Cloud Computing: A Strategic Engine of Change or Just Another Tool in the Kit?

A. DeCarlo

A. DeCarlo

Summary Bullets:       

  • Massive, multi-billion dollar growth projections and continuous vendor and service provider marketing keep a white-hot spotlight on cloud computing.
  • Yet, as rich as the potential benefits of on-demand computing are, enterprises are approaching the cloud with caution as well as some very fundamental questions which, left unanswered, will keep the model from becoming anything but a tactical tool.

If you believe everything you read, the cloud is supposed to be the cure for all that ails the enterprise.  Flexible, cost-effective, and scalable, the cloud holds a lot of promise for organizations struggling with severe budget limitations.  Every self-respecting vendor and managed IT services provider needs to have a coherent and innovative cloud strategy or risk looking backward in a fast-moving space.  Market projections seem to come out every week talking up the cloud’s potential value in astronomical multi-billion dollar terms.  The last one I saw projected cloud sales to top the $39 billion mark… this year.

That figure (and many of the others I have seen bandied about) seems exaggerated given the caution with which organizations are approaching the cloud.  In our 2011 study of North American cloud adoption, the majority of surveyed enterprises currently using on-demand computing, storage, software-as-a-service (SaaS), or platform-as-a-service (PaaS) solutions reported that 10% or less of their IT needs were being delivered through the cloud.  Moreover, enterprises do not expect that to change significantly in the coming years, with 58% of the respondents still estimating that even by next year one-fifth or less of their IT needs will be met through the cloud.

So, what should we make of the gap between expectations (and projections) and reality?  While some (or even much) of the inconsistency can be attributed to basic confusion over definitions and classifications (e.g., including dedicated services in the mix, whether to apply numbers from consumer-facing applications, etc.), there is also a very strong desire by an industry under stress to find a solution to severe resource constraints and painful revenue and profit reductions.  The potential of the cloud to act as a less expensive and more agile alternative to DIY or traditional outsourcing is undeniably compelling. 

However, continued questions around big obstacles such as privacy, security, and transition issues are pushing many organizations to look at the cloud as a tactical rather than a strategic resource, at least for now.  This is why we are still seeing so many use cases for things like test and development and collaboration applications while organizations mull over whether and when to make a bigger and bolder move into the cloud.

This becomes a chicken and egg problem.  Until IT providers have good use cases of strategic applications for the cloud, most enterprises are going to remain skeptical and stay on the sidelines.  Fortunately, much of this skepticism will fade as the model and the delivery methods mature and more standards emerge.  There are some organizations, particularly smaller and more nimble ones, willing to take calculated risks on the cloud, and as these examples go public many of their counterparts will become more comfortable.  In the meantime, I suggest we tone down the rhetoric and the radical projections.  I have no doubt the cloud is not just part of our futures but our present realities, along with many other transformational technologies and models, including mobility and analytics.

About Amy Larsen DeCarlo
As Principal Analyst for Security and Data Center Services at Current Analysis, Amy assesses the managed IT services sector, with an emphasis on security and data center solutions delivered through the cloud including on demand application and managed storage offerings.

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