Are dark clouds being created by vendors?

October 10, 2011 Off By David
Grazed from Business Cloud9.  Author: Mac Scott.

First things first: Cloud Computing is definitely here to stay and there is plenty of evidence to prove it. For example, almost every CIO (98 per cent) questioned by Xantus for its recent research report had already investigated Cloud services for their organisations; almost a quarter are now using them, with a further third planning to join them within the next six months, rising to 73 per cent within the next two years…

The research brings further good news for Cloud vendors. Looking five years ahead, almost 70 per cent of CIOs are likely to spend between 40 per cent and 80 per cent of their budgets on Cloud solutions. Equally, CIOs seemingly have relatively modest expectations of the Cloud life-cycle at this stage, with two thirds expecting Cloud solutions to deliver no more than a 25 per cent return on investment. If the sales teams need any further ammunition, two thirds of CIOs questioned also said “yes” when asked whether the claims of Cloud suppliers matched the estimated or actual IT costs and benefits within their organisations.

But just before vendors start reaching for the “bonus” button, there are some dark clouds on the horizon that could potentially pour rain on the vendors’ parade.

Mike Naden, IT Director at United Utilities, and one of the expert panellists interviewed by Xantus for the report, stated:   

“Personally, I think Cloud will be big in the market in the future, but it’s one of the most over-hyped words I’ve come across in IT/IS for at least 10 years. They’ve tried to take some of the confusion away by sub-naming it ‘public’ and ‘private’ cloud, but if you lift the lid they’re just naming a hosting service and putting a Cloud name around it. ”
 

In fact, Naden was one of a number of CIOs who were struggling to see a clear proposition from vendors. Another panellist, Paul Tamplin, Global Technical and Quality Assurance Director at Diageo, commented:   

“I think the vendors have got to get some consistency in their approach and description of what Cloud really is. I still feel we’re in the ‘VHS Betamax era’. They’re saying the same message but when you get underneath it, it’s all slightly different. ”
 

As well as the well-rehearsed, and continually expressed, concerns surrounding integration, compliance and security, the worries about procurement of Cloud services and applications are partly due to perceptions that vendors are trying to offer the emperor an impressive suit of ‘new clothes’. Julian Burnett, Sainsbury’s CTO said:   

“The reality is that 25 or 30 years ago you could have bought capacity for a mainframe from a bureau service that made capacity available to you at a guaranteed level of service and performance. I don’t think Cloud, as applied to IT infrastructure, can be differentiated from a more flexible, clever way of writing a contract. ”
 

Many Cloud vendors are offering a consumerised model. The critical questions they should be asking are how big will the take up be, have they got supply and demand right and who’s going to grab market share? One view might be that too much ‘tin’ is going into data centres and the whole global Cloud IT estate is going to look a lot like 3G immediately after the bandwidth auction. If that’s the case, then pricing will be very aggressive as vendors seek users for their newly-built mega datacentres.

Equally, a lot of clients are struggling with the technical and financial costs of integrating Cloud into their existing estates, evidenced by the low level of potential partners. Vendors that solve this issue will win accounts quickly and establish some serious market share in cloud. Greater vendor proactivity may be part of the solution according to Peter Scott, Head of Information and Technology Architecture at Ministry of Justice:   

“We are looking for suppliers to provide solutions that are credible and compliant. It’s not necessarily the role of the IT departments to be specifying this. ”
 

On balance, CIOs are generally positively disposed to Cloud computing and the benefits of agility, flexibility and cost that it can offer. However, there is still plenty of work to be done by vendors and clients alike to capitalise on the cloud’s business potential. There is a school of thought, to which I subscribe, that the term ‘cloud’ may fairly quickly disappear, becoming just another mainstream IT solution approach in the same way that ‘e-business’ has just become ‘business’. It is clear that everyone has big expectations of Cloud and most can see a compelling proposition in the end state.

The key question is how do you make it work in the interim, mixed estate model, from both a technology and business case point of view? If vendors can help potential and existing clients overcome the short-term challenges concerning integration, implementation and compliance, then Cloud presents an outstanding win-win opportunity for both sides.

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