Are big companies actually adopting cloud computing?

Are we about to enter a lull in cloud adoption as multinationals plan for a wholesale shift from next year?

6 June 2011 by Ambrose McNevin - DatacenterDynamics

Banks, manufacturers, utilities and professional services companies have the most pronounced concerns when it comes to adoption of cloud services.
 
The concerns of large companies are not markedly different from those of SMBs. Those concerns are security, data governance, loss of control, SLAs, use of the public internet, lack of standards and missing industry road maps. Yet despite these concerns among Multi-National Companies, adoption of Cloud computing is up 61% from last year. APAC countries are leading, with the US and Europe lagging behind.
 
The time frames for adoption make for interesting reading.
 
In a global survey of over one hundred C level executives at large Multi-National Companies, market watcher Ovum asked about what was being deployed now and what was stopping companies moving.
 
The analyst asked which applications would companies consider moving. There were no great surprises. Messaging, CRM and document management are viewed as cloud ready or soon to be cloud ready while Business Intelligence, ERP and finance are much more likely to be kept in house.
 
Findings on benefits again threw up no great surprises with performance, productivity, scalability, elasticity and flexibility all cited as key.
 
The list of what is shifting over to the cloud includes: Applications software (SaaS), HR, ecommerce; Networking e.g. VPN connectivity management, network sharing and provisioning; Corporate IT systems e.g. OS, servers, desktop; Communications e.g. hosted IPT, hosted contact center, web conferencing, hosted UC applications; Data management e.g. security, data backup, storage.
 
In each of the categories listed above the cloud adoption rate hovered around 50%. Ovum also asked if there were plans to move these to the cloud in the next six months or if the expectation was to use cloud in the next 6-24 months.
 
In the six month bracket, moving communications to the cloud ranked highest but only by fewer than 10% of those questioned.
 
For each category listed there was significantly more interest in shifting to the cloud in a six to 24 month time frame. The highest at over 30% was for data management, back up and storage and almost as high for corporate IT systems and operating systems.
 
These findings suggest that after the initial flurry of activity we can now expect a pause followed by a surge of activity from 2012 onwards.
 
Large banks, manufacturers, retailers and utilities have high expectations that within the next two years many of their key processes will be delivered via the cloud while they retain their core applications in owner managed facilities. This is the definition of a hybrid cloud model.
 
Adoption rate
The interesting point about this research is that it was conducted among multi-national companies. SMBs are viewed as being key targets for cloud because they are unlikely to have large existing infrastructure investments(Microsoft conducted its Global SMB Cloud Adoption Study which found that within three years, 43% of workloads will become paid cloud services, but 28% will remain on-premises, and 29% will be free or bundled with other services). Multi-nationals, however, have large data centers and significant IT assets.
 
But whereas these would once have acted as a barrier to change, what we are now seeing is that companies are already migration planning.
 
What this illustrates is a world where large companies are planning to shrink their data center footprint, possibly by adopting modular data center solutions and moving to buy services. Internal systems will shrink and the emphasis will shift to ensuring SLAs are met and additional services are considered.
 
We could actually be at the inflection point of large companies deciding that growing business no longer needs growing data center floor space or number of sites. Look at our news pages to gauge how many new builds are being undertaken by service providers.
 
Supply side
Analyst Frost and Sullivan says: "The rapid increase in the adoption of cloud computing will encourage IT service providers to introduce new services and business models that meet the end-user requirements. With the increase in complexity of services being offered, this in turn is expected to provide a growth opportunity for the test equipment companies to increase their product offerings and add new customers in this market."
 
So we have cloud suppliers attempting to differentiate themselves with value added services, lots of activity in modular data centers and now major companies considering moving the majority of their IT to the cloud in the next 6-24 months. It takes many factors to reach an inflection point.

This article first appeared in FOCUS magazine, issue 16, out now.

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