Is Cloud Computing Market Bigger Than We Thought?

It typically is difficult to estimate the size of a big a new market when that new market essentially cannibalizes existing businesses in the process. Unified communications has been that sort of market, since it logically includes or replaces many other ways of handling communications functions, ranging from fixed or mobile voice to email to messaging, voice mail, “presence” and call handling.

Something like that probably is going to happen with cloud computing. In a sense, cloud computing is part of the next generation of computing architecture. We don’t yet know what this next era will be called, but few question the assumption that cloud computing and mobility will be key foundations of the architecture.

Consider the notion of “business process as a service.” What’s a business process? Business process management is said by IBM to include such functions as:

• Web analytics
• Enterprise marketing management
• Business-to-business integration
• Supply-chain management
• Security governance, risk management and compliance
• Business service management

Others might see other building blocks such as email management, communications management or shopping cart services or catalog processes as similar inputs to create whole business processes.

As those processes all move to cloud delivery mechanisms, the logical question is whether such “outsourced” processes, supported by cloud delivery architectures, are part of the cloud computing business or not.

At some level, the answer has to be “yes.” Think of cloud-supported advertising systems, or retail operations outsourced to Amazon, both key business processes already often supplied to business partners that use cloud computing.

Still, you can see the problem. What counts as a business process “as a service?” Is it only the value of the contract to use a retail checkout system, a catalog or a fulfillment process? Is it partly the value of the transactions, or the value of the products traded?

For any cloud-supported mobile or Internet advertising system, what should be counted? Is it the value of the advertising, or only the commissions an exchange might earn? The same question can be asked for any cloud-based payment system.

The point is that it is possible cloud services markets might be bigger than currently envisioned, only partly depending on “what” gets counted.

The reason is that more and more business processes using software, processing and storage are shifting to cloud mechanisms, even though we traditionally have viewed software delivery, computing resources, storage and development environments are the primary cloud markets

Business process services (also known as business process as a service, or BPaaS, represents the largest segment of what analysts at Gartner now tabulate,  accounting for about 77 percent of the total market, Gartner now argues.

BPaaS is the largest segment primarily because of the inclusion of cloud advertising as a subsegment. But you might also argue that BPaaS is so big because it basically represents a redefinition of the traditional outsourcing business. And that is a larger business than simple computing, storage and applications delivery.

“Businesses that leverage traditional outsourcing deals are looking to move off of inflexible contract and delivery structures,” says Robert McNeill, Saugatuck Technology VP. “Businesses are looking for more flexibility, innovation, and responsiveness from their outsourcers. BPaaS is providing that alternative.”