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The UK software and IT services (SITS) market could be heading for a decade of recession, but cloud is set to buck the trend, claims a new report by TechMarketView.
According to the analyst's UK Software and IT Services Market Trends & Forecast 2012 report, the UK SITS industry “went into decline in real terms in 2008 for the second time last decade as inflation, at 3.6 per cent, just exceeded headline market growth.” While the rate of decline has since slowed to just under three per cent, TechMarketView expects this downward trend to continue, albeit more slowly, until 2015.
The report also claimed the value of the UK cloud market topped £1.2 billion in 2011, which is 38 per cent higher than in 2010, and is expected to reach £3.9 billion by 2015.
Speaking to Cloud Pro, Anthony Miller, managing partner at TechMarketView and one of the report's authors, said: “The underlying factor is that cloud computing, just like every other major technology trend in the market, is designed to lower the cost of computing for organisations, whether they are private sector enterprises or public sector bodies. So, not surprisingly, as organisations look for ways to cut costs, going to [the] cloud is one of the things they are looking at.”
However, when it comes to profitability, Miller pointed out that many of the big name providers are currently reliant on investors and may not have made any money from cloud yet.
In order for cloud to succeed, cloud service providers need to take a more realistic approach to cost and be aware that, while their offerings may be infinitely scalable, providers will always be left with some fixed costs.
“Cloud presents huge challenges for software and service providers, as clients are expecting the product or service to be delivered cheaper than it could be on-premise," said Miller.
"But suppliers need to be aware of the cost of delivering the service, because if the cost doesn’t change and the revenue comes down, that will hit profit margins."