Though cloud services are maturing fast, issues remain around real cost savings and service level agreements, Ian Campbell reports.
Technology companies expect revenue from cloud services to double in the next two years, suggesting that what started out as a buzzword in 2008 is starting to gain real traction. But the global survey of 179 cloud companies by KPMG also revealed that providers are struggling to show real evidence of cost savings and it's proving to be biggest barrier to cloud adoption.
Nearly six out of ten providers say cost reduction is still the chief reason most business users migrate to cloud yet almost four out of ten providers say it's hard to prove. Only 39 per cent of providers believe that users have realistic expectations for cost savings in the migration to cloud; 19 per cent don't. The challenge for providers is making a business case for switching to the cloud and providing information about contractual arrangements such as service level agreements (SLAs).
Despite concerns over loss of control over data - which always ranks as one of the top reasons why companies won't go to the cloud - revenue will increasingly come from data intensive applications, such as business analytics, content management, customer care, and operations and manufacturing.
Currently, two-thirds of cloud providers say they are most active in Software-as-a-Service applications (SaaS) and expect that to continue over the next two years. Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) activities are projected to have the greatest increase in activity over the same period.
The good news for IT services companies is that organisations want third-party help to fill the knowledge gap and explain how to acquire or implement cloud strategies. Nearly 40 per cent of providers say business users get outside help; 56 per cent want implementation services; 41 per cent want assistance on information security assistance.
Closer to home, a survey conducted by Lero (Ireland's National Software Engineering Research Centre) found that the cloud delivers significant time savings in terms of implementation, and, once installed, drive down administration costs. Two companies surveyed were implementing applications within 24 hours compared to six months with traditional IT systems.
In another case, administration costs were cut by 65 per cent once the system was implemented. The research also revealed that organisations that pursued deep and integrated cloud adoption would see better results than those who only dip a toe in the water.
Offering a view from the frontline in Ireland, John Purdy, Chief Executive Officer of Ergo, identified some clear trends that mirrored some of the research findings. "Organisations will selectively outsource some things to the cloud but still hold on to their own data. Regardless of what the big vendors are pushing at them, they are going to the cloud at a manageable pace that suits their people and their customers," he said. "They are adopting this technology in a far more measured way than what's gone before."
Most of the activity is around the private cloud, according to Purdy, where organisations can retain more control over their environment. The hybrid approach is also prevalent where some applications or infrastructure stay on premise. "Not too many organisations I'm talking to are prepared to take everything to the cloud. There are fantastic opportunities to scale, and there are cost advantages to be had by having some elements in the cloud, but it's not seen as single answer to all their issues. Not everything can be fixed by being off premise," he said. Ergo fulfils the role identified in the KPMG survey for third-party advisors and outsource partners, facilitating cloud service whether they are public, private or hybrid. "We have put out our dollars in the right place, on the right acquisitions and the right kinds of training for people to make sure we don't get left behind," he said.
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