IT managers will be pushed by their CEOs to adopt cloud computing strategies in a bid to reduce costs during the recession, according to a leading IT consultancy.
IT consultancy BroadGroup is advising CEOs to embrace cloud computing, in the same week that analyst group Gartner has said enterprises should avoid major cloud projects for two years because the market is immature.
Gartner predicts it will take seven years for the cloud industry to fully mature into a mainstream IT solution.
In its report on cloud computing, BroadGroup said compelling cost arguments will lead to CEOs driving IT managers and CIOs to adopt cloud platforms rapidly, while technology departments resist the change.
"Technology departments may need some pressure to migrate to cloud at a reasonable pace, because the change involves a loss of control for them, but their buy-in will be essential because there are numerous risks and problems to manage along the way," said the report.
Cloud computing is "the ultimate recession technology", said the report. The cost arguments for moving to cloud are becoming "more measurable and concrete", as "big-iron" providers of IT products and services start developing cloud offerings.
"For companies that are considering deploying enterprise software, it [cloud computing] can offer potential savings of up to 25% of the total cost," stated the report.
Cloud also cuts development-related costs, while making it possible to bring in new products and services to market quickly, said BroadGroup.
The report cites a McKinsey Quarterly article by Abhijit Dubey and Dilip Wagle that calculates potential cost saving examples. Overall, the consultants found that on a 200-seat customer-relationship management application, the on-premises cost would be $2.3 million, while the SaaS cost would be $1.6 million.
BroadGroup's report said "tipping-point is approaching" at which the wider community of corporate users will switch to cloud.
Despite these arguments, IT managers will resist the shift to cloud platforms. "To a CIO who runs a large fiefdom of staff and datacentres, with significant capex and frequent CEO access, the most obvious worry is that cloud is a profound threat, like outsourcing, that raises the possibility of reducing the size of his or her empire and influence," the report said.
But the consultants said cloud computing could actually give IT managers more control.
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"The move to enterprise-wide cloud solutions – whether at the infrastructure end with datacentres or at the user-facing end with, for instance, customer-relationship management applications – may actually leave the IT department in firmer control than before, given the possibility to have much greater centralisation of instalment decisions and functionality than with, for instance, desktop software."
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Ric Francis | Published: 10:06 GMT, 23 February 2009
All with the adoption of many new technologies the IT function is the most wary in their response. Cloud computing will be no different. Whilst the use of 'full' applications in the cloud will continue to take some time to adopt there should be no issue with email and standard office applications. Check out organisations like Nasstar plc to find out from people with experience why this could be the safe cost reduction step that your CEO might expect
John Everhard, technical director, Pegasystems | Published: 14:18 GMT, 19 February 2009
It’s easy to recognise a potential conflict emerging between the hard-pressed CEO looking to cloud computing to cut costs and his CIO concerned about a consequent loss of control. Yet as developments in the BPM arena have already demonstrated, this does not have to be an either/or argument. A ‘Platform-as-a-Service’ offers a cost-efficient SaaS model to internal and external users, but without the limitations associated with hosting off-site. However attractive SaaS appears, businesses rightly are concerned about trusting mission-critical processes, policies and data to an externally-hosted environment. By contrast, BPM PaaS removes the risks typically associated with SaaS solutions, such as integration, security, visibility and reliability, so they can focus on applying the benefits of BPM across the enterprise. And this becomes even more compelling as global enterprises use PaaS to rapidly drive out cost from the business and assimilate acquired businesses.