Well … they have not actually said it but the data provided in their report on “Sizing the Cloud – Understanding and Quantifying the Future of Cloud Computing” implies so. The projection claims that going forward more than 80% of US cloud revenue will be from SaaS. This trend will continue for next 10 years.

[Forrester has an additional cloud classification of BPaSS which stands for Business-process-as-a-service. It involves provisioning of highly standardized end-to-end business process delivered via dynamic pay-per-use and self-service consumption models. You can think of it as BPO offered in the cloud.]

I tend to agree with them. Here is why …

What is the value proposition of Cloud?

1. Save cost through better utilization
2. Improve IT agility
3. Help focus on core activities

Recent studies have questioned the cost saving potential of cloud. Costs saving possibilities exist when the load is unpredictable and volatile. However, most organizations and for most type of applications this is not true.

In theory, cloud gives you the freedom to start a new machine instance and deploy your application within minutes. In practice, how often will you need such speed? In how many different real world situations will it give you a competitive advantage?

That leaves us with the third option. You would definitely read about the analogy between IT and electricity generation. How electricity generation has move away from captive units to large centralized facilities. How cloud computing will do the same to IT infrastructure.

So, if the cost saving potential of cloud and the need for agile deployment is limited, then the main attraction of cloud computing is to get rid of the entire headache associated with managing the hardware, software and networking setup and focus on your core activity.

But software have become core IP of most organization
True.

But, such core software forms only a small part of any organizations application portfolio. Then again, most organizations will be reluctant to move such software to the cloud.

Vast majority of the application that is expected to move to cloud is of the kind which is not considered as the core activity of an enterprise.

To simplify IT infrastructure management – How does IaaS, PaaS and SaaS help?
Cloud does not help you in managing your client and networking infrastructure. You will more or less have the same overhead irrespective of your choice of IaaS, PaaS or SaaS.

IaaS partially relieves you of the burden of looking after the physical server infrastructure which includes physical security. However, you have to still manage the virtual instances of each server. Though some degree of automation is possible, you will still have to manage each instance of the virtual machine. The concept of Dev-Op is gaining momentum but that only shifts the burden and does nothing to reduce the workload. As some of the recent cloud service outage has demonstrated, you will still have to plan for DR (see this).

PaaS can have to variants. One is a pure PaaS environment like Google App Engine or Microsoft Azure where you can deploy you bespoke application. The other variant is the SaaS extension like Force.com which you can use to enhance or extend you SaaS. Though we cannot draw a clear line between the two (you can implement a bespoke application using Force.com) – I am talking here about those independent PaaS platforms. These platforms relieve you of the effort of managing the machine instance, operating system and most of the system software. However, the biggest challenge for PaaS is that your existing applications will not run on PaaS – so there is a high barrier for adoption.

SaaS may help you achieve cost saving or it may not. I may or may not also make you more agile but what it will definitely do is to relieve you of the necessity of spending effort to keep the applications running. Whether the SaaS provider will be able to match you security and reliability needs are a different question. The implication is that if you find a SaaS offering which meets you need you will no longer have to spend effort to keep the system running. DR also will be the headache of the provider.