Johannesburg, 08 Jun 2010
Given that cloud computing is a further improvement on the outsourcing model, CEOs leading companies of all sizes have an opportunity to explore the benefits cloud computing could offer to their supply chain.
According to a Deloitte report on cloud computing, there are 10 things every CEO should know about cloud computing.
1. Characteristics of cloud computing
The cloud is a collection of Internet-based or private-network services providing users with scalable, abstracted IT capabilities including software, development platforms and virtualised servers and storage.
The exact location of cloud resources is of no concern to users, while those resources offer virtually endless opportunities for improving productivity and cutting down IT costs. There are four key characteristics:
* Highly abstracted
* Variable expense
* Multi-tenant
* Immediately scalable
2. Cloud computing should be part of the corporate strategy
Cloud computing enables companies to concentrate on their core business and relinquish operational control and ownership of their IT resources. Multinational companies such as VISA and General Electric have already outsourced large parts of their IT operations to countries such as India and China, which gives more reason why CEOs should not be too cautious about making the move to cloud computing.
3.Cloud computing allows for channelling IT spending through operational budgets
Cloud computing has been able to eliminate initial capital investments and other upfront costs. For most companies, IT is a business support function and not a revenue generation stream, but usually accounts for a huge portion of the company's capital expense. Cloud can help to reduce IT spending.
4. Business agility and IT flexibility
The cloud enables organisations to use technology when they need it and for as long as they need it - scalability is one of its foremost benefits. As business cycles accelerate, many organisations need almost immediate deployment, adaptation or decommissioning of applications. Cloud computing enables accelerated deployment and greater flexibility.
5. Business users are put into the IT driver's seat
If cloud computing delivers on every aspect of the business needs, business users will select and arrange services as required and avoid the traditional reliance on the IT department whose task is to allocate IT resources and manage technical constraints. As much as 10% to 20% of IT spending occurs outside the IT department in business unit budgets. These expenses basically relate to maintenance and upgrade of the IT infrastructure, which businesses would not have to worry about if they are hosted on the cloud.
6. The market is not yet mature
Important providers of cloud computing services are still entering the market and evolutions are yet to be seen. Gartner estimates that the current market for cloud services accounts for approximately R348 billion globally and that it will reach R1125.75 billion by 2013. Analysts also estimate a compound annual growth rate of 26.5% in cloud investment during the 2008-2013 period.
7. Uptime
Cloud computing providers currently provide less uptime guarantees than a number of critical business applications require. For example, Amazon's cloud-based Simple Storage Service only promises 99.9% uptime. But analysts believe that the period of time when cloud computing service is functioning and available for use will improve from the 99% and exceed what businesses can provide for themselves.
8. Integration with the cloud
According to Forrester, integration is one of the top concerns people have about cloud computing. Therefore it is going to be one of the main drivers of user adoption of the cloud. Integration cost and duration, integrating software as a service (SaaS) and traditional applications and managing and monitoring interfaces are key challenges around integration.
To respond to the integration challenges underlying most implementations, cloud vendors are now proposing SaaS integration solutions that offer an easy way to integrate systems compared to traditional approaches.
9. Considerable security and audit challenges
Compared to the standard model of service provision, cloud computing raises strong security concerns, namely:
* Is data safely stored and handled by cloud providers?
* How are reliability and availability guaranteed?
* Are cloud providers sufficiently protected against cyber-attacks?
According to Kris Budnik Risk Advisory director, Deloitte: “We advise clients to take a holistic view of security, keeping it in mind with relation to the business process being migrated. To keep security concerns under control, we usually recommend that clients migrate low risk applications to the cloud until such a time that the experience has proved itself safe. Ironically, security is often better in the cloud than in many in-house managed environments, primarily as a result of the focus cloud service providers afford to it, given that is it seen as a major “trade barrier”.
10. Cloud computing puts privacy compliance at risk
The cross-border nature of cloud computing complicates the control over data location and therefore the compliance with local legal requirements. Overall, it is important for cloud users to request evidence from service providers of their compliance with prevailing regulations.
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