Cloud enters 'chapter two' as commoditisation kicks in

IDC warns users will need innovation from cloud instead of just cost savings as it forecasts spending will top $107bn by 2017

Spending on cloud computing is set to soar to $107bn (£68.71bn) by 2017, according to IDC, which warns that customers will demand more innovation from the technology as it enters 'the next chapter'.

The first phase of cloud was focused on improving efficiency and cutting costs, the analyst said, but, as the trend enters the next stage of its development, cloud technology will have to be more innovative.

"Growing commoditisation and competition is expected to bring about consolidation in basic cloud services and will force vendors to expand their offerings toward higher-value services," IDC said. "While commoditisation is expected to result in lower pricing and tighter profit margins, the competition will greatly expand the addressable market of solutions and customers.

"In order to survive, providers will have to scale their offerings 'up and out' toward a broader range (and dramatically larger number) of customers."

By the end of 2013, spending on public cloud will reach $47.4bn, and between now and 2017 – when spending will reach $107bn – the compound annual growth rate for cloud will be five times that of the wider IT industry.

In rival analyst Gartner's annual hype cycle, cloud computing has entered the "trough of disillusionment", which comes ahead of the eventual "plateau of productivity". IDC agreed that cloud was entering a new chapter.

"Now, there are signs that cloud services are starting to shift into a 'chapter two' phase where the scale of cloud adoption will not only be much bigger, but also more user and solution-driven," said IDC.

"The first wave of cloud services adoption was focused on improving the efficiency of the IT department," added Frank Gens, senior vice president at IDC. "Over the next several years, the primary driver for cloud adoption will shift from economics to innovation as leading-edge companies invest in cloud services as the foundation for new competitive offerings."