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Gartner’s Cloud Numbers Don’t Add Up (Again!)

Their numbers from last year were disputed by me

Once again, Gartner has publicized entirely useless and (worse) misleading numbers on the global market for cloud computing services.  Their numbers from last year were disputed by me (here, and here) and several others, yet they kept to their fataly flawed methodology for the 2010 update.  This is despite at least one of the analysts who’s name appears on the report privately agreeing with me that last years numbers were “rubbish” and that they were pressured into using this methodology.

The press release cited above indicates that “cloud services revenue is forecast to reach $68.3 billion in 2010…”  My primary question is “Hey Gartner, what color is the sky in your world?”  Or perhaps it should be “What have you been smoking?”

I should point out at this point that someone totally unrelated to this blog or my job recently handed me a copy of the complete Dataquest report on which the press release was based.

Here is a distribution of the 2010 numbers from there report:

Soure: Gartner (May 2010)

Breaking It Down – Google AdWords Ain’t Cloud!!

As was the case last time, the most ludicrous inclusion in these numbers is what they include under the heading “Business Process Services.”  Out of $68.3 billion total cloud services forecasted for 2010, Business Process Services is $57.9 billion, or 85%.  The biggest chunk of this is $32 billion in online advertising.  That’s right, Gartner thinks that the billions that advertisers spend with Google, Yahoo, and others for advertising their products and services should be counted as cloud spending.

Okay, so I’m marketing mortgages using AdWords, and the money coming out of my marketing budget counts as cloud?  Really?  Is it just me, or is that totally insane?!?

Other things that count as cloud in the “Business Process Services” bucket?

  • Cloud-based E-Commerce: this is a bit of a toss-up.  The fees that eBay collects from merchants and the Amazon marketplace fees are included here.  Is that really a cloud service, or just distribution???  I’d say it should be out.  Though if you want to put it anywhere, count it as SaaS revenue.
  • Payments: this includes the fees that PayPal charges, most for merchant card processing.  It ain’t cloud!
  • HR Services: the fees that ADP charges your company to process your checks and provide online access to your payroll records??  Yup, it’s cloud according to Gartner.
  • Supply Management: they are not clear about this, but I imagine fees charged to manufacturers for inclusion in supplier search engines (e.g. Alibaba) might count here.
  • Demand Management: could be advertising analytics apps and programs for managing online search spending, but again not clear
  • Finance, Accounting, Admin: again, they don’t provide good examples here.  This could include NetSuite, but wouldn’t that be in SaaS?
  • Operations: no idea, but most business operations I can think of would not be “cloud.

Frankly, I wish I knew what was going on over there (Gartner), but to me this report is nonsensical that I just can’t wrap my head around it.

The CloudBzz Revised Cloud Market Forecast

Using the Gartner numbers as a base, and stripping out the Business Process Services category in its entirety, I come up with the following numbers.

The CloudBzz revised worldwide market for cloud services in 2010 is forecasted at $10.5 billion, growing to $34.1 billion in 2014.

That’s a much more believable set of numbers, any way you want to look at it.

Source: Gartner (2010) revised by CloudBzz

Now, these are numbers I can believe in.  The vast bulk of cloud today is in the SaaS market.  Even out to 2014, more than 60% of “cloud” revenue is SaaS.

Source: Gartner (2010) revised by CloudBzz

Interestingly, by 2014 the PaaS market is only 3% of the total cloud market, according to Gartner.  Not sure that I believe that, but I don’t have any better numbers at this time.

Why Gartner Should Fix This…

Everybody likes big numbers, especially when they contribute to the “hype cycle” we all like to make fun of.  $10.5 billion in 2010 is actually a pretty big number.  $34.1 in 2014 is big too.  I just wish Gartner would come to their senses and stop adding to the confusion about what is a cloud service, though my expectation is that they will continue to propogate this farce as long as their customers are buying it. IaaS, PaaS, and (some would argue) SaaS are all that should be counted in anybody’s cloud forecast.

p.s. I really like the Gartner people that I’ve met who cover cloud.  I just can’t believe that they consider Google AdWords as part of this exciting and fast moving IT market.

Follow me on twitter for more cloud conversations: http://twitter.com/cloudbzz

Notice: This article was originally posted at http://CloudBzz.com by John Treadway.

(c) CloudBzz / John Treadway

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John Treadway is a Vice President at Cloud Technology Partners and has over 20 years of experience delivering technology and business solutions to domestic and global enterprises across multiple industries and sectors. As a senior enterprise technology and services executive, he has a successful track record of leading strategic cloud computing and data center initiatives. John is responsible for technology IP at Cloud Technology Partners, and is actively involved with client projects and strategic alliances. John is also an active blogger in the cloud computing space and authors the CloudBzz blog. Sites/Blogs CloudBzz