Merrill Lynch unveil ‘Cloud Dozen’ – positioned to capitalise on cloud computing opportunity

Interesting report on cloud computing market from Merrill Lynch. Cloud computing is an $8bn market set for massive and rapid growth over five years with significant economic advantages for early customers.

To view the full report, click here

Exec summary after this picture of some nice clouds


“Cloud computing-A multi-year tectonic and disruptive shift

We are in the midst of a tectonic shift from client-server to Cloud computing. Improvements in Internet bandwidth, computing, and memory, coupled with enabling technologies like virtualization, parallel processing and multi-core, make it feasible to run large computing tasks in a centralized ‘Cloud’. The long-term trend is driven by compelling economics, with cost advantages of 3-5x for business apps, and 5-10x for personal productivity apps. Companies most leveraged to the Cloud are CRM, MSFT, INTU, and RAX in software and GOOG and AMZN in Internet.

“Shift creates $100bn market; challengers and incumbents

Our analysis indicates that the Cloud could be a $100bn addressable market by 2013, driven by cost savings. Consumer Cloud buildout will be subsidized by $65bn in online advertising. Innovation in ERP, HR, e-mail and Office has slowed in the last decade with limited product differentiation. Cloud delivery is where innovation is headed. Incumbents like MSFT, ORCL and SAP have to reckon with slower product cycles as customers reckon with high cost implementations and upgrades and shift focus to the Cloud.

“Incumbents rising to the challenge; MSFT pushes with Azure

Microsoft has made the most headway since our last report with Azure in Oct 08. It continues to push ahead with its ‘software and services’ strategy and is positioning Azure as a platform for public multi-tenancy and private managed hosting. Amazon, Google, and have a technology and service delivery lead. SAP has taken steps with BBD. Oracle has said little about the Cloud, but we expect it to be a major player. We expect incumbents to enter the Cloud through M&A to embrace innovation.

“$8bn revenues, the Cloud is inching towards a tipping point

Y2K deadline pressures tipped mainframe and legacy applications to client-server. Cloud computing has no such deadline impetus, but instead has benefited from economic pressure and cost savings. The Cloud market has still grown rapidly to roughly $8bn in subscription revenues, but well below the $90bn client-server apps market. Cloud software is not at a tipping point but could make progress and Cloud companies could grow faster than IT.

“We highlight the Cloud Dozen

Our new “Cloud Dozen” includes Akamai, Amazon, Cisco, EMC, Google, IBM, Intuit, Microsoft, Rackspace,, Symantec, and VMware. These companies are expected to outpace broader IT spend (+3% vs. -8%) in 2009. Investors should review individual research on these companies before making investment decisions.”

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To view the full report, click here

2 responses to “Merrill Lynch unveil ‘Cloud Dozen’ – positioned to capitalise on cloud computing opportunity”

  1. Companies looking to slash costs will inevitably be attracted to Cloud. Companies and shareholders demand value for money. This is the way forward. Rgds Vince

  2. Mike Brunner says:

    Presumably they’d produced their report before Google announced its Google Wave Product/Process/Protocol? That might alter the stats a bit/lot.