This blog was jointly posted by Chirag Mehta (Independent Blogger On Cloud Computing) and R “Ray” Wang (Principal Analyst and CEO, Constellation Research, Inc.)
Cloud Adopters Embrace Cloud For Both Innovation and Legacy Optimization
Once thought to be the answer to deployment options for just the SMB market, early cloud adopters proved otherwise.  Stereotypes about industry, size of company, geographies, and roles no longer hold back adoption.  Cloud adoption at all 4 layers of the cloud passed the tipping points in 2010 as a key business and technology strategy (see Figure 1).  For 2011, we can expect users to:
Figure 1. The Four Layers Of Cloud Computing

General Trends Reflect Natural Maturation Of The Cloud Market

• Replace most new procurement with cloud strategies.  Preference in deployment options and lack of availability of innovative solutions in on-premises options will result in a huge shift for 2011.  Add capex swap out for opex, and most CFO’s will be singing the praises of Cloud along with the business and IT leaders.

• Start with private clouds as a stepping stone to public clouds.  Conservative CIO’s looking to dip their toes into cloud computing will invest into private cloud while evaluating the public cloud at the same time.

• Get real about security. Customers will move from "the cloud is not secured" to "how can security be achieved in the cloud?".  They will start asking real questions about security.  The result -- cloud vendors must further showcase various industry-specific compliance approaches.

• Move to private clouds as a back up to public clouds.  Forecasts in cloud security breaches will call for partly cloudy cloud adoption.  Despite the woes in on-premises security and the march to the cloud, cyber attacks will force companies to mov e from public clouds to private clouds in 2011.  Concern about cyber gangs hacking into commercial and military systems leads to a worldwide trend that temporarily reduces public cloud adoption.  Hybrid models for apps in the public cloud and data in the private cloud emerge as users migrate from on-premises models.  Data integration and security rise to key competencies for 2011.  The bottom line - improved data security reliability will drive overall cloud adoption in the latter half of 2011.  Organizations will keep private clouds for both security and back up.

SaaS (Consumption Layer) Emerges As The Primary Access To Innovation

• Begin the transition from best of breed purpose built solutions to cloud mega stacks. Customers will still need stacks to be augmented by best of breed purpose built solutions.  As with the early days of ERP and CRM, expect su ite consolidation to occur for SaaS apps vendors.   However, the vendors with both the best PaaS platform and ecosystem will win.  Mature cloud customers will bet on several emerging platforms and apps as well as content driven cloud platforms complemented by strong integration solutions.  Access to deep industry vertical solutions will play a key role in this migration.  The need to quickly innovate will hasten SaaS adoption.

• Leverage apps market places and ecosystems for the last mile. The growing consumerization of enterprise apps includes a shift in how software is acquired and consumed.  Market places will be the predominant channel for not only the acquisition of last mile apps but also, the request for proposal for custom app development.  System integrators will have to deliver solutions in the cloud.  Software vendors will emerge as information brokers.

• Superior user experience and scale won't be mutually exclusive. The customers, especially the line of businesses (LOBs) will demand superior user experience as well as the scale in the SaaS applications and the tools that they will use. Ease of use will be on top of the list while evaluating a SaaS application and will help the SaaS vendors win a deal against on-premise incumbents whose products may have more features but poor user experience.

DaaS (Creation Layer) Addresses the App Dev Needs Of The Advanced Customer

• Shift all new custom app development to the cloud.  Early adopters already see the benefits of elasticity as they design, build, and test custom app without waiting for the procurement of hardware, installation of software, and the preparation of the environment.  In addition, the emerging tool kits continue to take advantage of more business oriented development languages such as Ruby and Python.

• Expect DaaS and PaaS to merge in 2011. Customers expect their platforms to not only provide orchestration, but also support a plethora of development languages.  Smart customers will seek open standards and want to avoid platform lock-in.  Expect truly open PaaS platforms to provide more choices in 2011.

PaaS (Orchestration Layer) Focuses On Simplifying Connectivity And Delivering New Technologies

• Bet on integration vendors with extensive libraries that move beyond data integration. Increasing hybrid deployment models will raise customer expectations for easier integration management.  Most customers will expect integration to work beyond point to point data.  Better integration will address process and meta data.  Customers seek improved analytics and the resemblance of a common data model.

• Deliver consumer tech features into the enterprise. As social business platforms, mobile enterprise capabilities, predictive analytical models, unified communications, and other disruptive technologies enter the ecosystem, customers will expect their platforms to keep up.  Analytical platforms will emerge first, followed by mobile and social features.

IaaS (Infrastructure Layer) Aims To Reduce Complexity And Simplify Management

• Demand better virtualization. The private, as well as public cloud vendors, will focus on reducing the virtualiztion overhead.  As customers invest into virtualization as a stepping stone to full fledged cloud adoption, they will expect easier to use and more comprehensive virtualization management tools.

• Simplify the overall technology landscape. Customers with a hybrid landscape of legacy and modern cloud systems will use Cloud as a tool to simplifying their existing landscape.  Cloud will also be used to reduce the amount of software shelfware and unused hardware capacity.  Users will benefit from a smaller energy and management footprint.

• Access archival data online. For many customers, especially in certain industries, where it was economically and technologically impossible to keep all the content online, the cloud adoption will mean bringing back archival content - text, audio, and video - back to their online systems.  Information management skills in archiving and data management will emerge as a core competency among cloud users.

The Bottom Line: Cloud Adoption Provides A Path To The Next Generation Enterprise

Cloud adoption is inevitable.   Business technology leaders will move beyond "try and buy" across the Cloud Stack for seven reasons:

1. The cloud has moved from “when” to “how”
2. As the economic climate improves, the cloud adoption discussions are moving from cost to value and from tactical to strategic
3. Reducing hardware cost, increasing competition amongst vendors, and economies of scale have put the customers in a driver's seat
4. Customers have realized that TCO of software should be a vendor's problem, and not theirs
5. Cloud will deliver the optimization savings to pay for future innovations
6. Future innovations will arrive cloud first and maybe never as an option on-premises
7. Time to value, ease of use, and good-enough functionality will lead as the primary drivers for SaaS adoption

Your Point Of View
What's your cloud strategy for 2011?  Will you go to a private cloud?  What Cloud products do you use today and why?  Looking for additional cloud strategy resources?