Beware the fool’s gold in the heated mobile and cloud predictions

The two pillars of the so-called post-PC revolution — cloud computing and mobile apps — are at first blush an odd pair: one dull, one cool; one focused on the enterprise, another on the consumer. But according to recent reports by the market research mavens at Gartner, both are red hot.

On the most superficial level, Gartner’s predictions are a pointer for where to go if you’re looking for work or investment opportunities, or if you’re wondering what your CIO is going to throw at you next. They also underscore the continuing shift in the technology industry away from the bread-and-butter staples of the desktop and the big enterprise application deployments to a world in which computing occurs on devices you always have with you and are always connected to resources in the cloud. (That’s why the two technologies actually make sense as a couple.)

[ Also on InfoWorld.com: Developers who think the Amazon Appstore will be a welcome alternative to the Android Market should read the fine print. | Get the no-nonsense explanations and advice you need to take real advantage of cloud computing in InfoWorld editors’ 21-page Cloud Computing Deep Dive PDF special report. ]

But the Gartner predictions give me pause, and they should concern IT, users, and investors alike — blindly accepting them could send you on a chase for a mirage. Remember that tech prognostication can be much less of a science than researchers would like us to believe. However, don’t interpret this as a cheap shot at Gartner. I respect its work and its integrity — along with that of other major research shops — but I’ve seen too many charts that look like hockey sticks to believe everything I read about tech’s future.

For example, although I certainly agree that the mobile apps business has been wildly successful, I find it impossible not to question the bullish assumptions implicit in Gartner’s forecast. As to Gartner’s enthusiastic view on cloud computing, I don’t question the trend, but it’s hard not to notice that other analysts believe that server virtualization, the close cousin of cloud computing, is stalled. Can both be true?

App feeding frenzy unabated — but where’s the cash? According to Gartner, app store revenue will nearly triple this year to $15.1 billion, from $5.2 billion in 2010. The river of cash will come from 18 billion downloads of smartphone and tablet applications sold at Apple’s App Store, Google’s Android Market, Nokia’s Ovi Store, RIM’s BlackBerry App World, and Microsoft Marketplace.

Not surprisingly, Apple dominated the field last year; Gartner analysts Stephanie Baghdassarian and Carolina Milanesi estimated that Apple drove 90 percent of app downloads in 2010. Apple, which last week crowed about its App Store hitting its 10 billionth download, will maintain its lead for the next few years at least, but it will narrow as other stores mature, they said.

Apple’s downloads are simply a fact. But will overall app revenue actually triple in just 12 months? Let’s look a little closer. Gartner forecasts that of those 18 billion downloads (from all stores), just 3.4 billion will be for sale, with the rest free. Now consider most apps only cost about $1, which doesn’t even get you to $4 billion. Can advertising make up the rest of the projected $15.1 billion? I don’t think so, and neither does Gartner, which forecasts ad revenue of about $2.6 billion. The only way to make those numbers add up is to dramatically raise the average cost of an app.

Gartner predicted that although today about 80 percent of app downloads are free, over the next few years users will begin paying for more of them as they come to trust the apps and associated payment mechanisms. That makes sense.

Then Gartner said the trend will reverse itself as tablets and so on become mass-market products purchased by consumers who are less sophisticated and maybe poorer than today’s early adopters. That makes sense as well. But how can the revenue derived from the hardware and the apps rise so steeply for the next few years if we’re still in the early adopter phase? There’s something wrong here.

Heads in the cloud On the enterprise front, cloud computing was 2011’s top technology priority as revealed in Gartner’s survey of more than 2,000 CIOs in 50 countries across 38 industries. According to Gartner, the typical IT organization invests two-thirds of its budget to daily operations. Moving to the cloud will free up 35 to 50 percent of operational and infrastructure resources for allocation elsewhere.

Gartner wasn’t the only group that found wide interest in cloud computing this week. A much smaller poll by Unisys asked people to name their organization’s biggest priority for IT investment in 2011. Of the 262 respondents, 44 percent indicated that cloud computing would be their top priority. Additionally, a poll of over 800 business and IT execs by the IT Governance Institute found that more than 60 percent are planning to use cloud computing for non-mission-critical IT systems [while] more than 40 percent plan to use it for mission-critical IT systems.

All of that sounds good. But why is virtualization in a stall if everyone is rushing to the cloud?

A survey by ESG Research published in November showed that only 39 percent of the VMs currently deployed are in production environments, while a survey earlier in the year by Prism Microsystems found that just 30 percent of production servers have been virtualized. Gartner itself says that overall server utilization is still at 18 percent of x86 servers; Linux server virtualization is one-third lower at 12 percent.

Again, I don’t question the trend, but I do question the rate of change. As I’ve said before, the PC era isn’t over — yet — and neither is the day of the enterprise app. We’re certainly moving away from the old paradigms and business models. You’d be blind not to see that. But it’s all too easy to see theoretical money pouring from the skies, and the hockey-stick projections coming from the research houses, well meant as they may be, can feed that illusion. Stay skeptical — and beware fool’s gold.

I welcome your comments, tips, and suggestions. Post them here so that all our readers can share them, or reach me at bill.snyder@sbcglobal.net. Follow me on Twitter at BSnyderSF.

This article, “Beware the fool’s gold in the heated mobile and cloud predictions,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.