As companies grow, business conditions change

by Ashutosh Desai    May 17, 2010

At a recent event by Springboard Research, industry leaders from HCL, SAP, Google Enterprise came together to talk about how companies can derive ‘business’ value from the adoption of cloud computing services. According to the analyst firm, industrialization of IT is inevitable, with companies looking for ways to efficiently allocate resources and focus on their core competencies. Michael Barnes, VP-Software and Asia Pacific Research, Springboard Research, began by giving a general overview of the benefits companies can derive from cloud computing services such as SaaS, PaaS, IaaS, etc. One thing was apparent, the time for providing definitions is a done and dusted thing. Decision makers are more aware of cloud services than they were before and are now increasingly considering this route.

Barnes said that there is a need for businesses to dynamically allocate resources but at the same time need to follow processes to achieve success. At the same time, these resources should also provide the ability to ‘de-provision’ them as and when the required. Looking back at the economic downturn, Barnes viewed the recession as an event that actually made enterprises focus on needs, look for alternatives for on-premise solutions. He said on-demand approaches have evolved, with standardization and modernization of IT infrastructure. Going by the economies of scale, this has resulted in a favorable business climate considering cloud computing solutions.

But Barnes did say that one size may not necessarily fit all. The move to cloud computing is an evolution and needs to be viewed as a progressive path. According to Barnes, organizations are moving towards private clouds and trying to enhance their data centers and optimize their investments. Organizations are more interested in getting their business needs fulfilled than the technology a cloud computing solution uses. Technology is only an enabler and from a business standpoint it has no inherent value at all, he said. The value of IT as an enabler depends on how effectively it is applied to meet organizational objectives.

Barnes said that challenges like security, regulatory compliance, data governance, management and integration (cloud-to-cloud) are present but they also imply that the change will not come overnight. The future may possibly comprise of hybrid clouds. Whatever the outcome, the offerings must be repeatable and the business priorities should drive IT decisions. However, the speakers did say that there is considerable hype in the market regarding the security challenges. Dr. Thomas Vetter, VP, Business by Design Development, SAP, said that on-premise technology solutions in mid-sized companies are probably less secure than a hosted, offsite one. Doug Farber, MD, Google Enterprise said 60 percent of corporate data lies unprotected on employee PCs. Cloud computing solutions, on the other hand, follow standards such as SAS 70 Type-II and FISMA (which is in progress).

With regard to licensing costs, especially when a company already has made investments in this respect, Dr. Vetter told CXOtoday that it would probably make sense to adopt a ‘mixed’ approach. This means if a company already has an on-premise ERP solution and needed a CRM, it could consider a hosted one, which supports the said ERP. The phase out to a ERP cloud solution will then depend on the company’s existing investments in licenses over time.

According to Gartner, only 20 percent of business will own no IT assets. Cloud computing is here to stay, with all its benefits from agility to cost but it will not replace on-premise IT deployments. Challenges will remain and certain areas of IT will be affected sooner than later.