Cloud Game Still In The First Inning

 |  Includes: DELL, HPQ, MSFT, ORCL, RAX, RHT, VMW
by: Dana Blankenhorn

Two reports today, from Gartner Group and Open Forum Europe, offer more proof that, when it comes to enterprises and cloud computing, the game has just begun.

Gartner has released a Hype Cycle report on cloud to clients and, according to Louis Columbus at Business2Community, the key takeaway is just how little enterprises are doing with the cloud.

For instance, a previous Hype Report indicated 20% of corporate email would be handled by cloud systems in 2014, but now the same report says only 10% will go there by then. Sounds like a lot of talk and very little action.

What the corporate bigwigs are talking up now is Business Process Management, or BPM. This means using "Big Data" - the huge databases collected and warehoused in the normal course of doing business - to gain insights leading to organizations transforming themselves. By 2015, it's expected companies doing this will outperform competitors by 20%.

Uh, huh. And if you believe that I have a bridge to sell you.

As an investor it tells me you need patience with cloud vendors. Companies like Rackspace (RAX), Red Hat (RHT) and VMWare (VMW) have a lot of market growth ahead of them. But it also tells me that cloud laggards such as Dell (DELL), HP (HPQ), Microsoft (MSFT) and Oracle (ORCL) also have some time to kill before customers start leaving them en masse for cloud.

Why that is can be found in the OpenForum Europe report. As Simon Phipps writes at ComputerWorldUK, big buyers are still biased against open source and open standards, to the point where 17% ignore regulations that require them not to specify specific vendors in their bids.

Remember. Cloud is usually based on open source and open standards. What holds for open source goes double for cloud.

What new tech advocates forget, which old tech advocates know well, as that the enterprise market is as much about relationships as it is about technology. When you have something that works, you're very reluctant to leave that relationship until what's new is proven. Even then, change is like pulling teeth.

I think that investors are going to see this as a reason to buy into the hype of the "old tech" vendors, dropping the price of cloud vendors relative to their results, and making them bargains. Because at the end of the day the new is usually implemented through the new, not the old. It just takes the old longer than you think to leave the stage.

Disclosure: I am long MSFT.