For companies cutting IT costs, the cloud is the place to be

Story first appeared on USA Today -

Data storage shift helps companies' bottom line

Cloud computing is exploding and growing faster than a swirling funnel crossing the Oklahoma plains. The next generation of computing lowers information technology costs while increasing corporate profits at the same time. And what's not to like about that?

That one-two punch was revealed in a study obtained by USA TODAY conducted by England's Manchester Business School. The study, which was commissioned by San Antonio-based hosting company Rackspace, is expected to be released Wednesday.

The Manchester study indicates that cloud computing allows U.S. businesses to slash information technology costs by about 26%. What's more, 62% of those same American companies say that deploying in the cloud improved their bottom lines.

"The results are finally showing what we've known all along," says Rackspace Chief Technology Officer John Engates. "It's not just about moving workloads from your data center to our data center."

The rise of cloud computing has much bigger ramifications. It's a tectonic shift in how we work, live and play. iTunes is in the cloud. Ford's cars are connected to the cloud. Google's Gmail is based in the cloud. But those are largely consumer examples; now corporate computing is also shifting to the cloud.

"The move to the cloud can't happen fast enough for some companies," says Engates, who has been on the ground floor of the cloud-computing movement.

Cloud computing has myriad definitions, but in the most general sense it means devices linked to data centers located just about anywhere over a combination of wireless and wired networks. There are "private clouds," where companies own and control the data centers, which are usually centrally located in lower-cost geographies. And then there are "public clouds," in which companies use computing power delivered from servers they don't own, which are usually shared with other corporate customers.

Big companies tend to use a combination of private and public clouds, reserving their high-security functions and digital record keeping for the data centers they control. But the growing acceptance of public clouds foreshadows a trend in which computing power will be delivered similarly to the way electricity is distributed by utility companies. In fact, tech geeks refer to the long-term public cloud concept as "utility computing."

We are a long way from when most companies no longer own servers, or operate so-called on-premise data centers, and rely solely on public clouds. There are a number of reasons, including security concerns, control and reliability. But the Manchester survey suggests that enterprise computer customers are embracing the shift enthusiastically.

In addition to the cost-efficiency of cloud computing, the study found that 68% of U.S. firms are plowing the cash they saved back into their businesses. They are using the cost savings to improve and expand product lines, services and other offerings. More than 60% of the companies surveyed say they are using the money to hire new employees, give raises and offer bonuses. Employment at the American companies surveyed increased 28%.

While existing companies are transitioning to cloud computing at their own pace, start-ups unsurprisingly are totally embracing the change -- especially software and social-media concerns and online retail outfits.

More than half of the start-ups surveyed said they wouldn't have been able to afford on-premise data centers at the time of their launch.

Of course, it is self-serving for a cloud-service provider to hire a study that supports its case, but the numbers are the numbers, and Manchester interviewed some 1,300 companies in both the U.S. and the United Kingdom.

Intel's general manager of cloud computing, Jason Waxman, isn't surprised by the findings. Server, storage and networking sales have been booming at the chip giant in recent years. Intel pegs the compounded growth rate for servers at about 25% to 30% a year based largely on expansion of private and public clouds.

"The more companies can save on computer infrastructure, the more they can spend on infrastructure," Waxman says. "All of these new opportunities represent a huge build-out."

Waxman thinks that public cloud providers, including Rackspace, Seattle-based Amazon.com (yes, that Amazon) and San Francisco-based GoGrid, could grow as much as 70% a year.

Gartner, the industry research consultant, predicts that the total public cloud market could swell to more than $206 billion in 2016, roughly double what it is now.

Says Intel's Waxman, "It's an astronomical opportunity."

One Thriving Tech Industry: Home Office Networks
The market for home office networks and data storage is actually booming against the general economic downtrend
Story from Channel Web

Despite a general plummet in storage hardware sales, the SOHO NAS market is actually booming, according to recent Gartner data.

Total revenue from the sales of sub-$5,000 NAS appliances for the SOHO(Small Office/Home Office) market in 2008 were up 64 percent over the revenue booked in 2007, said Pushan Rinnin, research director at Gartner.

And, unlike most of the rest of the storage hardware market, sales of the low-cost appliances are expected to continue to grow in 2009 over 2008, although at a more moderate 6.4 percent, Rinnin said.

Total storage hardware revenue for all of 2008 grew at an anemic 3 percent, according to IDC, with sales falling 5 percent in the fourth quarter.

Overall storage hardware sales plunged in the first quarter of 2009, falling 18.2 percent compared to the same period in 2008, IDC said.

Rinnin said that the growth in the sub-$5,000 SOHO NAS market in 2008 was a lot more than Gartner expected.

However, she did admit there was somewhat of an apples-to-oranges comparison between 2008 and 2007. "Some vendors we didn't capture [data from] in 2007, but we later found out did well, like QNAP in Taiwan, which sells mainly to Europe," she said.

In 2008, Netgear was the largest seller of sub-$5,000 SOHO NAS appliances, with sales of $98.7 million, up 128 percent over 2007. That gave the company a 28 percent share of the market, Gartner said.

It was followed by Buffalo Technology with sales of $44 million, down 47.2 percent; EMC (NYSE:EMC)'s Iomega (NYSE:IOM) with sales of $38 million, up 69 percent; Hewlett-Packard (NYSE:HPQ) with sales of $30 million, up 13 percent; and LaCie with sales of $25 million (percent change unavailable), according to Gartner.

In terms of units, Buffalo Technology led the market despite a 34.4-percent drop in shipments to 62,950 units, giving it a market share of 19 percent.

It was followed by Netgear with 52,255 units, LaCie with 50,000 units, QNAP with 32,900 units and EMC's Iomega with 19,392 units, Gartner said.

Netgear's rise to the top came as a result of its acquisition of Infrant Technologies in 2007, Rinnin said.

Buffalo Tech's drop in sales does not indicate that the company is slipping as a storage vendor, Rinnin said. "Instead, it's more focused on the consumer side of the market," she said. "Its 2007 SOHO NAS numbers might have been overestimated. For some products, there's not such a clear cut between consumer and business use."

The consumer side of the NAS market also did very well in 2008, and that bodes well for growth in the SOHO NAS sector, Rinnin said.

"Growth in the home market comes from consumers getting more digital content," she said. "Putting in network-based storage in the home for use by multiple PCs or as a central backup is a reality now. And vendors are making it easier than ever to use. And as these kind of consumers become familiar with the product, they'll start to use it for their home-based offices as well."

Drew Meyer, director of product marketing for SMB storage at Netgear, said SOHO NAS vendors are some of the biggest storage companies people have never heard of before.

Netgear, for instance, in addition to being the largest sub-$5,000 SOHO NAS vendor in terms of revenue, also is the sixth-largest vendor of unified NAS-iSCSI storage appliances, Meyer said, quoting Gartner numbers. However, once either EMC or NetApp acquires Data Domain, Netgear will rise to No. 5, he said.

Netgear also is the No. 3 vendor of sub-$25,000 NAS in terms of revenue and No. 2 in terms of shipments, Meyer said.

"Nobody thinks of Netgear as a major player in the sub-$25,000 storage space," he said. "Maybe they do in the sub-$5,000 space. So this will give VARs a reason to look at Netgear."