Five Companies Shaping Cloud Computing: Who Wins?

Look at the figures for IT spending on cloud computing and you’ll have to squint to see the skinny percentage. Worldwide dollars directed toward the cloud accounted for a scant four percent of global IT spending in 2008, according to research firm IDC.

But if you gauge levels of vendor excitement about this new model – in which software is rented over the Web instead of installed in-house – you’ll realize they sense a once-in-a-lifetime gold rush.

Excitement runs hot. Seemingly every vendor now uses the magic term “cloud” in their software/hardware product. One of the new netbooks is called a Cloudbook, IBM touts its Blue Cloud, and Dell even attempted to copyright ‘cloud computing’ (so far unsuccessfully).

Given the tiny four percent spend, are these hyperventilating vendors chasing after pennies? What’s all the deep breathing about?

Top tech giants are looking to the future when IT forecasters do indeed see gold in them hills for cloud vendors. By the year 2012, if you accept IDC’s prediction, the cloud will account for a whopping 25 percent of new tech spending. That’s serious money by anyone’s measure.

The winner in this emerging world will likely claim dominance in the overall tech landscape. That's because cloud computing encompasses most of what’s coming: the hyper-growth in connected devices, the surge in real-time data streams, online and mobile commerce, and business use of service-oriented architectures, virtualization and Web 2.0 applications.

The cloud won’t just be the dominant software delivery model, it will be an essential part of all consumer and business computing. (Unless, of course, it turns out to be the fad of the early 21st century – we never did got those jetpacks they promised us in 1967.)

The $30 billion dollar question is: who’s leading the pack into this new era? Who’s the big dog that everyone has to keep up with if they expect to survive into the profitable era?

“There isn’t one,” says David Smith, a Gartner analyst. Despite the beckoning treasure the cloud market is still too inchoate to call a leader.

Yet there are top contenders. “If you look at the various sub segments, Amazon is clearly an early leader. Salesforce and Google are early leaders,” he says.

“I do consider Microsoft as, I wouldn’t say ‘early’, but a current visionary in terms of what they’re looking to offer,” he adds. The breadth of Redmond’s Azure initiative looks promising, even if parts are still vaporware. And IBM’s Blue Cloud benefits from the company’s large enterprise muscle.

The shift won’t happen overnight. Most of the top players have unveiled their plans in just the last year or so. And businesses customers, dispirited by the recession, don’t want to hear about anything newfangled. Worse, the term ‘cloud’ has a confusing jumble of meanings and is still seen as marketing voodoo by harried middle managers.

“There’s an incredible amount of inertia,” Smith notes. Changing something as complex as IT operations is necessarily cumbersome and slow.

Among the potentials of the cloud is that companies will purchase their raw computing power, along with software, from remote datacenters. (This is Nick Carr’s Big Switch theory.) The in-house IT department will fade.

Yet companies have invested massively in their IT infrastructures. In-house IT is inextricably linked with business process – even as cash-strapped companies look at IT departments as financial albatrosses. In short, classic on-premise IT isn’t about to die just yet.

“Now, IT’s out of the bottle,” Smith says. “Everybody has it. For better of worse, they know what it is. And you’re not going to get it away from them unless they have a really good reason for giving it up.”

Two key factors might prompt businesses to trend away from on-premise IT, he says. “One is if they can save an enormous amount of money – not ten percent, but an enormous amount. Or, if they can do things they couldn’t do otherwise. And to some extent that’s not really giving it up, but using it for new things.”

The five leading cloud contenders – Microsoft, Salesforce, Amazon, Google and IBM – hope to offer customers those two reasons. As the competition gets serious, here’s a look at their strategies:

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Or, go the page that describes a cloud vendor's strategy:

Microsoft

Salesforce

Amazon

Google

IBM