Cloud Computing as a Threat to Older Tech Companies

                                           Servers at the headquarters of Novell Inc.

The International Data Corporation, whose technology analysis and predictions influence a lot of corporate purchases, foresees the creation of a new high-technology industry in the convergence of mobile devices, social networking, and cloud-based computing and data storage. As a result, the company says in a new study, many industry giants will scramble to sustain relevance, and some upstarts will achieve leadership positions or be purchased.

Frank Gens, IDC’s chief analyst, who led the study, said, “The incumbents are facing a huge transition.”

Spending on the new technologies will reach nearly $700 billion, or about 20 percent of the $3.5 trillion in hardware, software, and services spent on information technology worldwide, IDC said. As a great deal of spending in the sector goes toward maintaining older systems, such a share for relatively new technologies is surprising. Spending on the new technologies is growing six times that of traditional computer servers and personal computers, IDC said, and by 2020 will be 80 percent industry growth.

Much of the new development will also take place in emerging markets such as China, IDC said. It predicted that 28 percent of overall spending, and 53 percent of the industry’s growth, would come from outside the United States, Japan, and Western Europe. By mid- 2012, China is expected to be the world’s second largest consumer of information technology, eclipsing Japan.

If the IDC predictions bear out, the technology industry is in the midst of perhaps its fastest-ever transition. Earlier transitions, like the move from mainframe and mini computers to personal computers and client-server technologies, led to the rise of giants like Oracle and Microsoft, and the downfall of older stalwarts, like Digital Equipment Corp. and Wang Laboratories.

This time will be no different, Mr. Gens said, adding: “Hewlett-Packard will be challenged. Microsoft, Intel, SAP, RIM, Oracle, Cisco, Dell – they are all facing the next transition, competing to be around in 2020. At least a third will fade away.”

Among the notable claims in the forecast, IDC said that spending on hardware, software and services in cloud computing systems alone will be $60 billion in 2012. The growth rate in this sector is about four and a half times that of the industry overall. About $36 billion of that was projected spending for companies providing cloud services to businesses, from companies like Amazon.com, Salesforce.com and Google, and the balance will be from “arms dealers,” supplying things like servers and networking gear. Amazon, which does not formally break out how much it makes from selling corporate computing services over the Internet, will make over $1 billion in that business next year, IDC said.

Mobile devices, which earlier this year outshipped personal computers worldwide, will in 2012 generate more revenue than PCs for the first time, IDC said. Shipments of mobile devices will outstrip PCs by two to one, and 85 million mobile applications, or apps, will be downloaded. More money will be spent on mobile data networks than on networks tethered by lines.

The rapid transition to mobile, driven by an explosion of tablet computers, will challenge both traditional computer software companies like Microsoft and beneficiaries like Apple, which is seeing the dominance of its iOS operating system challenged by the open source Android operating system developed by Google.

“By 2013 we’ll know who the leaders are,” Mr. Gens said. “Android will be there, iOS will be there – will Windows 8 put Microsoft there? By the end of the year we’ll know if putting a PC operating system onto mobile was a good idea.”

Amazon’s Kindle Fire, which IDC said would take 20 percent of the tablet market in 2012, will be a particularly successful device. While the Fire runs on Android, Google has no involvement with the product. Mr. Gens called the Fire “a phenomenal content device,” which he predicted Amazon will produce in larger formats that will make it more useful for business functions like creating and sending data in a couple of years.

The increasing number of people and machines online will additionally create an explosion of digital data. IDC said that the amount of data stored in 2012 would increase 48 percent from 2011, to 2.7 zetabytes, or 2.7 billion terabytes. By 2015, the firm said, the total will be 8 zetabytes.

These changes will likely prompt incumbents rich in cash but possibly challenged in relevance to acquire newer companies, Mr. Gens said. “IBM, Microsoft and Oracle all have to be cloud providers,” he said. “Microsoft needs a content and media cloud, like Netflix,” he said, adding that “smaller independent service providers like NetSuite, Workday, Taleo, and Success Factors will get bought up in the next six to ten months.”