Uncommon Wisdom

May 17 2011   1:54AM GMT

Cloud reality: IT budgets trump number of adopters

Tom Nolle Tom Nolle Profile: Tom Nolle

A recent research report on cloud computing says that small and midsized business (SMB) buyers prefer to get their cloud applications from a single provider rather than to mix and match. That’s not surprising given that for over a decade, SMBs have cited difficulties in sustaining strong technology talent as being among their top three tech problems. But it also shows that “the cloud” means different things to different people.

In my own research, SMBs have consistently said that a “cloud service” is any Software as a Service (SaaS) offering, meaning that SMBs equate the term to “hosted.” Interestingly, while 100% of enterprises know what Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) mean, only 31% of SMBs do, and almost a quarter of those who say they’re interested in or consuming SaaS ask to have the term defined before answering.

If you strip out the “hosted” applications of the cloud, SMBs currently spend less than 3% of their IT dollars on cloud services, bordering on statistical insignificance. If all hosted services are considered, the number is about 6% for midsized businesses and about 11% for small businesses, the latter being higher primarily because of hosted Web presence, email and backup.

There’s a moral here. All the surveys about the cloud success or the cloud explosion are dodging a hard reality, which is that it’s not the number of companies that use cloud services but the percentage of IT budget moving to the cloud that matters. “Cloud penetration is doubling” just means that twice as many people are trying the cloud, not that the cloud’s role in IT is increasing that rapidly. Further, since most of these surveys target SMBs more than enterprises, the results are biased first by the differences in the SMB space and second by the lack of understanding on the part of SMBs of what “cloud computing” really is.

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