Will the credit crunch help Cloud Computing cross the chasm ?

Without a doubt the credit crunch is affecting everyone big and small. Firstly jobs are being shed, even from previously impervious organisations. Microsoft announced that it was cutting 5,000 jobs worldwide, Intel announced it was cutting between 5-6,000 of its 83,000 employees, and SAP announced it was to reduce it’s 51,500 headcount by 3,000 before the end of 2009. Add to this Citrix cutting 4-500 jobs, Lenovo cutting 2,500 employees…well you get the picture. Times are tough and companies are doing whatever they need to so they can maintain profit margins.

Now if we look at the organisations that these companies supply we find a different problem. Banks are reluctant to lend and capital markets have dried up. How do companies find the capital expenditure to fund new initiatives or project that are the lifeblood of all companies who sell hardware or software in the IT space ? Well one way is for the same organisations who supply the software / kit to also provide the credit. To that end HP, SAP and even Microsoft have announced initiatives in which they will be offering 0% finance on new purchases.

Some of the companies bucking the trend are Amazon and VMWare. VMWare increased Q4 year-on-year profits by 25% to $515 million and it’s profits were up by 34% to $102 million.  Amazon’s net profit rose 9 percent, to $225 million,  in the 4th  quarter, up from $207 million, in the same quarter a year earlier. It is diificult to figure out how much of this was related to Amazon’s web services business as they do not break out these figures but the web services products feature strongly in the Amazon  investor relations release leading one to speculate that they continue to perform strongly.

I see two ways in which the current credit crunch can help Cloud Computing move much closer to fully crossing the chasm. Firstly because of the economics of the utility compute model (for more details see this article) Cloud Computing allows organisation to continue to drive innovation and project without the upfront capital costs (CAPEX) associated with such projects in the past, enabling them to utilise an OPEX model. Even if this only relates to using the Cloud for the testing cycle of a project this can be a huge win for cloud computing. I know of one telecoms company whose testing needs for their projects, in terms of software, hardware, data centre space etc are vast.

Secondly, by the very nature of companies utilising more Cloud Computing Services this will foster more companies to build products, have cloud strategies, and to compete with other established cloud vendors.

All in all, 2009 could truly be the year that Cloud crossed over.

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