The hype around the cloud will get tested seriously in 2010 as the rubber meets the road and the benefits and challenges of the cloud will become more transparent. As we look toward the software business in 2010, it is critical to take full stock of the current state of the cloud, the current vendor moves and what software companies must do this year in order to compete in the cloud computing era. MR's OPED on SandHill.com explores this in more detail.

Key insights
Customer migration to the cloud will be a multi-year journey. For smaller firms not saddled with legacy hardware and software, the migration will be simpler and adoption rates faster. Larger enterprises will need to figure out a way to leverage/migrate some of their existing legacy applications to the cloud especially when it comes time to refresh their hardware. We will see a number of variations of the hybrid approaches as we outlined in our Dec. 28 2009 issue. The business case for such hybrid implementation is murky at best with CIO's looking hard to make the economic justification clearer. Significantly, majority of CIO's still fail to see how the cloud can save them money. See survey results links below.

Read More
Smaller firms are adopting faster
CIOs confused about cloud computing, survey reveals

In a typical large enterprise today, one finds a heterogeneous mix of platforms (mainframes still run some large businesses), databases, applications, and services. History will repeat itself in the cloud environments. Not all applications will move to the cloud. Enterprise customers will pick and choose applications and their IaaS, PaaS, and SaaS (*aaS) vendors based on their internal business needs thus creating a diverse and heterogeneous cloud environment. Enterprises would need to practice the same due-diligence and strategy they would with B2B integration driven by principles of Service Oriented Architecture. Otherwise, they will end up with yet another silo-ed cloud-based data and services infrastructure and a tangled web of integrations linking *aaS to *aaS and *aaS to on-premise resources.

Key Insights
Some of the unique aspects of heterogeneous clouds working in concert with on-premise infrastructure include:
a. Managing federated identify and security
b. Moving data, workloads, and applications
c. Creating/buying and maintaining integration or "glue" applications to connect the clouds and to manage workflow and business processes
d. Managing metering, billings, and relationships with multiple cloud vendors
e. Network Latency could become an invisible bottleneck
f. Standards to avoid vendor lock-in

These issues are driving the emergence of a range of Enterprise Cloud Integration and Cloud Middleware products and services. Some of companies that are solving issues related to federation, migration, and integration include: Force.com integration services with its associated App Exchange marketplace, Boomi, CastIron, Symplified, Tricipher, Cloudswitch, Informatica, Pervasive Integration as a Service, DeltaCloud.

Read More
Not everything will move to the cloud: A Forbes magazine interview with RackSpace's CTO John Engates.
Cloud and its Integration strategies. Interview with the author of "Cloud Computing for Dummies"
The Cloud's Hidden Lockin: Network Latency
Internet Pioneer Vint Cerf urges cloud standards

Check out this interview with MR who shares his insights and opinions on the cloud's upcoming impact on outsourced application development services:

Key Insight
"Moving a legacy application and its data to the cloud (which in itself is a big challenge) may potentially save hardware maintenance dollars - lower Total Cost of Ownership (TCO) - but it doesn't necessarily mean that all the application/data updates, maintenance, and support will magically disappear. This has been the traditional strength of outsourced application developers and will continue to be the case at least for the next three to five years."

In order to gain first-hand insight into what customers are really doing with Cloud Computing, Sand Hill Group is conducting an in-depth research study, "The Business Case for the Cloud." The study will analyze why, when and how a broad range of customers - from Global 2000 enterprises to government agencies to SMB customers - are using cloud computing. The study's conclusions and key takeaways - including ROI estimates, use cases, opportunities and challenges - will be released at the Cloud Connect conference in March 2010.

Kamesh Pemmaraju heads cloud research at Sand Hill Group. He welcomes your comments, opinions, and questions. Drop in a line to kamesh@sandhill.com.