3 Companies Poised for the Shift to Cloud Systems

With as much press as cloud computing gets, you'd think that companies around the world already have, or are in the process of, shifting their internal systems and applications to cloud-based solutions. Turns out, according to research from Gartner, cloud aficionados may have put the cart before the horse. The research indicates the market for cloud office systems is going to be there, but in spite of all the cloud-related noise, it appears IT departments haven't made the leap -- yet.

A few data points
At first glance, Gartner's analysis suggesting "there are currently about 50 million enterprise users of cloud office systems" sounds pretty good. But all those existing cloud-related systems users represent a mere 8% of the global market, excluding China and India. As Tom Austin, Gartner Fellow and vice president, described it, "Despite the hype surrounding migration to the cloud, big differences in movement rates continue, depending on organizations' size, industry, geography and specific requirements."

The "hype," as Austin put it, may be a bit premature, but isn't entirely without merit. In fact, Gartner expects that by 2017, 33% of email and office systems will be running on the cloud, and the four-fold increase in the next few years may be just the tip of the iceberg. Gartner estimates that by 2022, cloud office system users will grow to 695 million, equal to 60% market penetration.

Though cloud fans may have been a bit premature in their excitement, even the naysayers are likely to agree: Cloud office systems are coming. It's simply a matter of when, not if. So if the opportunity in the cloud systems market is there and growing, who's best positioned to take advantage of the shift?

A few players to keep an eye on
Microsoft's (NASDAQ: MSFT  ) recent announcement that its cloud-based Office 365 is now available to Apple's iPhone users bodes well for the shift to cloud office systems. What does one have to do with the other? In 2007, when the cloud office system market began, the majority of users accessed their cloud office tools with one device, according to Gartner. By the beginning of this year, the number of devices used has jumped to as many as four, including smartphones, tablets, and both personal and enterprise PCs.

As the bring-your-own-device, or BYOD, phenomenon continues to grow, and more mobile computing devices are used for business, cloud office systems like Microsoft's Office 365 will have to run on multiple operating systems to be successful. In terms of iOS compatibility, Office 365 is only available on iPhones, but Microsoft may expand the offering to iPads before long. And why not? A Morgan Stanley analyst suggested in February that an Office 365 app for iPads could generate an additional $2.5 billion in revenue for Microsoft.

Don't forget about Google (NASDAQ: GOOGL  ) and Hewlett-Packard (NYSE: HP  ) . They're partnering to sell a solution consisting of HP's hardware and Google Apps cloud services. The combination of HP's existing customer base and strong vendor relationships with Google's cloud office systems suite and its 5 million business customers could make a serious dent in this high-growth market. Google has long been committed to cloud computing, but as the partnership with Google implies, HP is taking the cloud opportunity seriously, too.

In discussing the Google partnership, HP CEO Meg Whitman said, "This breakthrough, which we are really excited about, isn't a one off." Not only will the Google relationship be expanded upon, according to Whitman, but look for strategic alignments with other "like-minded technology companies" in the future.

The cloud office systems market may not match the hype just yet, but if Gartner's predictions are even close, the next several years could prove extremely profitable for the right providers. Microsoft is off to a good start with Office 365, particularly as it becomes increasingly available to mobile users on platforms like iOS. But the partnership between Google and Hewlett-Packard shouldn't be overlooked -- by Microsoft or investors.

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