By Daniel Hunter

As the impact of a double-dip recession takes hold, the increasing need to curtail costs is driving a growing number of businesses to adopt cloud-based solutions to their IT needs.

Latent concerns over security, stability and suitability are also not enough to stop growth — but causing businesses to focus on more stringent service level agreements, contract terms and governance.

According to KPMG’s latest Technology Issues Monitor, the dominant model in cloud computing is now ‘Software as a Service’ (SaaS) which provides businesses with on-demand software, eliminating the need to install and maintain programmes or pay for licences. It is a market worth $12.3 billion, worldwide in 2011, with projections to reach $14.5 billion before the end of 2012.

“As the current tight economic conditions are felt across the globe, tight IT budgets are pushing demand for cloud computing services," Steve Watmough, partner in KPMG’s CIO Advisory team, said.

"The attraction, especially for the smaller business, lies in organisations no longer needing to find funds for infrastructure, deployment or training.

“And with an increasingly mobile workforce, there is a greater need to access data from smart-phones or tablets. SaaS allows for the integration of powerful business apps on mobile devices meaning that it is only likely to increase in popularity with the corporate environment.

"The technology ensures employees can work on the same documents in real-time from anywhere on any internet-connected device — and all for a monthly subscription, which can be adjusted with ease.”

KPMG’s analysis shows that as the demand for SaaS grows, service providers are competing to launch new offerings and add new capabilities, with many trying to differentiate themselves by introducing industry-specific solutions. However, a number of high profile problems have ensured that customers still have four key concerns — security, network stability, the limited integration with their existing systems and the time it takes for organisations to implement new technology.

“The need for security means businesses are pushing for stricter governance controls around cloud computing and SaaS," Watmough concludes.

"But security is not where concerns stop and customers are also increasingly emphasising ‘uptime’ and performance in their negotiations with suppliers. They want opt out clauses which weren’t so easy to secure with infrastructure investments and suppliers would be well advised to take these concerns seriously or lose out to the competition.”

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