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Business hesitant to leap into the Cloud

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8th Dec 2010
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The business benefits of Cloud Computing have been clear for quite some time, so why are companies taking so long to adopt it? Chris Challis reports.

“The Cloud is now mainstream” commented one provider at last week’s Business Cloud Summit, which might be a fair statement for large corporates and government departments but it doesn’t hold true in other sectors. The question is, why not?

The benefits of Cloud Computing have been clear for a long time:

  • It offers cost savings, as there’s no need to buy hardware and software up front.
  • It’s ideal for any customer-facing apps, such as ecommerce which could be completely unaffordable on-premise.
  • There’s no need to administer the system – that can be left to the experts.
  • It offers consequent improvements in backup and disaster recovery for a typical user.
  • It also offers reduced implementation times, principally through rapid access.

These benefits were obvious over ten years ago. Apps were becoming available, and it looked like they would be mainstream in areas such as accounting and ERP in no more than five years. Yet here we are approaching 2011 with many areas still not mainstream.

There are two distinct sets of reasons for this – both technical and commercial. Many on-premise systems are not ready to be changed, so unless there is a significant problem or opportunity that would justify a change, legacy on-premise systems will remain. An organisation is likely to have a mix of Cloud and on-premise systems for some time in a hybrid model, but when an app needs to be changed, will people stay on-premise? Many have, so why not go to the Cloud?

On the technical side, improvements in the functionality of SaaS Cloud offerings is unlocking opportunities which were not previously practical. For example, one CEO of a group of companies said they only moved to a Cloud-based ERP system once consolidation had been added. The email case study highlighted that earlier Cloud-based email systems had not been of business grade. Improvements in internet access are also helping adoption now.

There was some mention of issues such as security, lock-in and upgrades (a “two edged sword,” one speaker said), but with only some in-depth discussion. The WikiLeaks story was mentioned as showing that you have to be just as concerned about security with on-premise systems. Nonetheless, “the cloud brings new risks and rewards,” according to David Terrar.

Then there are the commercial reasons. Subscription payments rather than up-front purchase is great for users, but conversely not great for existing IT businesses and departments.

  • The apps on display at the Summit had been written specifically for the Cloud. With only a couple of exceptions, the companies had been formed for that purpose. On-premise software vendors may have some form of Cloud offering, but were not keen to promote them.
  • At the corporate end, many organisations use outsourced managed services. The outsourcing companies will lose hosting business with cloud services being hosted elsewhere. Business process outsourcers are now realising that as the Cloud offerings improve, unless they help their customers move to the Cloud, someone else will do it for them. They must do this or perish.
  • Much was made of the threat to CIOs and their teams, especially in large organisations. It was suggested that the more enlightened CIO will see the cloud as empowerment to provide better value to the business, without having to worry so much about the tin and its administration. It would have been interesting to get a wider view from CIOs on this.
  • In the mid-market, software vendors have traditionally relied on resellers. Resellers do more than just sell software, often combining software from different sources together with a range of implementation and support services. As a company, why earn less for your sales effort? How will there be the funds to pay a sensible commission to the salesperson? Cloud vendors have not found it easy to recruit resellers who will actively sell cloud solutions. People may spot an opportunity to start a reseller, but one such delegate asked how he could make any money at it!
  • The Cloud has worked best when apps can be reasonably sold “off the page” with little marketing or sales spend. This is at the smaller end of the spectrum, and for simpler apps for larger organisations. Or like CRM apps, can start small even if they grow much bigger.

So where does the Cloud go from here?
Cloud is definitely the future, and has already become mainstream in some sectors which best leverage its benefits. Further adoption in each sector in my view is dependent on providers better addressing buyers’ concerns, and having a business model that works commercially. Both aspects have their challenges, and the industry will need to unlock them to let end-users truly gain the benefits of Cloud Computing.

Chris Challis is a partner at Camwells and a member of the board of the Cloud Industry Forum.

 

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Replies (10)

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By Trevor Scott
08th Dec 2010 08:55

Any chance...

... of ever getting an impartial assessment of Cloud?

 

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
08th Dec 2010 10:01

We're working towards that goal

While I can understand your impatience Trevor, I'd like to answer in two ways.

First, if there is an implication in your comment that Chris has a vested interest here, I'd suggest you join our cloud computing for accountants discussion group. He's been involved with it for several months now as "group manager" and having adopted a stance of cautious optimism about the technology, he's been on the receiving end of several diatribes from Cloud evangelists with more tunnel vision. While he may have joined the Cloud Industry Forum he's not a mindless advocate for the technology for it's own sake - he's putting in a real effort to understand it from an accountant's perspective and to highlight the pros and the cons, as his report on the summit suggests.

On the wider issue of impartial guidance, we have long harboured the ambition to document the emerging Cloud accounting applications. It seems one or two new ones pop out every week and due to a lack of resource at AccountingWEB.co.uk we haven't been able to keep up. This will be one of my ambitions for 2011 and I hope that we can help provide the information and impartial analysis you seek.

You can help too by adding your thoughts and observations to the deliberations in our Cloud group.

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By Trevor Scott
08th Dec 2010 23:00

...
It is another biased Cloud article, attempting to portray non-cloud users as uninformed or fuddled thinkers.Cloud is of use to some people, not all.Over 20 years ago I worked at a firm which installed a complete hardware and software solution, cheap in the first few years though strangely expensive once seriously committed to the software and hardware. Support became a nightmare, faults were not always resolved, customer service became worse and obviously control was minimal. Other IT "solutions" were the same. Of course we could repeat the same mistakes, and added to the bargain be dependent upon internet access which can’t be relied upon. No thanks.    

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By User deleted
09th Dec 2010 12:46

Open mind ....

@Trevor Scott - good to know that an open mind still prevails

As I undertand matters Chris Challis is a 'user' who originally lean't towards scepticism about Cloud systems; because of this he was initially chosen as representative of a questionning public

One has to ask what is the point in providing you with '.. an impartial assessment of Cloud ..' because on the face of it, your mind is already made up. In any event, very often impartiality is in the mind of the beholder and whichever way one plays it there are bound to be accusations of impartiality from one side or the other

The bottom line is if you don't wish to adopt this technology then that is just fine - don't use it. But to cite something 20 years ago as a reason for not considering a solution today is a questionable stance. Surely any technology must be judged on its merits today and not on historical heresay

Quite frankly the internet access reliability argument is equally spurious to day and will become more so in the future - yes there are outages but from experience it is not an everyday occurance as implied - in fact the last time my internet went down was months ago
 

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By mikewhit
09th Dec 2010 16:41

Wikileaks saga suggests that Cloud Finance is a useful concept t

Just looking at the abstract concepts rather than the rights and wrongs of the parties, it looks to me that as well as placing its data on Cloud servers to distribute the riskand avoid attacks/takedowns, Wikileaks should also have distributed its finances in an analogous manner, to avoid being overly reliant on any one (or dozen !) payment provider or system.

Are there any signs of this concept coming into being in reality ? How might it be implemented ? Does anyone (else) care ?!

Seems as if it would have uses:

in authoritarian regimesfor civil liberties organisations but ...for criminals of varying degree :-(

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By Trevor Scott
09th Dec 2010 18:03

....

Dear JC

Please don’t misrepresent my views.I am so sick of biased marketing that I asked for an impartial assessment of Cloud, thereby establishing that I would actually like an impartial assessment of Cloud.I am aware that Mr Challis has a financial interest in marketing Cloud and this is reflected in the above article. “why are companies taking so long to adopt it” should perhaps be changed to “why should they give up management control and enslave themselves to a provider who is strangely quiet when a software upgrade goes wrong or they can’t correct a fault, yet is all too loud if you threaten to withhold a payment until you have a working service”.  You may live in an area with excellent internet access but I don’t share your luxury and I don’t live in the sticks…many are in a far worse position than moi. My internet access isn’t the fastest, crawls at times and breaks off a few times per day but isn’t forecasted to improve unless the Uk government can find the billions they fantasise that they can get.I do operate Cloud to a limited extent, so I know the SWOT’s. Many people already operate on some kind of Cloud basis but don’t realise it.Cloud was around before the term “Cloud”, it is of use to some but certainly not to all.During the 1980’s there was a similar craze to Cloud, missing out the jargon it consisted of dumb terminals connected to a server hosting a selection of software. Marketed as a low cost, one step solution to all your needs, a complete trouble free service where the worry of IT is removed at a reduced cost.  The dumb terminals were quickly outdated, couldn’t be upgraded, were expensive to replace; software updates were slow to arrive, never worked properly and there were always compatibility issues, they often caused chaos, cost a fortune in time and money with a knock on effect to customers, all at the same time as suffering higher contract prices which strangely went up as you were ever more entrenched into their system.  At that time many practices promised never again.   I gave an outline of my views with indications of how I arrived at them, using the example of a system that operated on a similar basis and with similar issues, ie giving up in part/whole the practical ability to plan, lead, organise and control …. which are the four basic functions of management. Many boards wouldn’t stand for management who didn’t have complete control of systems essential to the very existence of the organisation. So, in an age when IT systems are even more critical to an organisations survival, I would just love someone to explain why it is such a great idea for so many to take the extra step of abandoning the ability to have total management control of their own IT system.And as for data security, Wikileaks distributing details of a certain bank’s activities may well severely limit the trust in sending data over the internet.    

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By User deleted
10th Dec 2010 08:52

Accepted but ...

@Trevor Scott - many thanks for elaborating on your point of view

'.. biased marketing ..' - did you go to the Business Cloud Summit to see for yourself what was on offer and challenge the providers? @jstokdyk has already indicated that Aweb would like to provide an impartial assessment of Cloud - however, does your concern refer to Cloud in generic terms or applications within that environment? I am sure that if you offered your sevices to AWeb to review Cloud systems they would probably take you up on the offer

I was not aware that Chris Challis had an overt '.. financial interest in marketing Cloud ..'. As for the commment '.. why should they give up management control and enslave themselves ....' this actually strikes of an axe to grind or the fact that a bad experince in the past has an over-riding influence on the present. Most of the Cloud systems currently available have no contract period so the user can walk away at any time - this in turn means that they have to be more responsive because their revenue stream is at stake

Yes the term Cloud is fairly recent - in simple terms it's predecessors were SaaS, ASP etc... - as has already been acknowledged it suits some people/situations but not others - so don't use it if it is unsuitable

'.. During the 1980's ..' - there are all sorts of reasons for dumb-terminals being superceeded which range from the advent of todays client/server in place of traditional main frames (IBM370/ICL2972 etc) and the emergence of windows with GUI instead of text based screens; for the most part these were driven by advances in technology

At the time the whole point of a dumb-terminal was just that - a basic viewing medium to provide a 'window' on a backend main frame. Of course a dumb-terminal couldn't be updated and in the main most of the software updates you illude to were main frame updates which by their very nature were slow to implement (remember only 5 years before 1980 a lot of programming was done on punched cards)

'.. I gave an outline of my views with indications of how I arrived at them ..' - I accept this statement, although it would seem as though most of the objections are based on historical experience

'.. as for data security ..' - the main flaw in any security system is people. As for thinking that your desktop computer is any more secure that the internet then think again. Your desktop is probably connected to the internet and no doubt you run critical applications on the machine. Do you know whether any of those applications is sending all sorts of information contained on your computer back up the line to someone elsewhere (this is the whole concept of certain types of virus)? Whereas with a Cloud system the browser is 'ring fenced' from the rest of your computer and only communicates with the host

One of the beauties of a Cloud based system is delivery through the browser. Yes there are certain technical constraints but the advantages of backend processing, operating system independance, single point system updates, 'ring fencing' from the underlying pc, access anywhere, no downloads etc.. make it a very attractive approach
 

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By Trevor Scott
10th Dec 2010 10:31

Oh dear
Since you have posted again and misrepresented my views, with quite an angry tone, this will be my last comment.No I didn’t go to the Cloud Summit. I am sure that I had other things to do. but even if I didn’t then I would probably give it a miss because I would likely run into people like Bob-Ad-Nauseam.You may find it strange, but I do classify someone who was a partner in a business that marketed/sold Cloud as having a financial interest in such.The purpose of using what you describe as “historical experience” is that unlike many characters I do not have experience of that which I haven’t yet taken part in; because nobody can have experience of the future!!!!!I used an old example of dumb terminals connected to a server as trap for an unsuspecting expert, if such a person comes along then I will deal with them.It takes time to organise a replacement for a “Cloud partnership”, anyone taking it lightly is likely to find themselves in a bigger mess…and I’d have a few queries about their ability to manage… That was why I asked for someone to explain why it is such a great idea for so many to take the extra step of abandoning the ability to have total management control of their own IT system.

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By User deleted
10th Dec 2010 14:43

Confused ....

@Trevor Scott - apologies for misrepresenting your views in any way, it was not intentional and my responses only referred to specific points raised in your preceding posting

Nevertheless, I have the following questions just to clarify some areas so that any misrepresentation doesn't occur again

'.. I would likely run into people like Bob-Ad-Nauseam ..' what do you mean by this

'.. unlike many characters I do not have experience of that which I haven’t yet taken part in ..' - as I understand this comment, you do not have any experience with current Cloud systems and as a substitute choose to discuss matters that occurred 20 years ago

'.. as trap for an unsuspecting expert ..' - perhaps you can explain why anyone would try to deliberately trap a person in this manner
 

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By alan.kennedy.smithkennedy
11th Dec 2010 07:39

Cloud

We operate Cloud and it is brilliant.  See my blog http://tinyurl.com/35xtnhw for the full story!
 

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