Circle of reality

Has the market become disillusioned and cloud moved past its peak?

What goes around, comes around: everything seems to travel in a circle. The wheel of life turns; cycles begin, end, and begin again. Is the same thing starting to happen in cloud computing? The just-released Gartner Hype Cycle for Emerging Technologies has suggested that the excitement over cloud computing may have passed its peak, with the market appearing to be on the edge of becoming disillusioned with the technology.

Chas Davis, chief executive officer of Redhill SMB-focused managed services provider SAS Group [pictured, right] says the Gartner hype cycle could well be accurate. However, the positioning of cloud at Gartner's so-called peak of inflated expectations this year could be just as likely to represent a positive readjustment as any sort of shake-out.

"The hype around IP telephony was starting in the late 1990s. Uptake did not really start until 2006 for many reasons. This is the same as cloud, which started as hosting and then application services provision, and now cloud; it is probably the third launch of this technology.

"It's a bit like building datacentres - it is always best to be the third owner as the cost will have been written off and you can make profit."

Davis says it is best to wait until the hype from any phenomenon has died down. When the dust settles, the real business requirements become understood in detail, although there may be "a lot of hard and costly lessons" to learn along with that. The wheel, he suggests, is turning.

"Being a leader in this market still has to prove its value - especially in the SMB market," Davis adds.

Travelling up the slope of enlightenment

This year's Hype Cycle for Emerging Technologies divides cloud into several phenomena, all placed at different points in the cycle. Cloud computing is flagged as being transformational overall, with the cloud/web platform and private cloud segments both promising "high benefit" to businesses within two to five years.

This contrasts with phenomena such as consumerisation, biometrics and speech recognition, for example, which, to use Gartner's terms, have climbed out of the "trough of disillusionment" and are moving up the "slope of enlightenment" to reach what it calls the "plateau of productivity" - where the reputation or hype around a technology is more in line, presumably, with reality.

According to Gartner, reaching the plateau of productivity means the real-world benefits of the technology have not only been accepted but the tools and methodologies have entered their second and third generations, becoming increasingly stable and less inherently risky. Increasing numbers of organisations not only adopt the technology, but feel comfortable with it. Gartner says obtaining 20 per cent market share is a likely indicator of a trend having reached this phase of mainstream adoption.

David Mitchell Smith, a US-based vice president and Fellow at Gartner specialising in research on catalytic computing trends, warns against aligning cloud's position on the hype cycle closely with potential revenue or sales growth. How well the market is doing in revenue terms is not directly related to the technological trend's position on that chart, which reflects the hype level around the product or trend.

"The hype cycle is a measure of sentiment," he says.

Even if cloud does find itself sliding into the trough of disillusionment, that does not mean a lot of disappointed providers will necessarily follow, Smith says.

"But we are clearly seeing cloud computing continue as the most-hyped subject in IT today," he says. "Also, several aspects are quite mature, such as virtualisation and SaaS, and because so much of cloud is related to or based on that, that helps [cloud] along."

Focus on the customer

Private cloud and platform-as-a-service (PaaS) are examples of where the cloud hype is still peaking, and providers need to remain cognisant of that. Progress of cloud through the cycle has been slow, although it could proceed more quickly in future. But as reality aligns with expectation, third-party tech providers in the channel can look forward to a stronger market on the whole - although that does not necessarily rule out consolidation either, Smith notes.

"It is more likely that cloud will gradually fade into the background on the hype cycle, and just become part of everything," Smith says. "Cloud fills a void in the IT world, which likes to have a ‘next big thing'. And there is no other big thing on the horizon."

Peter King, SMB cloud lead at Microsoft UK, the hype cycle is not something Microsoft broadly uses but it is certainly useful to subscribe to. "It enables us to note things we should think about," he says.

King adds that cloud has reached the point where Microsoft is able to articulate what it does for the customer, and how it solves the problem the customer wants to solve. This is all good news for the market, he says, as the focus moves back to the customer need and away from the technology.

"But whether that solution is delivered on-premise, in the cloud, or as a hybrid, is kind of irrelevant. There has been a lot of traction and stories and information in the air, and we are becoming clear about what the cloud is and what it does," he adds.

Andy Burton, chairman of the Cloud Industry Forum (CIF) [pictured, left] says its figures show that cloud is clearly gaining traction, and there is no reason to suggest that might stop just because the hype is dying down. Cloud has been and will be transformative throughout 2011, and in two to five years' time it is tipped to go mainstream. These are all good things.

"Cloud computing is more about business transformation and business process re-engineering than about the technology," he explains. "And here the channel has a fundamentally important role to play."

Having clarified their own needs and offering around cloud, it is channel companies that will be critical to customers transforming themselves using cloud. And for that to happen, it has to have moved beyond the notion of cloud as simply an overhyped buzzword. If you look at the market, that is all now coming together, he says.

"Also, there is no price point barrier to entry, because cloud is about future skills and business knowledge, rather than technology," Burton says. "And people buy from people."

Complexity and confusion

Marcus Jewell, UK and Ireland country manager at datacentre IP specialist Brocade [pictured, right], says what is happening with cloud is no different to any other technology's life cycle. Now, though, providers must ensure they really know and can explain what role they play in cloud delivery.

"As we go through the trough of disillusionment, people will talk more about exactly what part they play. For example, we are about enablement. And that is the next point of clarity we can see," he says.

As the hype fades, massive complexity and confusion will become more apparent, says Jewell, and channel partners will need to navigate that morass for their customers, who will still be hunting out the best-of-breed offerings. For example, resellers will need to obtain transparency on how their solutions enable their customers' applications.

The whole process of industry readjustment around cloud could take up much of the next decade, he adds, and some of the huge vendors may lose out.

"The channel will need to continue to evolve," Jewell says.

John Earley, director of strategic development at Manchester-based wireless networking and managed services provider Metronet, says he believes Gartner has got its hype cycle "about right" on cloud.

"What they are effectively saying is that there has been an awful lot of talk about it [cloud] and not so much delivery. And I think there is more private cloud than public cloud utilisation," he says.

Earley adds that performance-related SLAs on putting apps into the cloud will be even more important as cloud moves out of the disillusionment phase. At the moment, people are moving apps into the cloud - particularly around security or backup - but not yet being much more adventurous.

By far the major issues that must still be resolved before cloud goes truly mainstream, he says, are financial. Channel companies still need to work out how best to profit; the incentives that salespeople should be offered; and how they should be remunerated for selling cloud, for example, because it is completely different from selling product.

"Once you get to the point of that happening, you are getting to the reality," Earley says. "And we are beginning to see somebody other than Salesforce.com delivering against the business model. So I think that [moving down towards the trough of disillusionment] is probably a good thing."

Let us hope so; market watcher Canalys announced that private cloud infrastructure and services should represent a $36bn (£22.1bn) revenue opportunity for channel partners globally in 2011 and the channel opportunity is but a subset of the total, since the public cloud market is expected to come in at about $85bn worldwide. Consumers are driving public cloud expansion via companies such as Google, Microsoft, Baidu, Facebook, Yahoo and YouTube, according to Canalys.

Alastair Edwards, principal analyst at Canalys, says private cloud initiatives provide the obvious choice for channel partners looking to grow new business.

"The IT partner community is as relevant as ever, thanks to its close customer relationships. Proximity, along with a history of product sales, gives channel partners a strong position from which to support internal cloud rollouts," he says.

"With a track record that includes service outages, security concerns and regulatory question marks, cloud computing has yet to become pervasive on the enterprise side. Its adoption is certain to accelerate rapidly over the next few years though, as technologies improve and comfort levels increase."

Hype or no hype, it seems once again that cloud cannot be ignored.