InformationWeek Green - Mar. 7, 2011

InformationWeek Green

Cloud beyond Saas

Damian Brennan doesn't mince words about the benefits his manufacturing company gets from the software-as-a-service model of IT delivery. "Most cloud providers offer software and services that are more secure, scalable, and feature-rich than what we could hope to develop internally or buy out of the box," says Brennan, VP and CIO of Artco Group International, a steel industry supplier. Brennan currently use SaaS for ERP, email and archiving, Web hosting, spam filtering, IT support desk, backup

and file sharing, and more. Where he hits the wall, for now, is with Active Directory, some legacy and niche applications, and VPN and network appliances--though he's in the market for a cloud provider to take those on.

A cut of our InformationWeek 2012 State of Cloud Computing Survey reflecting companies with fewer than 1,000 employees shows that while Brennan is one of a very small group--just 7% strong--planning to have 75% or more of their IT services delivered from the cloud, few will take a pass completely. About half of SMB respondents are either using a cloud provider now or expect to by the end of the year. Just 26% have no plans, down from 33% in our 2011 survey.

Among the doubters is Mark Webb, IT and operations manager for the Minnesota Children's Museum in St. Paul, and he's made that decision mainly based on cost analysis. "Since we are a nonprofit, we get great discounts on software and hardware," says Webb. "Currently there are no services out there that could even come close to handling what we do in-house at our cost." Webb's also leery of losing tight integration and being tied to the way the service provider wants to operate, concerns IT leaders often cite.

Still, looking ahead, avoiding cloud services will be a bit like trying to keep iPhones off your LAN. You'll succeed for a while, but eventually, most companies will succumb to the ongoing shift in the way enterprise technology is sold, deployed, and used. And when companies do give in, they may be playing catch-up with early-adopting competitors who saw the advantages.

Love them or hate them, cloud services do level the playing field. The smallest company can rent a robust BI or CRM package or VoIP system that makes it look like a big business in the eyes of customers. And, like any buy-vs.-rent decision, the need to save money short term usually weighs heavily--a factor no doubt contributing to cloud providers' bottom lines. IDC reports that worldwide revenue from public IT cloud services exceeded $21.5 billion in 2010 and predicts it will reach $72.9 billion in 2015; that's a compound annual growth rate of 27.6%. Compare that to the 6.7% growth the research firm projects for the worldwide IT market as a whole.

Even true believers, though, tend to hit a bump in the road, one that's common among CIOs at smaller companies: SaaS is an easy sell; infrastructure-as-a-service, not so much. Many have data center gear that they can't afford to entirely retire, even as they eye the lower maintenance and fixed costs that could come from a largely cloud-based infrastructure. And there's often, as with Webb, a legitimate fear of forced standardization and lock-in. We also see a skills gap: Admins used to managing virtual infrastructures with VMware will need to adapt to a new platform, with much less granular control than you've enjoyed with VirtualCenter. It's worth pushing forward, though, because the IaaS model lends itself particularly well to small companies, as we discuss in this Practical Analysis column.

The question then becomes, how do you migrate your infrastructure to the cloud in as efficient and risk-free a manner as possible? The answer is to develop a methodology for assessing where a cloud infrastructure provider could maintain or improve the quality of the IT services you deliver. We'll present a road map to help you focus your efforts on the areas of your infrastructure that could benefit the most from a migration to the cloud. You'll also need to consider the full return-on-investment picture; our Cloud ROI report can help.

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