Can cloud computing survive an economic upturn?

Cloud computing's recent popularity is due in part to the economic downturn and pressure to cut IT costs. But will the benefits of cloud computing and hosted service providers be enough to sustain the technology post-recession?

The collapse of the credit bubble and the demands for IT departments to cut budgets has added pressure on enterprises to speed up IT modernisation in the drive to reduce costs.

However, in the seemingly frenetic pace and urgency to make productivity gains, one key element is being overlooked -- will the cloud continue to offer long-term value for users once the recession passes and the focus on reducing costs eases?

The cloud has a reputation for being able to radically streamline business processes for organisations of all sizes. Its ability to offer greater business agility, minimise hardware purchases and automate processes has been hugely popular. It enables organisations to do more with less and has offered substantial value to both private- and public-sector businesses.

Saving with virtualisation and the cloud
The Royal Borough of Windsor and Maidenhead is one organisation that has achieved stunning results through virtualisation. It reports a reduction of its energy bill by 44% and predicts a saving of around £1.2 million on the project during the next three-year period.

Another is Rowanmoor Pensions, which looks after 4,300 pension schemes. The company decided to minimise security risks by only allowing remote access via a hosted managed service provider through the cloud. It offers a major advantage, allowing the business to easily and quickly lock down systems and information.

These examples are not isolated. Key players in the software industry such as Amazon, IBM, Microsoft and Google are now investing significant resources into providing applications through the cloud. This is supported by a recent forecast from research firm Gartner that predicts a rosy future for the market, expecting it to grow to $19.3 billion by 2011 from $6.3 billion in 2006.

The question beckons, will anything dent this phenomenon and will the cloud prosper once IT budgets expand when the global economy picks up? There is no reason to assume that once organisations have experienced the benefits of cloud-based computing that they will want to return to packing offices with costly boxes, complex licensing and bringing the attendant maintenance back on board.

For some, stringent compliance or particular business reasons mean that IT remains in-house. For others, the opportunity to shed physical kit, outsource services and provision as need dictates, without complicated installations, will prove irresistible, an eminently sensible business decision.

Picking the right service provider
Technology business leaders need to ask the appropriate questions and check the certification of their prospective service providers. They must make sure there is clarity regarding service-level agreements, security, availability and penalties for IT failure. These are all standard actions that should be checked just as with any other IT project. This is vital at the point of use: There shouldn't be any talk of the cloud, only of a particular service delivered in a particular way to an agreed standard.

Small and medium-sized businesses in particular will continue to embrace cloud computing as an easy way to get enterprise-level software without huge overhead costs. Companies want a fast rollout with low startup costs. Cloud computing gives a faster time to market so organisations can concentrate on their core business rather than be distracted by IT.

Challenges of the cloud
There will of course be businesses that experience problems; cloud failures are sure to occur, as with any technology. However, the levels of investment that service providers spend on data centres and their hosted services is prodigious. Outages mean penalties and the loss of large amounts of revenue-paying customers. Therefore services are offered with built-in redundancy, replication and business continuity, and outages will be few and far between, as there is already significant choice and competition in the market to spur efficiency.

Hosted service providers have even more of an incentive to get things right than a firm's own IT department. For the service provider, any outage is unacceptable and causes delay and disruption for great numbers of its customers. A hosted provider may lose a considerable amount of business, so it works very hard to stop downtime by careful planning and seamless failover technologies -- and it is able to invest more in these protections than most individual firms can.

It's a simple calculation to look at what the IT department currently pays in capital expenditure for new software and hardware, operating costs, rent for space, power and cooling, and so on. Assuming, just for a moment, that there are no other issues preventing a move to hosted solutions, a direct cost comparison can be made.

At some point in the near future, organisations will start to become more financially fluid and will look at refreshing their IT architectures and thinking long-term again. The economic downturn represents an opportunity for those organisations willing to look beyond their own server rooms and data centres to explore a cloud-based IT world. Time will be the ultimate test to measure the ongoing success of the cloud; however, I think the trend will see more IT leaders embrace a range of cloud services and applications. After all, who wouldn't want to do more with less?

Gary Collins is the Chief Information Officer at cloud and virtualisation consultancy Intercept and a contributor to

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