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December 7, 2012

Cloud services revenue to double the current share of provider revenue in two years: KPMG

The survey anticipates the migration to arise regardless of users' ongoing concerns over loss of control and data security, which have been providers' challenges of proving savings and the business case.

By CBR Staff Writer

The revenues generated by cloud-based services are expected to be twice the current share of provider revenue in next two years, according to a new survey from KPMG International.

KPMG’s 2012 Cloud Providers Global Survey revealed that revenue generated through the migration of business users to cloud in the coming two years will be mainly data-intensive applications that include business and data analytics, content management, customer care, and operations and manufacturing.

The survey finds that the migration will happen regardless of users’ ongoing concerns over loss of control and data security, which are the providers’ challenges of confirming savings and the business case.

More than half of the cloud service providers claim that cost reduction has still a major reason for most business users’ shift towards cloud, so far almost four out of 10 providers reveal that proving cost savings has been the biggest challenge.

About 39% of providers consider that users have practical expectations for cost savings in the shift to cloud, while 19% consider users don’t, further complicating the challenge for providers.

KPMG Technology, Media and Telecommunications practice partner, global chair and US leader Gary Matuszak said while providers are seeing the challenges of a maturing, yet still relatively young, market, there has been a pivotal point in the evolution of the cloud ecosystem as users become more comfortable with a variety of cloud applications.

"Leading cloud providers know they must evolve to provide a new level of scale, capacity and capability," Matuszak said.

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About 38% of surveyed providers see that showing stronger evidence of cost savings is the highest challenge followed by 31% for devising usage-driven pricing and about 27% consider helping clients develop realistic business cases for switching to cloud as major challenge.

Nearly half of providers consider loss of control has been a business user’s biggest difficulty with cloud adoption which is followed by data loss and privacy risks, while 57% of providers said that they have been dealing with data security issue with tighter restrictions on user access.

Currently, 59 percent of providers have service level commitments in their cloud service level agreements (SLA).

Over the coming three years, about 68% believe that they will have commitment parameters in SLAs, and 82% anticipate data security to be the single-most prioritised SLA parameter.

Nearly two-thirds of cloud providers consider they are most active in software-as-a-service applications (SaaS) and anticipate continuing over the next two years, while platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) are also forecast to have the large rise during the period.

KPMG Technology sector global advisory leader Tom Lamoureux said that the expected shift 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 directionand guidance from providers across a broad range of areas.

"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," Lamoureux said.

Nearly half of surveyed providers believe that business users have been sufficiently familiar about the marketplace for cloud services, with a quarter believing that customers require to be learned more on the basic aspects of cloud, while a quarter believe customers need more information about contractual arrangements.

About 60% of providers claim that users turn to a third party for assistance with acquiring or implementing technology, while 40% believe business users employ third parties for assistance on user business strategy.

According to KPMG, about 48% providers were willing to form a partnership, while 47% were planning to expand capabilities to provide more strategic services and consulting to business users.

According to the survey, 79% of chief information officers and 77% of chief technology officers have been influencing the purchasing decisions on cloud.

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