U.S. Consumers Survey on Cloud Services

SURVEY

U.S. Consumers and Cloud Services
Danielle Levitas Michael DeHart
Archana Ramachandra

IDC OPINION
In this year's ConsumerScape 360 Survey, we asked consumers about their
awareness and usage of and general concerns about consumer-oriented cloud
www.idc.com

services. What is clear from the survey results is that the segments that are aware of
and using personal cloud services are the most attractive technology demographics
— those that are younger (18- to 34-year-olds), more affluent (household income of
$75,000+), and more mobile (smartphone and tablet owners). In addition, we note the
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following:

 With less than 15% of U.S. respondents reporting being "very familiar" with cloud
services, it is clear that the market is extremely nascent.

 Consumers have numerous concerns about cloud services, with cost being the
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current leading inhibitor; however, pricing is also in its infancy, and companies
can gain traction by offering more flexible services with larger-than-average free
baseline offerings.

 Education and general awareness building of cloud services is greatly needed.
Global Headquarters: 5 Speen Street Framingham, MA 01701 USA

IDC expects awareness of cloud services as a category to grow dramatically over
the next couple of years while confusion over consumer cloud offerings' specific
features and capabilities remains, given competing and conflicting messaging
from various players; robust yet simple offerings need to be developed and
messaged by new participants.

 We believe the opportunity associated with consumer cloud services is
tremendous as the mass market begins to understand and use these services
and as these services' utility expands with individuals' growing dependency on
more devices.

Filing Information: July 2012, IDC #235199, Volume: 1
ConsumerScape 360: Survey

IN THIS STUDY

Methodology

Data for this study comes from IDC's ConsumerScape 360 Survey, fielded February–
March 2012. The total sample size for this study is 4,068 U.S. consumer households
and is representative of consumers who own and use any major consumer
electronics devices and have access to the Internet from home or elsewhere (the
lion's share of U.S. households).

We've analyzed results by age group, by income group, and by consumers who own
a smartphone and consumers who own a tablet to better understand what types of
consumers are most informed about — and using — cloud services.

Note: All numbers in this document may not be exact due to rounding.

SITUATION OVERVIEW
Over the past five years, the technology industry started ramping up cloud offerings,
and the term cloud computing began to gain mindshare as a new architecture to
deliver software, services, and infrastructure as a service — largely from an
enterprise perspective. Yet, long before we started to use the term cloud, consumers
were using online, cloudlike services for email, photo sharing, content streaming, and
more. It's really been over the past 12–18 months that the momentum around cloud
offerings for consumers began to take off, where we saw mainstream press begin
writing about personal/consumer cloud services as more and more of these services
began to launch and gain users. This attention to personal cloud services rose as
many offerings to manage multiple kinds of media across multiple device types
ramped up from companies like SugarSync, Dropbox, and Box.net. Of course, with
the launch of Apple's iCloud in the fall of 2011, the mass market started to be
introduced to the concept en masse.

U.S. consumers show a wide range of familiarity, usage, and comfort level with cloud
services — not surprisingly, results are varied by age group, device ownership, and
household income level, among other demographic and socioeconomic factors. A
plethora of barriers to and drivers of cloud service adoption exist, ranging from cost-
of-service concerns to trusting the security of cloud in general and cloud service
providers specifically. Younger consumers, higher-income consumers, and "latest and
greatest" device owners are all tier 1 targets in this market because of a myriad of
factors, as laid out in this section.

Starting with general familiarity with cloud services, we find that 18- to 34-year-old
consumers, higher-income consumers (those with household incomes of $75,000+),
and smartphone and tablet owners (particularly tablet owners) are most familiar with
cloud services. Among consumers 55+ years old, nearly 70% indicate that they've
never heard of cloud services or have only heard the name and don't know anything
specific about cloud technology and consumer offerings. Comparing this with
consumers 34 years old and younger, the results are dramatic as among this younger

©2012 IDC #235199 1

consumer group nearly 60% are somewhat to very familiar with cloud service
offerings, about double the rate of consumers 55+ years old. This is likely due to a
conflux of factors including device ownership (younger consumers being much more
likely to own devices that utilize cloud services in a direct and obvious manner, such
as smartphones and iPads) and wanting to keep abreast of the latest technology
trends, as well as younger consumers being more dialed into and involved with
technology-related media, including blogs and other technology news sources. These
results are laid out in Figure 1.

Consumers also have strong concerns about adoption of cloud services, even those
who are familiar with cloud offerings. We've assessed the impact of various potential
barriers to cloud adoption among those who are at least somewhat familiar with cloud
offerings, as shown in Figure 2.

FIGURE 1

Consumer Familiarity with Cloud Services by Age, Device
Ownership, and Household Income
Q. Do you use the following services?

n = 4,068
Base = U.S. respondents
Source: IDC's ConsumerScape 360 Survey, 2012

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FIGURE 2

Major/Significant Barriers to Cloud Service Adoption
Q. How much of a barrier are each of the following to cloud adoption?

n = 4,068

The primary potential barrier to cloud adoption among U.S. consumers is the cost of
cloud services, followed very closely by concerns about security of files and trusting
cloud providers. Given that only about 14% of U.S. respondents reported they were
"very familiar" with cloud services, we believe that the high degree of concern for
issues like cost has more to do with the lack of awareness and knowledge of these
services by the broader respondent base than a true concern over potential barriers
like cost.

Interestingly, reliability/speed of Internet connection via PC or smartphone, ability to
use cloud services across multiple connected devices, and the ability to move files
between cloud providers are far less severe in terms of being potential barriers than
are the primary concerns of cost, security, and trusting providers. We believe that part
of the reason why reliability/speed of Internet connection, ability to move files to
another provider, and ability to use services across devices aren't of greater concern
is because most users have yet to leverage personal cloud services to their full
potential where they have a dependence on them across multiple devices/OSs and
across multiple locations, and we believe users to date have only limited content/data
stored in personal cloud services (given most people who use the services have 2–
5GB of free access versus a replica of their files in the cloud). As consumers' usage
of personal cloud services grows and deepens, we expect these issues will be ones
that providers will increasingly address (and most continue to build out device
categories and OSs) to remain competitive. Potential barriers related to trusting the
provider, security, and confusion over services' offerings will be ongoing challenges
for any player in the personal cloud space.

©2012 IDC #235199 3

A deeper look at the top barriers to cloud adoption (cost of cloud, security of files, and
trusting cloud providers) shows that these barriers can actually become drivers of
cloud adoption, if targeted to the right audience. Figure 3 takes a deeper look at the
top potential barrier of cloud service adoption — cost of cloud service.

FIGURE 3

Barriers to Cloud Service Adoption by Age, Device Ownership,
and Household Income: Cost of Cloud
Q. How much are each of the issues below a barrier to adopt cloud services? Cost of cloud.

n = 4,068

Cost of cloud service is the biggest potential barrier to adoption among the general
population of U.S. consumers (with 56% indicating it was a major or significant
barrier) (refer back to Figure 2). In looking at the cost of cloud from the other side of
the fence (refer back to Figure 3) (i.e., consumers for whom cost of cloud is either not
a barrier at all or only a slight barrier), we do find significant market opportunities
among a highly lucrative subset of U.S. consumers. Expectedly, the majority of the
highest-income consumers in the United States (those making $150,000+ per
household) indicate that cost of cloud isn't a prohibitive barrier. But we also find that
half of consumers aged 18–34 years and half of tablet owners indicate that cost of
cloud is not a driving prohibitive factor. Smartphone owners are also less concerned

4 #235199 ©2012 IDC

about cost of cloud, though slightly more concerned than tablet owners are.
Expectedly, lower-income consumers and older consumers are most concerned
about the cost of cloud services.

Delving further into the topic of cost of cloud, as it's the main potential barrier to cloud
service adoption, we've also assessed how PC and smartphone owners perceive the
cost of cloud services relative to the cost of purchasing apps. Specifically, we asked
3,900 PC/smartphone-owning U.S. consumers how strongly they agreed or disagreed
with the statement "cloud/online applications typically cost less to use than
purchasing applications to run off my PC/mobile phone." Results show clear concern
on the behalf of consumers in terms of cost of cloud services, as shown in Figure 4.

Figure 4 shows clearly that there is very little consensus on the consumer side in
terms of belief of the expense of cloud services being more or less than the cost of
apps. While the majority of consumers are neutral on this statement, there are more
younger consumers and high-income households that agree that cost of cloud
services is less than that of apps. Most importantly, when you consider tablet owners
specifically, 25.5% believe that cloud services cost less than apps and 18.7% believe
that apps cost more than cloud offerings, leaving the vast majority (55.8%) neutral on
this topic. Smartphone owners are exactly split down the middle on the issue of cost
of cloud relative to the cost of smartphone apps. Given that most apps range in price
from free to several dollars and cloud services have a baseline offering that is free, it
is reasonable that respondents are largely neutral when comparing costs of apps and
cloud services.

Results for the next major potential barrier to cloud service adoption —concerns
around security of files — are shown in Figure 5, which indicates that there are also
groups among which this potential barrier may be more of a driver than a barrier (i.e.,
there are groups that believe security of files when using cloud services is very good).

©2012 IDC #235199 5

FIGURE 4

Perceived Cost of Cloud Relative to Cost of Apps by Age,
Device Ownership, and Household Income
Q. Cloud/online applications typically cost less to use than purchasing applications to run off
my PC/mobile phone.

n = 3,900
Base = U.S. respondents who own a PC

6 #235199 ©2012 IDC

FIGURE 5

and Household Income: Security of Files
Q. How much are each of the issues below a barrier to adopt cloud services? Security of files.

n = 4,068

Results indicate that there is a direct relationship between concern of security of files
and age (in that older consumers are more concerned about security than younger
consumers are), while there really is no clear direct relationship between concern of
security of files when using cloud services and household income level. Among tablet
and smartphone owners, results are pretty evenly split — about half of smartphone
and half of tablet owners believe security of files is a significant/major barrier to
adoption and about half believe it's not a barrier at all/only a slight barrier.

Given that more than 1 out of 2 respondents view security of files as a major or
significant barrier to the use of cloud services, providers will have to message their
solution's security as a central competency and leverage technologies that
demonstrate users have strong, simple controls over their content's access.

The third top barrier to cloud adoption is trusting cloud providers themselves (52% of
U.S. consumers), and Figure 6 shows results when this barrier is further dissected by
demographic and device-specific owners (smartphones and tablets specifically).

©2012 IDC #235199 7

FIGURE 6

and Household Income: Trusting Cloud Provider
Q. How much are each of the issues below a barrier to adopt cloud services? Trusting cloud
provider.

n = 4,068

Results clearly show that younger mobile consumers are much less hesitant to trust
cloud providers, a likely function of younger consumers' typical embrace of new
technologies in general, demonstrated by younger population's use of online services
and social media. Smartphone and tablet owners are equally split on this issue, while
there is no direct relationship with trusting cloud providers and household income
level, with the exception being that the highest household income consumers are
generally more trusting of cloud service providers. This is likely more of a function of
more affluent users having more technology (devices, digital services, etc.) in their
lives, hence a greater comfort and dependency level on it.

In terms of who is using consumer cloud offerings, there is still a large degree of
confusion in the consumer mind, with many people using cloud services but not
realizing it. To get past this confusion, we've assessed the usage of cloud services
among consumers at least somewhat familiar with cloud offerings (see Figure 7).

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FIGURE 7

Current Use of Cloud Services
Q. Do you use a cloud service to store and/or get remote access to your files/data/photos,
etc.?

Base = U.S. respondents who are somewhat/very familiar with cloud offerings

We find that more than 50% of PC and/or smartphone owners in the United States
are already using cloud services of one type or another, though the type of usage
varies considerably. Out of those who use cloud services, the majority use it for
personal content/services only or primarily for personal content/services, with a very
small minority using cloud for work or work-personal mix (but supplied by employers).
We believe that had we listed a range of specific services (beyond the broader
personal cloud providers) and included premium content services that stream media
to users or allow them to share photos and so forth, the percentage of "No"
responses would have fallen dramatically. That being said, the purpose of these initial
questions was to understand general awareness levels and attitudes toward the
concept of cloud and personal cloud offerings for managing one's digital information.

Looking at smartphone and tablet owners specifically, as shown in Figure 8, we find
rates of cloud service usage are much higher than the general PC-owning population,
particularly among tablet owners, who are 13% more likely than PC owners to be
using cloud services already. Both tablet and smartphone owners are more likely than
general PC-owning counterparts to use cloud for personal use only, with tablet
owners being about 5% more likely than smartphone owners to use their cloud
service on their tablet for personal use only. This makes sense due to a large number
of employer-supplied smartphones as well as the high rates of dual work-personal
usage among smartphone owners.

©2012 IDC #235199 9

FIGURE 8

Current Use of Cloud Services by Smartphone and
Tablet Owners
Q. Do you use a cloud service to store and/or get remote access to your files/data/photos,
etc.?

Base = U.S. respondents who are somewhat/very familiar with cloud offerings and own a tablet
or smartphone

FUTURE OUTLOOK
Cloud services come in many variants, spanning personal content storage,
management, and synchronization and access to services that deliver premium
streaming content. The survey questions just begin to scratch the surface of
consumer attitudes toward personal cloud services. In the coming months, IDC will be
doing in-depth research on consumer usage of cloud services and forecasting the
broader market opportunity.

10 #235199 ©2012 IDC

What the present data demonstrates is that there is reasonable awareness for
consumer cloud services among key demographics (wealthier, younger, and more
mobilized users) but that the long-term opportunity is tremendous as the mass market
has yet to learn about or understand what these services are and how it can benefit
from using them.

IDC sees the longer-term potential for consumer cloud spanning both premium
content services and personal data services. As consumers own and use more and
more connected screens (expanding from PCs and smartphones to tablets and then
the TV), access to and management of one's data and content will only intensify, and
the challenge of delivering a unified, secure, reliable, and affordable solution will be
one that companies from across the ecosystem (from OEMs to telcos to online-only
players to traditional software companies) will compete fiercely to gain share and
drive consumer loyalty and lock-in.

ESSENTIAL GUIDANCE
While consumers have reported barriers to the adoption of personal cloud services,
IDC believes many of these challenges are more related to a lack of awareness and
knowledge than anything else and that as vendors educate users about their offerings
and their benefits, these challenges will subside for many consumers.

That being said, given the fact that usage of personal cloud services is more niche
today, Apple is arguably going to set the broadest, most understood expectations for
such an offering with its iCloud. While this is helpful in getting consumer awareness of
cloud higher, it creates a relatively narrow definition of personal cloud given it is Apple
OS driven.

The current crop of personal cloud providers have varying levels of awareness, but
we believe that as personal cloud offerings debut from service providers (which are in
a very advantageous position given their network assets) and from major IT players
like Microsoft, Google, and Amazon (not that Amazon is viewed as an IT player by
consumers), adoption will accelerate. Furthermore, storage vendors, software
companies, and many others are launching offerings that will compete for mindshare
as well.

For vendors just entering this space, there are some things that can be done to make
one's offerings more attractive. Given that cost is a top concern to adoption of
personal cloud offerings, making sure one's free baseline offering has higher capacity
is a must-have (5GB is an absolute minimum and, we would argue, too low to
compete today against incumbents like iCloud and Dropbox). Also, we believe the
majority of consumers will use more than one service, so providers need to develop
offerings that allow for the most flexibility across devices/OSs and allow for the most
robust sharing of one's content and data regardless of file formats supported on a
given device at a given time (thus enabling transcoding and transrating when
appropriate) while having robust synchronization capabilities. Finally, security of
users' data will be of utmost concern long term, and demonstrating best-in-class
privacy and security will determine the long-term winners.

©2012 IDC #235199 11

We will be exploring consumer sentiment of various companies that provide cloud
offerings in the upcoming work we do, and we expect that we will see distinct
segments of consumers favoring smaller companies versus others that will favor
large, established vendors or service providers given various levels of trust (or lack
thereof).

Personal cloud services are strategic for any company that delivers content to
consumers, sells multiple device types to consumers, offers key software or services
to consumers, and so forth. Managing end users' personal content and data is a long-
term strategic opportunity that will drive a level of customer lock-in that will not
present itself again for many years (even while enabling your users to move their data
to another provider). IDC expects consumer usage of personal cloud services to not
only expand but become broadly and regularly used to enable the next wave of
seamless content and data access and personal and professional productivity.

LEARN MORE

Related Research

 ConsumerScape 360: The Global Digital Consumer, 2012 Worldwide Consumer
Market Segmentation (IDC #235045, May 2012)

Synopsis

This IDC study discusses results from the 2012 ConsumerScape 360 Survey, which
looked at consumers' awareness and usage of and general concerns about
consumer-oriented cloud services. The large growth opportunity seen around
consumer cloud hinges on its speed of growth in educating consumers about cloud
solutions (particularly with regard to education about security solutions and how these
are addressed through cloud platforms).

"We believe the opportunity associated with consumer cloud services is tremendous
as the mass market begins to understand and use these services and as these
services' utility expands with individuals' growing dependency on more devices," said
Danielle Levitas, group vice president, Consumer, Client, and New Media. "That
being said, U.S. consumers are still very unfamiliar with cloud services, are unsure of
when or where they're already using cloud services, and currently only have a
moderate level of trust in both cloud providers and cloud technologies."

12 #235199 ©2012 IDC

Copyright Notice

This IDC research document was published as part of an IDC continuous intelligence
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Copyright 2012 IDC. Reproduction is forbidden unless authorized. All rights reserved.

©2012 IDC #235199 13

U.S. Consumers Survey on Cloud Services

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