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Piper Jaffray on the Cloud

Piper Jaffray has published a 300+ page study on the cloud computing industry based on a recent survey undertaken of 100 CIOs. Bottom line, cloud computing is expected to grow significantly over the next five years. 

    Survey respondents expect the mix of cloud computing to escalate strongly to 13.5% in five years. This equates to a five-year CAGR of 19.2%, or 23.9% when we also incorporate IDC’s forecast that total software budgets will grow 4.7% annually. In other words, software spending will grow gradually in the next five years, but the mix of spend allocated to cloud-based applications will likely surge rapidly. Another way to think about the data is that the Cloud Computing market is expected to grow five times as fast as the broader software market: 23.9% vs. 4.7%.

If anything, I think the prediction is conservative and the impact could be much larger in magnitude when mainstream adoption occurs.  But the risk is that adoption takes longer, just as it did for open source software.  And as the report indicates, open source is powering much of the cloud computing that's going on:

    The next-generation Cloud Computing data centers are NOT running Microsoft Windows; they are increasingly leveraging the compelling economics of open source components. For example, the data centers powering Amazon, Google, and salesforce.com all run on Linux and other open source technologies. In fact, Red Hat’s operating system and the MySQL database are key components to many of the leading-edge Clouds being developed today. 

Why is this occurring? Because open source leverages a global community development process which results in a product that evolves rapidly, provides transparency into the source code dynamics, and surpasses other products in terms of security and reliability – all at a lower total cost of ownership (TCO) than traditional offerings.

Comments

Hi Zack,

First I need to mention that I am Microsoft employee and work for Windows Azure, which is another major player in the cloud computing market. You may consider my answer biased but here is what I think about this topic. It is true that open source may look as a cheaper alternative however it has its own price. In general the price for maintaining the hardware and the underlying operating system software in a cloud scenario is incurred by the provider, which makes it irrelevant what operating system the provider uses as long as it satisfies the needs of the customer and offers competitive prices. If customers pay to the provider comparable fees for Linux and Windows then the decision which one to choose will not be based on whether Linux is free and Windows is paid – they are both paid in this case. The decision will mostly be influenced by what are the customer’s existing infrastructure investments, what are the capabilities of the platform, what are the customer’s needs etc.
In my opinion both Windows and Linux have their own advantages. If as a customer I have made significant investments in Windows-based infrastructure it wouldn’t make sense for me to go with Linux in the cloud, as well as the opposite is true.

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