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Goldman Sachs: Shift toward cloud unstoppable

The latest technology software report by the investment bank confirms an unstoppable shift in IT toward on-demand and cloud applications.

The latest technology software report from investment bank Goldman Sachs confirms what IT industry analysts have been seeing as an unstoppable shift toward on-demand IT services and what we now consider to be cloud applications, especially among small businesses.

According the report, e-mailed to subscribers this week, the macroeconomic downturn has likely accelerated software-as-a-service, or cloud, adoption, as customers are forced to look for lower-cost solutions to mission-critical business problems. Forty percent of survey respondents indicated that they would be more likely to use SaaS solutions in a weaker economy, due to perceived cost benefits, while only 4 percent said they were less likely to use an SaaS solution.

Goldman Sachs

Terminology remains a bit confusing, as marketers take hold of the cloud, and vendors mix and match the terminology at will. Most analysts and marketers have dropped the SaaS term altogether, instead using the cloud as a descriptor for pretty much anything that doesn't live within a corporate firewall. Regardless, Goldman believes that the cloud will continue to take shape.

Goldman remains bullish on IT in general, having predicted in the fourth quarter of 2009 that spending would recover in 2010, as long as macroeconomic conditions continued to improve.

Below are a few highlights of the report, titled "Techtonics: Unstoppable shift to SaaS continues."

  • An "SaaS first" policy is being enacted in the majority of small and midsize businesses. Goldman's survey highlights that 58 percent of respondents always consider an SaaS option when making an application purchase decision. At total of 39 percent prefer an SaaS option, if available.
  • Web conferencing and sales force automation continue to rank as the most utilized SaaS applications; accounting and billing shows significant improvement, underscoring broad acceptance in all application areas.
  • Accounting and billing, call center automation, and eRecruiting were the largest gainers, with 20 percent, 18 percent, and 17 percent increases, respectively, from April 2009.
  • Data warehousing, supply chain management, and product life cycle management require more customization, or are more embedded within the core of a company than cloud applications. They are also utilized by a smaller group of individuals, which could impact the time to, or volume of, deployments.
  • is used by 67 percent of the survey respondents. It is clearly the out-in-front leader, despite being a "newcomer" to enterprise IT. For internal clouds, VMware's leadership remains pronounced, with 83 percent of respondents using its virtualization technology.
  • Platform-as-a-service layers are gaining momentum, dominated by Amazon's Elastic Compute Cloud, or EC2, service, with 77 percent of respondents choosing EC2 as a preferred partner, well ahead of Google
  • Forty percent of respondents indicated that they would be more likely to use SaaS solutions in a weaker economy, due to perceived total cost of ownership (TCO) benefits

Most people following technology these days will likely agree that cloud computing in a wide variety of permutations will continue to grow. What's less clear is how soon enterprise IT will move from public clouds, which offer a fair majority of the functionality required, to private enterprise clouds, which straddle the border between the corporate firewall and the public Internet.