With the spread of IP networks, cloud services are slowly but steadily catching on in the corporate IT market, winning over CIOs because they can pay for their services as they use them rather than make huge upfront capital spends. Alan Burkitt-Gray reports from a roundtable of providers and users

 
 



The BT Tower: there is already a lot of adoption of cloud
services that CIOs don’t see
Cloud technology is robust, but the market is still doubtful — yet businesses are steadily starting to adopt cloud services. It is, say some, one of those fundamental and inevitable changes in the industry, and it is starting to happen.
Mark Quartermaine, managing director of BT Global Services in the UK, accepts that “there is a degree of uncertainty that is huge” in both the public and the private sectors among potential users but asserts: “The technology is robust enough.”
People recognise the value of cloud services, he says, “and cloud will come to the market in layers”. Software as a service “is coming but it is not where cloud will start”.
Quartermaine was speaking at a roundtable organised by BT on the development of cloud services — held, appropriately enough, in the revolving former restaurant at the top of the BT Tower in London, though on a day without a cloud to be seen.
According to David Bradshaw, research manager for software as a service and cloud services at analyst company IDC, “the cloud is already happening” but sometimes without the official knowledge of companies. “There’s an awful lot of adoption that CIOs don’t always see,” he says.
Amazon.com and Salesforce.com are both known for offering their services on cloud platforms, but Bradshaw cited companies such as Experian — which provides individual credit analysis services — as cloud advocates.
“The idea has been around for some time, though the term ‘cloud’ is relatively recent,” says Bradshaw. “But the term ‘cloud’ is a bit vague.” Perhaps, the implication is, the name is part of the reason for any lack of enthusiasm in the market.
There is change ahead, though, as existing software vendors are moving into cloud services. “Microsoft is taking some courageous decisions,” he says. This is a big risk considering Microsoft’s traditional revenue model, he notes. “Bravo to Microsoft for being very brave.”
 
 
Still small but fast growth
 
Meanwhile there is growth “all around Europe” — Bradshaw’s area of focus at IDC. Indeed, “lots and lots of growth”, he adds. “It’s still a small market but growth rates are so high that for many mature software markets all the growth is happening in the cloud.”
It is, he adds, “a fundamental shift in the technology business” that is happening over the next five, 10 and 20 years, comparable with previous shifts to client-server technology or to outsourcing.
The reason is simple to explain: cloud allows users to shift their IT spend from capital expenditure up front to paying for it out of revenue. “It is a long-term transition in business enablement”, says Bradshaw.
True, there are worries: security, governance and location of data above all. At the same time “IT people are worried about their role”. This is a big shift in the way IT is done, “and IT departments are wondering what to do”.
What about users? Stuart Curley, chief technology architect at Royal Mail, the UK’s postal service, believes security is good. “We’re building private clouds in the Royal Mail,” he says, “which are going to be a sight securer that what we have at the moment.”
But cloud is not just about cost. Cloud services such as Salesforce.com are introducing features that Bradshaw calls “the socialisation of CRM”, which enable people to link different information sources. “You can follow a deal just like you can follow a person in Facebook,” he says. “This is a way of tackling unstructured data — a big issue in CRM. It’s one of the new ways of using the cloud.”
Cloud services are growing between 30% and 70% a year in Europe and in the Asia Pacific regions, he says, though “that will flatten out over time”. Growth in the US is lower, he adds.
But — perhaps a significant indicator of the way things are going — he notes that some venture capital funds are “only funding people who are doing cloud”. The traditional licensing model of using software is not accepted “unless there is a very strong business case”.
 
 
IT procurement
 
Neil Sutton, BT’s vice president for its global service portfolio, sells cloud services to enterprises. He believes that no company is going to ditch everything and move to cloud but it is surprising how much cloud is impacting IT procurement.
“All the hype” about cloud means that his IT customers “are suffering cloud fatigue”, he smiles, “but when they are asked for the biggest trend in the industry the answer is ‘cloud’.”
And there is now interest in the financial world, he notes — perhaps a sign that the argument about security and privacy is being won.
Sutton echoes Bradshaw’s point about IT departments being concerned for their future. If companies save money by moving to cloud services, “the money will go to the bottom line and the CIO will get a budget reduction”, he says. “The challenge of aligning IT and business has never been greater.”
But cloud “allows you to innovate much more quickly”, he adds, citing work that BT has done with a number of pilot customers. “We spun it up, we innovated and we showed it to them,” he reports. “when you come back tomorrow” you can see results. “This is an example of the flexibility and agility. Every customer is saying: ‘Show me the real value.’”
 
 
Infrastructure needs
 
But the infrastructure on which cloud services run “has to be up to scratch”, adds Sutton. There are some horror stories: “One manufacturer found that when it moved to a private cloud service the response time dropped from three seconds to 35 seconds.” Clearly that is unacceptable — and is one reason that some IT managers are still wary.
“It’s not a matter of bandwidth and ports and pipes,” he says. “You need a tiered infrastructure for these things to work.”
Meanwhile communications providers themselves are looking at cloud as a way of providing new, regularly updated IP-based services to their customers — or, as Sutton calls it, “an evergreened platform”. It means that providers can deliver services to all terminals and don’t have to send out thousands of technicians to upgrade everyone’s deskphone when a new facility is introduced.
And ways are evolving of handling security concerns, he notes: providing information in the system about what information should not leave national boundaries, for example. “You can’t get away from the security and the compliance issues.”
The central issue, though, is that: “You just want it to work as a user. When you can do that you get a good user experience — but going over the internet at four in the afternoon you have a challenge.”
Back to a user: “I’m more interested in the performance of the organisation and the service it is delivering,” says Curley. “As a customer I’m frustrated about the way my suppliers serve their customers.”
And he is enthusiastic about the speed of change in IT systems that cloud services promise. “With big organisations it is never less than 12 months for an IT change, and it is usually more like 24 months.” As a result “I get pain from my business colleagues”, he adds.
And the cost is high. “When I’m talking about significant IT to change the business, I’m talking £10 million.” That adds a year to the process of getting the investment approved. The model is “broken”, he suggests.
That’s why he likes the idea of pay-as-you-go that is the prospect for cloud services. “I don’t pay for anything until I use it. Until that technology is delivered to my business I don’t want to pay a penny.” That is the model he likes, as an experienced IT director. “We cannot afford this capital investment in IT. Times are hard.”
And the way IT is done at the moment, IT directors can end up with “stranded costs on my books sitting there using electricity”. Curley “would like someone else to take that over”.
That’s why he is increasingly positive about the idea of cloud services. “It is breaking the mould of the way IT suppliers supply IT,” he says. “The technology must be aligned with the business. You pay for what you use.”
But he identifies another concern in corporate users of cloud services: fear of the cost. A chief financial officer wants to be able to predict the cost of IT, but with cloud there is an uncertainty, he suggests. That needs to be sorted out.
Who implements it? A new breed of systems integrators are becoming service integrators, it seems. Corporate users don’t necessarily go direct to the cloud service providers, but use service integrators to put the elements together.
“If you’re a big corporation you have to have a prime contractor that is taking care of your network,” adds Curley. GTB