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Cloud Comprises More Share of Total Revenue Due to Migration of Sophisticated Apps

Today, cloud computing is a huge step forward in technology as well as a smart move for businesses. The cloud offers all businesses the agility, flexibility and scalability that is not obtainable with on-premises computing , creating a competitive advantage.

According to the 2012 Cloud Providers Global Survey from KPMG International, in just two years cloud-based services revenue is expected to comprise twice its current share of provider revenue.

Cloud migration revenue is likely to become frequently used for data applications like data analytics, content management, customer care and operations. The shift is expected to happen despite concerns of loss of data security, in addition to the providers' challenges of proving savings. In fact, six out of 10 providers say cost reduction is still the main reason business users migrate to cloud, yet four out of 10 providers say proving cost savings is the biggest challenge.

"While providers are seeing the challenges of a maturing, yet still relatively young, market, we're at a pivotal point in the evolution of the cloud ecosystem as users become more comfortable with a variety of cloud applications," said Gary Matuszak, partner, global chair and U.S. leader for KPMG's Technology, Media and Telecommunications practice, in a statement.

Addressing the expectations gap on cost savings is one of the interrelated challenges as users embrace the cloud for more strategic reasons. Also, providers see the top three challenges as: showing stronger evidence of cost savings (38 percent), devising usage-driven pricing (31 percent), and helping clients develop realistic business cases for switching to cloud (27 percent).

According to half of cloud providers, loss of control is a business user's biggest difficulty with cloud adoption followed by data loss and privacy risks, according to 39 percent. 57 percent of providers say they are addressing the data security issue with more restrictions on user access and sophisticated data encryption.

Currently, 59 percent of providers surveyed have service level commitments in their cloud SLAs. Over the next three years, 68 percent say they will have commitment parameters in SLAs, and 82 percent expect data security to be the single most important SLA parameter.  Moreover, two thirds of cloud providers say they are most active in SaaS (News - Alert) and expect that to continue over the next two years. PaaS and IaaS activities are projected to have the highest increase in activity over the same period.   

"The anticipated migration of core systems and critical infrastructure to cloud in the next two years will be complex undertakings; users will be requiring if not demanding strategic direction and guidance from providers across a broad range of areas," said Tom Lamoureux, global advisory leader, KPMG Technology sector.  "The lines are blurring across the various types of cloud services; users need and want to understand cloud's value and immense power much better than they do."

While half of providers say that business users are knowledgeable about the marketplace for cloud services, a quarter believe that customers need to be educated. The knowledge gap may explain the interest in outside assistance, as 60 percent of providers say users turn to a third party for help with implementing technology.

Providers are shoring up deeper expertise to meet user demands for greater proficiency in the cloud.  More than one third of providers say they need to train their sales forces on how the cloud works.  Half of providers say they will form a partnership (48 percent) or expand capabilities to provide strategic services and consulting to business users (47 percent).

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