I admit that when I first heard about “hosted private cloud” (sometimes called “virtual private cloud”) a few years ago, I was deeply skeptical. Some providers were just re-branding their dedicated managed hosting offerings and slapping a cloud label on them. I recall one person who worked for cloud provider telling me that there was no difference between the two. Really?

Cover cloud long enough and chances are you’ll become this guy.

The marketing around these services also struck me as a little odd. They would be billed as having “true enterprise-grade security,” which always seemed to send the message that their public cloud services were… what? Not secure? Marginally secure? Amateur hour?

But legitimate “hosted private cloud” offerings finally found a home in the market, embodying all of the other characteristics of a cloud service except multi-tenancy. Here’s how market research firm IDC explains what hosted private cloud really means:

At the highest level, there are two types of deployment models for cloud services: public and private. Public cloud services are designed for a market and are open to a largely unrestricted universe of potential users who share the services. Private cloud services are designed for a single enterprise and have user-defined and controlled restrictions on access and level of resource dedication.

Hosted private cloud is a composite view of two private cloud services deployment models, both of which offer customers and providers very different choices about resource dedication, tenancy cost, user access/control of the computing asset, and real and perceived security structures in place. The two HPC deployment models are:

• Dedicated Private Cloud: This model offers dedicated 1:1 physical compute and storage resources focused on the needs of one enterprise or extended enterprise. This model offers the greatest customer control over their contracted resource. Examples of dedicated private cloud service offerings include Amazon EC2 Dedicated Instances, IBM SmartCloud Enterprise, Savvis Symphony Dedicated, and Rackspace Cloud: Private Edition.

• Virtual Private Cloud: This model is an adjunct of public cloud services with shared virtualized resources and a range of customer control and security options distinct from most public cloud services. Examples of virtual private cloud service offerings include Amazon Virtual Private Cloud (VPC), IBM SmartCloud Enterprise Plus, Savvis Symphony VPDC/Open, and Rackspace RackConnect.

Now, IDC forecasts that worldwide revenue for hosted private cloud services will surpass $24 billion in 2016, anticipating that the virtual private cloud approach will be the predominant model. IDC also expects the overall hosted private cloud market to experience a compound annual growth rate of more than 50% between 2012 and 2016.

Here’s some more interesting analysis from its press release:

[T]he majority of dedicated private cloud buyers will be those companies with existing IS outsourcing or hosted infrastructure services contracts. Potential buyers of dedicated private cloud services will place a premium on off-loading the asset management burden and on operational reliability, over and above other cloud features such as scalability, granular billing, and customer self-service.

When dedicated private cloud grows, the winners are likely to be large incumbent packaged software providers and equipment providers, global systems integrators, professional services firms, and telecommunications service providers. These providers are working mightily to build single-vendor stacks, providing all the underlying components from bare metal to “trusted partner applications.” But if virtual private cloud becomes the dominant provider-based model, as IDC expects, it will be more like a public cloud model with mostly standardized, virtually dedicated assets, which means a vastly different set of vendors will benefit.

“Not even the largest technology incumbents can sustain IT market leadership without achieving leadership in cloud services. Quite simply, vendor failure in cloud services will mean stagnation,” added [Robert] Mahowald[, Research Vice President, SaaS and Cloud Services]. “Vendors need to be doing everything they can – today – to develop a full range of competitive cloud offerings and operating models optimized around those offerings.”

A new study out of Infonetics Research reveals a little about who’s sitting at the cool kids’ table in the cloud provider cafeteria.

Microsoft Corp, IBM and Cisco Systems are on the short list for homecoming king top cloud service provider, according to Infonetics’ recent survey of 107 North American enterprise IT decision-makers. The analyst firm did note, however, that other “unexpected vendors dominate the cloud landscape in key technology deployment areas.”

Sorry, Google. They’re just not that into you.

Keep in mind the sample size is pretty small, and the group surveyed appears to be overwhelmingly made up of die-hard cloud supporters; 91% of respondents interviewed said they use cloud services today, and 100% expect to use them by the end of 2014.

Still, some other data points seem to ring true: Software as a Service (SaaS) was the most popular cloud service adopted (our survey revealed the same thing), and the leading drivers for adoption now are “application performance and management of IT costs.”

“There is no doubt, the cloud has come of age,” said Sam Barnett, directing analyst for data center and cloud at Infonetics, in a statement. “While investments in cloud outsourcing are small in comparison to internal IT/data center spending, they are growing each year, with the number of enterprise organizations turning to cloud technology to manage budgets and transform service delivery increasing significantly in the last two years.”

It’s getting harder and harder to remain skeptical when it comes to the value and profit potential of the cloud, and even more difficult to deny that public cloud adoption is maturing beyond just test and development like some cynics had speculated.

Further validating the public cloud’s credibility is new research by Eileen Smith, program manager at IDC, who predicts that the U.S. public IT cloud services revenue will grow from $18.5 billion in 2011 to $43.2 billion by 2016. The market will experience a compound annual growth rate of 18.5% over the forecast period – making it increasingly challenging to argue that the cloud doesn’t have staying power.

The “services and distribution” vertical, which includes retail and professional services, spent the most money on cloud services in 2011, accounting for 30.3% of total revenue that year. Smith also measured cloud spending in financial services; manufacturing and resources; infrastructure services (includes media and utilities); public sector; and home businesses and consumers.

The forecast tracked five cloud service segments, which IDC refers to as: Applications as a Service, System infrastructure software as a Service, Platform as a Service (PaaS), Server as a Service, and “basic” Storage as a Service. It’s interesting to note that most of the services studied by IDC also ranked as high-growth areas in TechTarget’s recent Cloud Pulse survey. Our survey asked 1,497 IT professionals about their use of and attitudes toward public, private and hybrid cloud, and the results indicated that respondents continue to be drawn to public cloud due to several advantages it has over on-premises deployments (such as increased infrastructure availability, scalability, cost management and the “as a Service” model).

Also worth noting is that two months ago, another IDC analyst released a forecast for global public cloud services spending over the same time period. Worldwide, revenue is expected to shoot up to $100 billion by 2016 — meaning that U.S. cloud revenue may account for almost half of worldwide spending. So, if there are skeptics still out there, soon enough you may have to leave the country to hear their arguments.

There’s a litany of reasons why enterprises don’t want to buy public cloud services, but sunk investments in legacy IT tops the list, according to TechTarget’s recent Cloud Pulse survey.

Looking over the results, I thought about how this adoption barrier might be more difficult to overcome than, say, security. I know many of you categorically disagree with that statement, but humor me for a minute: Of course, there are many prospective customers who will never believe the cloud can be secure, no matter what a cloud provider’s strategy or messaging is. But there’s definitely a population that’s willing to consider cloud services if providers strengthen their IT security strategies, embrace transparency, conduct third-party audits and so on. I guess what I’m saying is there are tangible steps cloud providers can take to further fortify the cloud, and they have an opportunity to demonstrate this and possibly change the hearts and minds of enterprise IT pros.

But it seemed to me that there isn’t much a cloud provider can do when an enterprise isn’t interested in hearing the cloud pitch because it’s already sunk hundreds of thousands or millions of dollars into its internal [fill in the blank, e.g., storage area network, CRM deployment, development platforms].

I spoke to several cloud providers about all this for a recent story we published, Why CIOs have problems with cloud computing: Sunk costs in legacy IT. You can (and should!) check out the story to see how providers such as Microsoft, Savvis and Bluelock are dealing with this issue (spoiler alert: hybrid cloud is a common denominator), but I also wanted to share some of the really great reader feedback we’ve received in the comments section of this article.

We asked readers what they thought the biggest barrier to cloud adoption might be. Here are a few interesting responses we got:

• “In my point of view, solution providers still do not have a coherent [go to market], and, in most cases, they fail to provide a real business value proposition. The adoption of the model is restricted to IT service islands. In most cases, the focus remains on mere cost reduction rather than the possibility of having access to computing resources and preconfigured applications that add performance to companies into a new level of information processing and management, that only the mega corporations have today, through direct investment in IT assets, applications and IT and systems specialists.”
• “Empire’s [sic] built – similar to the sunk IT investment, can often be a big barrier. A CIO who clings to the concept of “building his empire” doesn’t want to lose that piece of his crown to an outsourced provider. If an IT Manager sees installing infrastructure as his key strength and can’t adapt to the new services model, keeping the status quo is a safe play. It takes a CIO or other C level managers to reconsider what an IT department provides and whether it is best placed to provide it. I think an IT department can be equated with the public service – where it is run lean, it adds value, but as a bloated empire it just acts as a roadblock for innovation.”
• “I believe the real reason around the “fear factor” syndrome of Security is not IT security but job security. Loss of control is a huge factor which individuals are downplaying. Most companies will not consider allowing their core transactional systems and applications to reside off site. Also a detailed transition plan that allows migration in phases is a must for any cloud business case which is sorely lacking and in most cases excludes a vital issue and that is a mutual sharing of risk and benefits.”
• “It could be a combination. Big Firms typically want to have their infrastructure managed internally. It is not the question of money but security, tradesecrets etc. Cloud can be good solution for SMBs,other organizations and can help generate new businesses and bring IT to businesses that can not afford Big IT. In my opinion, both IBM and Microsoft have good offerings on Cloud along with Salesforce.”

Yes, yes, we know. Lies, damned lies and statistics. Still, this recent forecast from IDC (specifically, from its Asia/Pacific research division) caught my attention, as I’ve heard various analysts rattle off similar predictions here and there:

After five years of cloud hype, real examples of its business benefits are starting to present themselves. Cloud services and technologies are no longer simply used to replace aging or costly on-premises infrastructure and the scene will continue to evolve in the next few years.

However, in terms of the number of vendors in the market, IDC is of the view that about 30% of suppliers currently in the cloud market will be out of business by 2015 as it is a relatively new market with many players entering and leaving the playing field. Therefore, it is imperative for CIOs to ensure due diligence when selecting a cloud service provider.

It probably comes as no surprise that such a young market will experience some consolidation, but one out of three? Yikes.

I checked in with the analyst behind this research, Chris Morris — vice president of for Asia/Pacific cloud services and computing research and director of IDC’s regional services research — to see if this consolidation will be global or specific to APAC. Here are his thoughts:

You will find that this will be a universal phenomenon in the cloud business. Competition is very strong with the current market actually being relatively small. For a new start-up, generating cash-flow to support their start-up and R&D costs can be slow, especially in emerging markets where there is a more cautious approach to public cloud. For an existing ISV with existing revenue streams from traditional licenses, making the transition from license-based business models to a subscription-based can also be difficult, as they essentially have to cannibalize their own business to make the move.

So some will falter and fall from business causes, while others — those who pick a business niche based on either industry vertical or horizontal business process — will be ripe for acquisition by the likes of IBM, Oracle, SAP et al.

But those 30% which fall from view will likely be replaced by at least that many new entrants. So for the CIO and any vendor managing an ecosystem of partners, managing the market churn will be onerous.

Cloud providers, consider yourself on notice.

Image courtesy of ajc.com.

Although the cloud still has its skeptics, some new research from International Data Corporation (IDC) suggests their influence is going to dwindle — and fast.

Global spending on public cloud IT services is expected to exceed $40 billion by the end of this year, IDC reports. By 2016, cloud spending will approach $100 billion.

Over this four-year period, that represents a 26.4% compound annual growth rate. That’s five times as fast as the IT industry overall, according to IDC.

Which cloud services are going to be the hottest markets? IDC says Software as a Service (SaaS) will “claim the largest share” of cloud services spending over the next five years. Interestingly, however, cloud storage and Platform as a Service (PaaS) will grow faster.

This probably comes as no surprise to cloud providers. Infrastructure as a Service (IaaS) is on track to become commoditized (if it hasn’t already), and cloud providers are recognizing that selling SaaS and PaaS will be more profitable over the long term.

From a geographic perspective, the United States will occupy the largest share of the cloud market, IDC reported. Following closely behind the U.S. are Western Europe and the Asia-Pacific region (minus Japan). But the fastest-growth area for cloud spending? Emerging markets, whose “collective share [will] nearly double by 2016 when it will account for almost 30% of net-new public IT cloud services spending growth,” according to IDC.

OK, we know. You’ve got apocalypse fatigue. But hear us out.

As 2011 comes to a close, cloud providers are on the brink of — well, not an apocalypse. Seismic shift might be a more appropriate term.

Cloud and networking guru Tom Nolle outlines five big cloud computing trends that will reshape the cloud provider market in 2012, making the cloud far more successful and profitable for the providers that get on board.

Perhaps the most interesting of all is Nolle’s depiction of the rise of the “virtual cloud operator,” a spin-off of the “virtual network operator” (VNO) wholesale telecom model.

If “cloud VNO” models are combined with cloud federation, then every application developer has the potential to be a cloud provider on a global scale. How many new services or features could be easily created and supported by this internetworked cloud infrastructure? The result could be an explosion of innovation that remakes the whole relationship among consumers, business users, networks and IT.

The question of “Who is a cloud provider?” is bound to get a lot more interesting if the playing field opens this way. This kind of shift will also undoubtedly leave prospective customers kind of jumpy about the cloud security and compliance implications (because not everyone is comfortable with multiple providers touching their data).