As cloud computing moves slowly from curiosity to accepted practice, CIOs are finding disruptions everywhere. Cloud adoption -- in which IT infrastructure, platforms, software and business processes are hosted and served through the Internet -- is redrawing the IT landscape.
The adoption rate of cloud computing is accelerating quickly. Gartner forecasts that worldwide cloud services revenue will increase nearly 17% this year to $68.3 billion, with the UK accounting for 10% of those revenues. By 2014, the global market will approach $150 billion, a 20.5 percent compound annual growth rate over the next five years, according to Gartner.
In a study released in June by the Pew Research Centre's Internet & American Life Project and Elon University, 71% of the respondents (technologists and other 'stakeholders') agreed that by 2020 most people will access applications on the Internet instead of via software housed on their PCs.
Cloud services offer several potential benefits to enterprise and midmarket businesses alike, including reduced capital costs, pay-as-you-go pricing, faster deployment of technology, and more efficient and effective methods for sharing information.
Cloud can facilitate new ways of working that are just not possible on premise.
Robert Whiteside, head of enterprise UK, Ireland and Benelux, Google,
"Cloud can facilitate new ways of working that are just not possible on premise," said Robert Whiteside, Google's head of enterprise for the UK, Ireland and Benelux. "It can be as simple as running a 25 GB inbox to every one of your staff or as impactful as allowing real-time translation of instant messages to help your global support centre."
Whiteside noted that more than 2 million businesses worldwide have adopted Google Apps, a suite of cloud-based applications that include email, calendaring, word processing and collaboration tools. While Google does not break its adoption numbers out by region, Whiteside did emphasise that Google has signed up some large customers in the UK market, including Jaguar Land Rover (more than 17,000 employees running Google Apps) and Rentokil (in the process of migrating more than 35,000 employees to Google Apps).
Dee Set, a York-based fulfillment and logistics company, has also made the switch to Google Apps, opting for a lower-cost option to Microsoft Exchange as its user base grew.
"With a lot of people joining the company, we figured we would need more capacity," said Gavin Jones, Dee Set's director of information systems. "But it quickly became apparent we didn't need the Exchange solution based on costs. We wanted something more easily administered and more universal."
Jones used Google's Gmail personally but had never really considered Google as an enterprise mail system. He was, however, comfortable with its interface and reliability and intrigued by the potential cost savings -- which his team had estimated could reach as much as £60,000 annually. The decision was made to transition off of Exchange and onto Google.
The migration in early 2009 "was insanely easy," Jones said. His team created ghost mailboxes for all users and, while keeping Exchange live, imported each user's existing Exchange emails into their new Google mailbox. In a week and a half, about 900 users were up and running on Google Apps. One big contributor to the time savings: Remote employees did not have to come in to the office to have the software installed on their mobile devices or laptops, as they would have with an on-premise application.
Jones puts actual savings from the switch to Google Apps at about £48,000 annually -- not counting the money saved through more efficient configuration and administration of the software.
Cost uncertainty for the rental model
Dee Set's results support cloud service providers' claims that pay Software as a Service (SaaS) solutions can dramatically reduce capital investments in technology. Not everyone, however, is sold on the rental model for cloud services, particularly for enterprise installations.
"With larger SaaS subscriptions, some CIOs start to realise that it's not automatically cheaper," said Stefan Ried, a senior analyst with Forrester Research. "Prices can rise in a hurry when you're adding thousands of users."
Uncertainty around costs has been a key factor in Ivan Brooks' decision to bypass cloud options when it deployed its first corporate-wide email system last year. Brooks is CIO of Countrywide, a leading property services organisation in the UK. The company's IT infrastructure spans five core businesses, 7,500 employees and 1,200 physical premises, made up primarily of retail locations.
With larger SaaS subscriptions, some CIOs start to realise that it's not automatically cheaper.
Stefan Ried, senior analyst, Forrester Research,
When the company decided to centralise its email system, Brooks' team evaluated both cloud and in-house solutions.
"We felt that capital investment would lower our operating costs given that we were getting into a product that was relatively new," said Brooks. "We felt that firstly, integration with cloud-based messaging was very immature. Secondly, we couldn't get our hands around what the costs would be."
Integration issues were as important as the cost concerns, leading the team to go with Microsoft's Exchange.
"When you talk about email services through the cloud, mailboxes are typically difficult to integrate with existing systems," he said. Because Countrywide's core business platforms are heavily linked into Exchange, integration will continue to drive the company's decision-making around cloud solutions, Brooks said. Other factors include bandwidth and quality of service.
Security concerns diminish, slowly
Security continues to be a concern for many CIOs as well. The concept of storing sensitive data off-premise in a shared computing grid on the Internet is a turnoff for many IT leaders, particularly in industries such as government or healthcare, where data privacy is strictly regulated.
Many cloud proponents believe these concerns are a natural part of any technology innovation and are already beginning to lessen.
"IT buyers will always ask questions about security, about the provenness of any technology," said Whiteside.
Forrester's Ried points out that in some cases a cloud solution can be more secure than when data is stored locally. "If you lose your laptop, all your data is gone," he said. "But if my apps are in the cloud and I lose my laptop, I log into another one and I've lost nothing."
Looking for proof points
Despite his decision to bypass cloud solutions for Countrywide's enterprise email system, Brooks says he will "absolutely" evaluate cloud solutions for other parts of the business.
"We're not going against cloud as a solution," he said. "When we think about lifecycle planning, we will evaluate different ways of delivering those services, including cloud and traditional solutions." The delivery method, he added, will be determined by "the nature of the business case."
In the meantime, Brooks would like to see more examples of sustainable business gains from companies that are using cloud services.
"You have to use something developed through this approach for months, if not years, to get the confidence," he said. "A few case studies will go a long way to increasing that confidence."
Microsoft could have an impact on adoption rates as well. Companies that are heavily invested in Microsoft applications may be more likely to consider cloud solutions now that Microsoft has released its Azure cloud platform.
Brooks said Azure doesn't make him any more inclined to favor Microsoft when evaluating cloud options, "but it does demonstrate that Microsoft is listening to the things customers are looking for. It's a step forward.
"There's some cause for optimism that they understand and are moving to address concerns around integration," he added. "The challenge, as it always is, is that the systems deliver what they say they will."
Rob O'Regan is a freelance writer. Let us know what you think about the story; email editor@searchCIO-Midmarket.com.