Martin Hingley's Blog

Dutch Cloud Computing Highlights

• 15% of ITC spending in 2010
• Set to grow to 19% in 2013, worth €7.5 billion
• Current spending mainly by consumers on broadband and internet service
• Strong growth in SaaS, IaaS and PaaS expected
• Cloud Computing threatens national managed services and outsourcing suppliers in Holland

Earlier this year we published a highly successful sizing of the UK Cloud Computing market. This article builds on the research we carried out then and adds some important new categories and definitions which hopefully will help clarify some of the more difficult issues for those who need to assess the market size and forecast.

Cloud Computing is becoming a real, money making market in 2010. ITCandor has been active in sizing and defining its various elements and is pleased to outline its initial findings for the Netherlands in this article.

Cloud Computing Is A Modest Market In Holland With Strong Growth Prospects

We size the Dutch ITC market will be worth €37.7 billion in 2010 and predict it will grow to be worth €40.7 billion in 2013. Of this Cloud Computing will account for 15% (€5.5 billion) in 2010. It is set to grow faster than the overall market to reach €7.5 billion (19% of total) in 2013. An illustration of the comparison between tradition and Cloud Computing spending is shown in Figure 1.

IT And Telecom Services Will Account For The Majority Of Cloud Computing Expenditure In Holland

When itemising the numerous spending categories for Cloud Computing the two strongest components are IT Service (of which Internet and Other Services account for the largest part) and Telecom (of which Broadband Service predominates). Other categories – in particular SaaS, IaaS and PaaS – account for only a small proportion of current spending and, despite the focus on these areas, they are important for the role they play in developing private and public Clouds from which end-user services are delivered. We’ve included a view of the forecast by category in Figure 2.

Cloud Development Services Offer Most Growth, Retail Cloud Services Most Revenue In Holland

Of the various Cloud Computing elements Retail Cloud Services dominates current spending due to its inclusion of Broadband and Internet Service: consequentially they contribute strongly to the overall shape of the forecast (see Figure 3). 2010 has shown a strong growth in spending on Cloud Access Devices, which we expect to fall off significantly in the New Year. Cloud Telecom Connection is expected to be stronger than total Cloud Computing spending. The strongest growth of the various elements is expected in Cloud Development Services, especially in 2011 and 2012.

Among Retail Cloud Services Broadband And Internet Service Will Over-Shadow ‘… As A Service’ Offerings

For some Cloud Computing definitions are restricted to Software, Infrastructure and Platform as a Service (SaaS, IaaS and PaaS). While these categories will continue to show strong growth, it will take to a long time after the period of our forecasts before they challenge the size of the two pre-existing services, Broadband and Internet Service.

Consumers And Small Business Will Invest Most In Cloud Computing In The Netherlands

Consumers are already the majority users of Cloud Computing. The use of free-to-use social networking, Internet email and backup services is naturally being expanded with the introduction of music and television streaming and other paid-for Internet services. Equally small businesses (those with less than 100 employees) have found initial Cloud Computing easier to adopt than those companies which run their own IT infrastructure. We don’t expect the success of companies such as IBM, HP and Fujitsu to help larger organisations build their own private Clouds to lead to those companies spending overtaking smaller organisations and consumers within the current forecast. A view of ITCandor’s forecast for Cloud Computing spending by company size is shown in Figure 5.

The Majority Of Cloud Computing Spending In Holland Will Be For Off Premise Offerings

The majority of Cloud Computing spending in Holland will be on off premise solutions and offerings. Cloud Access Devices and Cloud Delivery Platforms are the main on premise elements, while we also include 50% of the spending on Cloud Telecom Connections in this area. A picture of the development of on and off premise spending is shown in Figure 6.

Defining Cloud Computing Elements

Market research requires definitions of what something is and isn’t before it can produce findings. In the case of Cloud Computing the process is extremely difficult, not least because it is not itself a product. In addition even where it can be clearly differentiated, it is currently often a technical description of how applications are delivered and used, rather than something you can go out and buy. For Cloud Computing to become successful it is important that it should be chosen in preference to some other kinds of computing. This is not entirely true today, as most users of social networking, Google or iPhone apps and Web-based email are blissfully unaware that they are early Cloud Computing participants: this however is very likely to change. Cloud Computing is the most valuable marketing term in the ITC industry already and will undoubtedly become increasingly used to differentiate offerings for users and solution builders alike.

Cloud Computing Defined For Market Sizing

As with our UK sizing activities we started by looking at the total ITC spending by quarter and offering in Holland. Once done we then set about estimating what to count as ‘Cloud Computing’. For this we’ve adopted the following definition:

“For market-sizing purposes Cloud Computing encompasses all ITC offerings (products or services) which are used for the consumption or delivery of remote, browser-accessed applications – the delivery of which comes from data centre resources unknown to the ultimate end-user. Typically Cloud Computing applications are purchased on a pay-as-you-go basis and can be accessed by industry standard client devices such as PCs and Smart Phones. Specifically excluded are applications requiring local processing and storage, client server computing and interactive processing. Single-customer applications are not excluded as long as the delivery mechanisms have been adjusted.”

This is quite a generous definition and we even allowed offerings such as printers, gaming consoles, converged devices to be counted for the time they spend associated with these applications.
For our latest sizing we have grouped the offerings into new subdivisions in order to make our forecasts more vital. In particular:

• Cloud Access Devices (CADs) – we grouped the devices to which Cloud Computing is delivered, taking PCs, smart phones, smart tablets gaming consoles, peripherals and set top boxes; as before we’ve estimated only the expenditure on those devices accessing the relevant applications and excluding the proportion of the time these machines are involved with traditional computing; iPhones downloading music from iTunes are excluded, those using Google maps are included for instance; traditional TV is a broadcast media – not Cloud; it is only when there is interactive streaming to a browser based TV that we would consider it
• Cloud Delivery Platforms (CDP) – here we included those components used to deliver Cloud Computing either to a company’s own employees or consumers; elements including include servers, storage systems, networking equipment, operating systems, infrastructure software and applications as well as hardware and software maintenance; again we’ve excluded those machines used for traditional computing from our estimates
• Cloud Telecom Connections (CTC) – here we’ve estimate the costs of Telecoms service (fixed line and wireless) used to access and deliver Cloud Computing applications to users; a small, but growing, part of the overall Telecoms service market; it may be contraversial but we believe these are additional to Broadband connections which are bought as a RCS
• Cloud Development Services (CDS) – in this category we’ve tried to capture the amount being spent on developing Cloud Computing by users and aggregators; the components include implementation service, as well custom and development and test software
• Retail Cloud Services (RCS) – this is where we capture the majority of Cloud Computing spending; the two existing 100% classes – Broadband and Internet Service are joined by the newer SaaS, IaaS and PaaS services
• Cloud Location – in addition to the groupings of products and services we’ve also decided to plot where the applications and systems are run by identifying on and off premise locations; this is designed to help identify the balance in the business between selling services or building private Clouds for customers

We’ve been engaged in some interesting discussions about definitions over the last few weeks and have found some strong disagreements on which classes can be included and whether they can be measured. ITCandor believes that more clarity will develop over time for the classes which appear obscure today. Our subdivisions should allow business planners to pick and chose their inclusive classes, ignoring those they exclude.
Of course we have also kept count of the non-Cloud Computing spending in order to judge the relative growth rates and opportunities.

Some Conclusions – Cloud Computing Will Disruptive In Holland

Cloud Computing is one of the few ITC topics which is growing from the ‘bottom up’, enabling small companies to compete more effectively than ever before. Large companies and the government is investing to keep from falling behind – one reason why Cloud Development Services will show particularly strong growth in the next two years.
The current heart of the Dutch market is managed services and outsourcing – hundreds of suppliers looking after the needs of small and medium companies. We expect this business to be threatened by Cloud Computing, especially if the government fails to protect national companies from larger American suppliers. We don’t expect Holland will follow the free for all of the UK market however. Local suppliers have the advantage of trusted relationships with their customers and an understanding of governance, compliance, security and data protection issues. This means that the Cloud will remain inappropriate for many corporate applications and most Dutch companies will continue to need real people to help them implement and run their internal systems. However even in larger organisations we expect a slow influx of non-critical applications from suppliers such as Salesforce.com, Google, Amazon and eBay. Cloud Computing can be much cheaper than running your own systems, especially in a multi-tenanted hosted environment and its usage may also increase as a consequence of the influence of younger, less conservative ITC purchasers. We believe ‘those born into technology’ will most probably be bigger friends of Cloud Computing than those of us who ‘learnt technology’.
Cloud Computing is part of a natural process of simplification and centralisation: there has been enough standardisation over the last 10 years for many users to trust someone else to run ITC as a quasi-utility.
Finally we see that Cloud Computing will involve a closer merger of IT and Communications than ever before – not least because it can only exist in a heavily connected world. It will undoubtedly help many Telecom suppliers with their convergence strategies and lead to many new types of services over time.
Are you interested in sizing Cloud Computing? Which countries are most important? Please let me know by commenting on this article.

Filed under: Cloud Computing, Holland, Market Share And Forecast Tagged: | CLoud Access Devices, Cloud Computing, Cloud Delivery Platforms, Cloud Development Services, Cloud Telecom Connections, Dutch, Holland, IaaS, Netherlands, Off Premise, On Premise, PaaS, Retail Cloud Services, SaaS