Cloud Computing: Pain or Panacea?

by p b    Jun 29, 2011

Anurag Agrawal

Cloud computing has become an all pervasive terminology promising the holy grail of quick start up and low costs allowing businesses to focus on their core competencies. We have to pause and think about the reality and outcome in the next five years. As businesses increasingly adopt cloud computing and reach a new level of complexity: the very technology that had a low start-up cost for them may become a drain of IT budget.

It is no wonder that many businesses are only moving their simple applications to cloud to test the waters and keeping mission-critical applications inhouse. Many enterprises are working towards developing their own Return on investment (ROI) models based on their experiences – a classic case of customer teaching the vendor.

Techaisle believes that in the coming years, both Enterprise & small and medium business (SMB) Cloud ccomputing will begin its steady route of complexity of client-server technology. Client-server technology (alternatively server-based computing) became increasingly complex to implement and maintain because of the following reasons:

· Lack of control
· Complexity in development and usage
· Muddled total cost of ownership (TCO)
· Intricacies in data integration
· Expensive implementation
· Dependency on consultants
· Too many vendors providing niche solutions

Similar signs are already becoming visible in the cloud computing arena. The beneficiaries of this complexity will be three different types of entities:

. Those that provide consulting to SMBs prior to cloud computing Implementation
. Those that provide consulting and data integration across clouds - post cloud implementation for SMBs
. Those that have a stack of offerings providing not only cloud solutions but also seamless data exchange capabilities for SMBs

Techaisle’s recent survey indicates that a top reason for Enterprises and SMBs to not adopt cloud computing is perceived lack of control and security. This is a huge barrier already for cloud computing adoption. It is seen more commonly in countries where the government policies are discouraging data to be held outside of their own borders. In the chart below, the top reasons cited by SMBs for not using Cloud Computing relate to lack of control.

However, due to mass movement towards cloud computing, it will not be long before the strongest skeptics will also embrace cloud. Lack of control will still be the top reason but it will not hinder its adoption. This is similar to the findings that disaster recovery is still a pain point for small businesses since the last ten years. Despite many attempts, vendors have not been able to completely eliminate this concern of small businesses.

It is surprising that cloud computing vendors are not pushing a key advantage of using cloud applications – disaster recovery with built-in cloud solutions becoming a core service.

Complexity in development has now been transferred to providers of cloud computing. Good news indeed but the level and nature of complexity have changed. Some of the key issues of companies that need to be addressed will be:

· What can I move to the cloud?
· What solutions are best for my business?
· How will I transfer my data to the cloud?
· Who will train my employees?
· What will be my cost?
· If I move from a capital expenditure (Capex) to an expense situation as far as my IT investments are concerned, what will be the impact on my financial health? How does it affect my cash flow, profitability?

There will be different levels of cloud computing adopters. A recent Techaisle survey showed that while the average number of fee-based applications/services being used has largely remained the same over the last three years, the maximum number of applications has shown steady growth.
For example, for US SMBs, that number now stands at 11 applications. Essentially this means that as and when a business begins to use eleven different applications on the cloud, mostly provided by different vendors, the level of complexity increases.

This is where consultants will have to step in, artificially increasing costs and “clouding” the promise of cloud computing. Or perhaps it will become a lucrative and useful opportunity for channels. Either way, this will put a dent in the cost structure of the adopters and start to negate the very reason why they went to the Cloud. Questions like the following become relevant with no easy answers.

· How do I move my data and information across applications?
· How do I have a single sign-on?
· How do I change vendors?
· Will I be able to change vendors?
· How do I migrate my data?
· I like applications from two different providers and I want to run them both but will they interact?

GraphOwning vs. Renting is therefore becoming an overriding principle for not using cloud services. Interestingly, the discussion has not yet revealed any inclination towards the financial impact of the decision. We believe that as and when adoption becomes a serious issue, financial issues will also need to understood and addressed.

Anurag Agrawal
Techaisle
Anurag@cxotoday.com

Anurag Agrawal is the CEO of Techaisle, a global market research and consulting company focused on SMBs and Channels. Prior to Techaisle, Anurag headed Gartner’s Worldwide Research Operations and before that was with IDC.