I read through the McKinsey & Co. report today on cloud computing. The one that caused a bit of a fracas a few weeks ago when they kind of rained on the parade about cloud computing. Hype is a big concern for McKinsey as they recognize how it can damage the overall market. I still think that McKinsey is a bit curmudgeonly but their views sure don’t seem so stuffy now that I have learned how Gartner is coming up with its numbers.
Gartner says the size of the 2008 cloud computing market stood at $42 $46 billion and will jump to $115 $150 billion by 2013.
He learned that Gartner counts Google AdWords in its totals. Huh?
From Cloud Bzz:
I spoke with Gartner analyst Ben Pring (leading a session on Cloud), and he indicated that about half of that number is spending on Google AdWords. Say what??? That’s right, the people at Gartner consider media buying for Google AdWords a “business process” that is cloud-based. They also include ADP’s hosted payroll service and any ASP-delivered or SaaS offerings.
According to Treadway, Pring could not really justify how Google AdWords has anything to do with IT. That’s because there is no correlation at all.
As Treadway explains, the largest companies in the world buy Google keywords through agencies. They may use some online tools but for the mot part the work is outsourced.
How can Gartner expect to maintain credibility in the IT community with such predictions?
As Treadway writes:
The SaaS market he quoted at about $5b or so. If you add in all of the pure-play cloud stuff and PaaS vendors like Salesforce and Intut (QuickBase), you might be able to get to $10b. $42b is just a ridiculous number and will confuse the heck out of enterprise IT buyers.
Back to the McKinsey report…I am now not so skeptical of the consulting firm’s conclusions about how the hype can be so dangerous and the comparisons they make to the dot-com bubble.
The 2000 dot-com bubble provides an extreme example of the dangers of investing in hype…
* Huge investments were made based largely on hype
* Eventually, the inability to generate profits led to the collapse of most of the boom-time dot-coms
* From peak to trough, the NASDAQ-composite lost ~ 80% of it’s value
McKinsey caught a lot of criticism for its report. Gartner should get some criticism, too, for how it comes to its predictions for the cloud computing market.