Weekly Update

Heroku Growth Tells Cloud Story, Not Sidekick Data Losses

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Despite all the criticism being bandied about in the IT press, cloud computing appears to be doing just fine. Yes, it needs to be more secure, reliability needs to improve, it needs a better definition and Microsoft definitely should not have lost all that Sidekick data (even though it eventually was recovered), but there are plenty of users who do not view the cloud as the pariah it is made out to be.

Evidence of this can be found in the financial results of cloud-computing providers. This week alone, Ruby-focused startup Heroku told us it has doubled its install base since this time last year, and has seen 50 percent growth in month-over-month sales since its commercial launch in April. Perhaps anticipating even greater growth, Heroku brought on a seasoned veteran to lead the company into the big time. Hosting provider SoftLayer, which also offers cloud computing (including of the bare-metal variety), cloud storage and a cloud CDN, proclaimed it has experienced 12 straight months of profitability and growth and is on track to earn more than $80 million in revenue this year. On a far larger scale, Google’s $5.94 billion third quarter exceeded expectations and constituted a 7 percent year-over-year improvement.

And these are just the latest kernels of cloud profitably to be made public. This year has brought consistently impressive revenues for Salesforce.com, high interest in SaaS and cloud funding, and anecdotal evidence from several privately held cloud-computing companies who say they have never seen more interest in their products. It has been estimated that Amazon Web Services generates around $220 million in revenue per year.

The users of these services are not all individual developers or risk-blind startups, either. We learned this week that the Department of Energy is spending $32 million to investigate cloud computing for science (EC2 already has garnered much interest in the research community), and pharmaceutical firm Amylin is a cloud fan (a broadly shared affinity in the pharma space). The federal government has made no secrets about its cloud plans (it just released Apps.gov, after all), and the Department of Defense has its own cloud infrastructure. Even banks are increasingly likely to adopt cloud computing, and many have been using public clouds to run Monte Carlo simulations for some time.

The cloud is by no means perfect, but reactionary commentators are remiss to write off the entire delivery model as a nonstarter or a disaster waiting to happen. Although adoption is nowhere near where many predict it ultimately will be, there are plenty of users reaping its rewards and plenty of cloud service providers making plenty of money.

Question of the week

What is your take on the cloud market in terms of adoption and revenue potential?