Analyst warns of latent cloud pricing risks

Monday, April 11, 2011

Misconceptions over cloud computing pricing have started to represent a contract negotiation stumbling block in the Brazilian market, international tech consultancy IDC's Brazilian survey manager, Célia Sarauza, told BNamericas.

Promises of lower costs through cloud computing's pay-as-you-go model are driving Brazilian companies toward that service model, but inaccurate perceptions on their software use sometimes translates into discrepancies over savings.

"Companies are not familiar with the entire infrastructure of people and machines and how much [software] the company is really using," Sarauza said. "In some cases, companies are ending up paying more than they imagined they would pay [with cloud] because they didn't have any idea about their real consumption."

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Nagging concerns over pricing and also data security have kept Brazilian firms from putting mission-critical applications in the cloud.

"They are putting back-office applications in the cloud," she said.

"Cloud is a very good environment for developing and testing new software. We thought that we would see more of this type of use, but that hasn't been the case.... These companies still have not realized all the potential that cloud has."

IDC expects cloud computing sales volume in Brazil to increase 60% this year, reaching US$34mn, Sarauza said.

Major players such as IBM (NYSE: IBM), Microsoft (Nasdaq: MSFT), (NYSE: CRM), Oracle (Nasdaq: ORCL), Google (Nasdaq: GOOG), VMware (NYSE: VMW), Citrix Systems (Nasdaq: CTXS) and Brazilian data storage company Locaweb are seen as establishing the strongest presence in the local cloud market.

Some 18% of large and medium-sized enterprises in Brazil have already implemented cloud applications, and 30-35% of these companies will have done so by 2013, according to a recently released IDC study.