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Posted by: briansittley Comments: 0 0 Post Date: February 9, 2016

cloud confusionThe cloud is just another computer somewhere else.
That clever little phrase pretty well embodies What Cloud Is as well as anything you’ll probably read.
But, it turns out, assessing just how well and how fast cloud computing is growing is a bit more problematical.  This comes to a light in a February 2, 2016 article by Angus Loten and Kimberly Johnson of the Wall Street Journal.
It seems these days that some very large cloud providers, including Microsoft, IBM, Oracle and others have been a little fuzzy about their numbers and what they classify as “cloud” services.
Gartner researchers expect 17% growth in cloud services to $204 billion this year.  But some providers use the cloud term in marketing and sales pitches, as well as earnings reports, to include a very wide range of services, according to senior tech executives, industry analysts and the Journal’s reporting.
As the CIO of General Electric noted, “Vendors are constantly showing up and trying to sell you everything as cloud.”  It takes “extra work” to determine what are and aren’t true cloud services that will be around for the long haul.  That’s a growing concern as software deals stretch into longer and longer terms of years.
Under GAAP, these tech companies have wide latitude to define cloud revenue, but it’s hard to see how providers stack up when their earnings reports may reflect not just software sales, but also servers, maintenance, other tools, infrastructure and consulting fees.  It makes comparisons difficult, and the suspicion becomes that companies are inflating their “cloud” revenue reporting in an effort to demonstrate (read: impress the markets with) stronger cloud sales growth.
As a result, the perceptions of such strong sales growth can amplify a company’s stock, since organizations today are being “rewarded with higher multiplies [i.e., stock price values] for cloud revenue,” notes the Journal.  It’s becoming “highly complex” to determine exactly how firms are booking cloud revenues.
The Journal article points out the need for greater clarity and detail from these large vendors when reporting cloud revenue.  Since companies have a lot of leeway in their reporting, standards are non-existent, and it’s becoming harder to separate the marketing fluff from the actual cloud performances of these firms.
Look for further confusion for awhile, while companies figure out how to provide more clarity around just what exactly comprises cloud.

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