services. The market for public IaaS in the USA is more than twice the size of the whole EMEA market and four times the size of APAC. When it comes to outsourced private IaaS, this difference is much less significant. The US market has only less than 1.5 times the size of EMEA, and slightly more than twice the size of APAC," comments Mr. Leclerque.

Especially India has a remarkable position in the IaaS domain. Industry estimates show that digital information in India will grow from 40,000 petabytes to 2.3 million petabytes by 2020, twice as fast as the worldwide rate. With a huge surge in digital information, companies are looking for efficient as well as cost-effective infrastructure to host their data.

While in the US, already today more than 10 percent of IaaS solutions are used in a public cloud model, this share is no more than 5-8% in major European countries like Germany or France, but also in the APAC region; India, China, and Indonesia show the highest public cloud adoption rate there. PAC sees strong growth of the public cloud model in all regions, and expects shares of between slightly less than 20 percent and 30 percent by 2015.

Strong regional differences in cloud benefits perception

Multi-national user surveys conducted by PAC show that the arguments in favor of cloud concepts are rather similar across all regions surveyed. Financial advantages, ease of use/management, flexibility and scalability are generally considered as the most important advantages. However, as Karsten Leclerque points out, "individual aspects are weighted differently. For instance, an increase in the reliability and availability of the infrastructure services is considered a positive aspect of the cloud concept in Anglo-Saxon countries. German or French companies, in contrast, consider criteria such as reliability or availability as areas of concern for the cloud model, or even as reasons against cloud usage, rather than a benefit."

One explanation for this discrepancy in cloud adoption is, according to Mr. Leclerque, the higher maturity of the Anglo-Saxon countries in the area of IT sourcing. In this regard, US- and UK-based companies are less skeptical towards the externalization of data - one of the main fears that European companies have about the cloud concept.

Open questions on data privacy and legislation limit IaaS adoption

Despite the impressive growth of public IaaS services in recent years there have still been obstacles to broader adoption. Privacy and availability of data and resources are often at the heart of cloud discussions. Yet, a lot of unanswered questions remain around security issues, lacking standards and partly unclear legislation - mainly around privacy and data protection.

Especially Continental European companies still fear a loss of IT performance through public cloud computing. Further arguments against cloud usage include dependency, provider lock-in, complexity and bandwidth/ network issues.

CIOs, however, also fear an increased complexity of IT services management when including third-party cloud solutions into their IT architectures - and with this, their necessary transformation from an IT to a service contract manager.

Cloud remaining on top of the IT agendas
PAC analyst Leclerque is convinced, though, that cloud models will remain on top of the IT agendas in the coming years. "Users are well aware of the various benefits and are strongly interested in exploiting them; but they should not blindly follow the cloud trend. Cloud usage promises many advantages, such as potential cost reduction, access to resources without the need to invest in own infrastructures, scalability, usage-based pricing, etc. The concept is still emerging, though, and there are many different concepts and offerings in the market, with partly very different security and service levels, that might or might not fit your needs.”

Costs are only one aspect that should be considered by IT users when it comes to the decision towards cloud usage or towards a specific offering. A basic comparison of the ‘costs per gigabyte’ for example would be too shortsighted. Many other aspects impact the TCO of different solutions, such as necessary implementation and integration efforts, additional network or security investments, trainings, etc, but also potential decommissioning costs, such as for the data (re-)transfer.

"Companies should be sure to ask themselves: Do we need a cloud concept at all? And are we able/ willing to manage this kind of sourcing? Users should carefully compare security and privacy measures as well as service and availability levels," warns Mr. Leclerque.

The report "Infrastructure as a Service (IaaS) Worldwide: Adoption, Barriers and Future Dynamics" is now available. It provides insight into the evolving global IaaS market: the trends, challenges and opportunities as well as its vendor landscape and gives recommendations for IT users and vendors for the adoption and provision of IaaS concepts. Complementary to the report, PAC provides detailed market figures by cloud segments for 25 countries. (PAC: ra)

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