It’s very easy to get on a rolling bandwagon that is travelling so fast your vision becomes blurred to what is really going on around you. That’s how we felt after talking to key market analysts about the state of the market for cloud-based applications.
Whilst we are assured by the likes of the Cloud Industry Forum that it is full steam ahead for cloud based application deployment the truth is that others believe it is not all plain sailing when it comes to the cloud.
A recent global study of almost 2,100 contracts covering deals worth £7.8 billion suggests that cloud-based services are failing to capture the popular imagination of UK businesses. It also suggests that organisations are increasing the level of IT services they outsource to improve service delivery, with many investing budgets saved over the past few years on HR, sales and finance support.
KPMG’s 8th annual ‘Service Provider and Performance Satisfaction’ study includes detailed analysis of current corporate IT spend in Britain, by examining more than 330 UK-based contracts. It reveals that 71 per cent of UK organisations are spending a mere 10 per cent, or less, of their IT budget on Cloud services.
Many organisations are also continuing to rely on ‘tried and tested’ outsourcing models and the survey shows that favoured destinations for IT support services remain India (51 per cent), Poland (8 per cent) and South Africa (8 per cent).
Why is it that UK firms are reticent about employing cloud services?
Well the top three reasons cited by UK C-suite respondents centred around data location, security and privacy risks (26 per cent), concerns over regulation and compliance (16 per cent) and cynicism around the ease with which cloud services can integrate with legacy IT systems (15 per cent).
“Despite widespread acceptance that cloud services offer access to the latest technologies, and make IT more accessible, adoption remains relatively sluggish. While concern about the security risks surrounding new technology is understandable it may also be disproportionate, as cloud options are just as safe as other outsourcing solutions. Of course, investors and stakeholders will welcome caution on the part of the buyers, but they also want to see innovation, meaning that UK plc will need to find the right balance to remain competitive,” says Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team.
The survey goes on to reveal that, despite the economy picking up, some companies across the UK are still nervous when it comes to committing to long-term investments. Asked about their IT outsourcing plans for the next two to three years, just 43 per cent said they plan to increase spending. This figure contrasts with 77 per cent, this time last year.
However, where budget has been set aside for outsourcing, it is clear that organisational thinking is maturing. When the survey was first undertaken, respondents focused primarily on cost savings as their reason to outsource – but this year’s survey shows that the search for quality improvement (20 per cent), access to skills (16 per cent) and a desire to reduce the time it takes to ‘get things to market’ (6 per cent) are driving the rationale behind IT outsourcing decisions.
The findings also suggest that satisfaction levels remain high in the UK, with 77 per cent of respondents reporting that they are comfortable with the support they receive. Worryingly, however, the research shows inconsistencies in how businesses are approaching integration and governance of the services they outsource. The majority (70 per cent) said that their IT function currently performs the role of service integrator, whilst only half (50 per cent) have partially met the expected benefits of service integration and management.
Sahota concludes, “As IT forms an inseparable part of the wider business strategy in many organisations, technology decisions are now rarely left to the CIO alone. It means that, with the potential for conflict over the choices being made, organisations should dedicate a greater level of investment towards governance than they may have in the past. If they fail to do so as they move towards more complex delivery models, poor governance can impact their ability to provide quality services, increasing risks around cost, service quality and delivery.”
Complex IT Landscape
The fact remains that IT leaders face new levels of complexity as they seek to address business needs and according to Claranet, partnerships are key to navigating this increasingly complex IT landscape.
Claranet says the cloud industry has perpetuated a notion that cloud is simple and cheap, when, in fact, the opposite is often true. While the cloud has enabled all sorts of flexibility and agility, the explosion of available choice has actually driven complexity for most IT teams. As this accelerates, IT leaders will need greater support from their providers to navigate the increasingly complex IT landscape.
The principals behind cloud computing services make IT a simpler, and sometimes cheaper, proposition for organisations to adopt than traditional forms of procuring and using technology. However, while cloud has helped to drive simplicity for end users, it has also increased the capacity for businesses to be more demanding of their IT departments, while expanding the number of potential suppliers and systems that an IT department has to manage and secure. It’s widely accepted that there will not be a single cloud computing platform for all requirements, and that therefore Hybrid cloud solutions will be the way of the future. However, as IT environment spans over a greater number of different ecosystems, the management overhead grows.
Neil Thomas, Claranet’s Product Director, says, “Cloud computing has been marketed as a simpler, easier and cheaper alternative to on-premises IT, but in many respects, the situation is now considerably more complex. Behind the veneer of cloud’s simplicity sits an increasingly complex and difficult-to-manage ecosystem, creating new challenges for the IT department.
As the cloud industry matures, it’s becoming clear that there is a vast amount of choice, and that there is no one cloud solution for all requirements, creating the more complicated world of Hybrid IT. While choice is a good thing, it also risks becoming a headache as applications and data are spread over multiple systems, creating an overhead that many IT managers don’t have the resource to deal with or manage. Although start-ups might just find it easier to put everything into the public cloud, the picture for most businesses is more complex.
Mid-tier organisations are faced with increasingly complex IT estates, and must balance legacy considerations, different software solutions, and multiple suppliers, which demands new skillsets. Many will have spent a long time trying to consolidate their systems down, but it’s starting to explode out in terms of choice, and the optimum solution today might involve using multiple different infrastructure providers – shifting the IT department’s focus away from the technology to supplier management.
A supplier who can work over different infrastructures will therefore be essential going forward, simplifying the management process and freeing up the IT department to focus on core business activities. The successful IT departments use their supply chain correctly and partner with trusted suppliers that can offer the support they need. This in turn can help them to deliver the business agility that the industry said that cloud would deliver,” Thomas concluded.
Steady as She Goes.
So if it is not full steam ahead under a clear sky with a few white fluffy clouds what about a more cautious approach?
As you would expect there is a study to support most points of view and this view is no exception as a survey finds that despite understanding the benefits of cloud computing, UK IT teams are taking a staged approach with migration to the cloud.
NaviSite Europe, a Time Warner Cable company, say that today workforce management, data security and compliance, budget and cost considerations are the top challenges for migrating IT workloads and that their study of the market found that whilst most UK businesses recognise the benefits of cloud computing, they are also still running a significant amount of systems either in-house, or externally on traditional platforms.
In fact, over three-quarters of those surveyed have migrated less than 50 per cent of their infrastructure to the cloud. Not having the right tools and technical skills required to execute a migration were cited as a major detractor. NaviSite surveyed more than 250 IT professionals from organisations with more than 300 employees across the UK and US to understand cloud computing adoption, what companies look for in a cloud service provider and to understand concerns over migrating to a cloud based infrastructure.
For UK respondents, when it comes to evaluating a cloud service provider to host a business’ IT infrastructure, not surprisingly, 59 per cent of respondents said security is a main concern. Interestingly, nearly half said the ability to customise solutions to meet their unique needs was an extremely important aspect to consider in the selection process. 31 per cent said the service provider’s ability to unlock tangible cost saving on existing spend was their top consideration.
In the UK, 45 per cent of survey respondents said that business continuity and reliability are the biggest drivers to implementing an overall cloud strategy, and 89 per cent say that deploying some sort of private cloud and hybrid infrastructure is a priority within the next 12 months.
Ed Says…
Surveys can tell you almost anything you want and the interpretations of them just more opportunities to have statistics fit your chosen point of view. No matter what the surveys say IT departments will make up their own minds based upon their own research and usage examples seen in deployments (case studies).