A few observations from the 2009 IDC Directions Conference

I recently had the opportunity to sit in on IDC’s annual Directions conference here in sunny Silicon Valley (the weather, not the economic climate is sunny). As you might imagine the global economic recession (or is it implosion?) was on everyone’s mind and permeated the presentations, discussions, and hallway conversations.

In one of the “main tent” presentations IDC presented their market projections, which they have need to adjust (downward) twice since last summer. Interestingly, they are still projecting overall growth in WW IT spending this year (a scant 0.5% growth, but growth nonetheless) but down significantly from pre-crash expectations of 5.9% year over year growth. They are even more bullish as we move into 2010 and beyond, with growth of 4.4% expected next year. I hope they’re right.

The interesting message underlying this growth was where they are expecting it to come from. It's probably not a surprise that emerging economies (e.g. Brazil, China, SE Asia, India, Russia, etc.) are going to outpace the mature economies in uptake. What might be a surprise is that there are more incremental total dollars of spending increase from these countries over the next 3 years than mature economies – not just a higher growth rate, but actually greater absolute increases. The message is clear, get the appropriate visa’s in your passport if you want to grow your business in the next few years.

As you might expect, I spent a fair amount of time in presentations regarding SaaS and cloud computing – it was hard to miss, it was a major focus of the conference. The celebrity speaker for the event was Nicholas Carr, the author of “The Big Switch” with a nice, high level presentation on the transformation underway to cloud computing. He had a great analogy to the early days of electricity (and some great old pictures!) where companies used to produce their own power locally until the advent of centralized power plants and effective distribution systems. Very compelling arguments for the parallels to today’s emergence of “cloud computing” and SaaS applications.

SaaS was on IDC list of “hot technologies” for 2009 (if anything can be considered “hot” this year) along with some other interesting areas for growth this year including, enterprise social media, IT outsourcing, internet advertising, and a few others. Unfortunately for my friends in a few of the traditional software spaces I have known and loved, they had ERP, manufacturing software, and large enterprise IT on their cold list. I would guess that given the economic climate, that would be Bemidji level cold for this year.

Perhaps as an indicator of SaaS being “hot” this year was the fact that in their twice revised forecasts, they actually INCREASED their projections for SaaS revenues over the next three years in range of about 15%, adding $8.4B of spend over that time horizon to their forecast. They attributed this to the economic conditions favoring the SaaS model and helping to overcome some of the resistance to adoption. I recently did an analysis (available in this presentation), which showed the public SaaS companies far outstripping the growth rates of traditional companies, even in the downturn. SaaS is definitely the right place to be, right now.

SaaS reached it’s 10 year anniversary this year (if you take the founding of Salesforce.com to be the inaugural event), and IDC declared that the market is now “crossing the chasm”. This is when it becomes “safe” for more mainstream enterprises to look at adoption of an emerging technology. According to their “IDC Enterprise Panel” study, 23-25% of enterprises are now widely using SaaS for collaborative and business applications, projected to grow to 34-46% over the next three years. I think it safe to go into the water now …