Continuing my survey of the cloud computing surveys, I’ve been staring at the results from the June 2009 CIO Magazine cloud computing survey, wondering what I’m missing. The responses that have me scratching my head are related to cloud computing drivers, budget spend and budget reductions. Snapshots of the three questions follow.
[Click on pictures to enlarge].
As you can see, the first question shows reduce hardware and staffing costs as the primary drivers of cloud computing. The second question attempts to quantify this savings (% budget reduction) over time. Take note of the Average (Mean) line. The expected reductions are 5.6%, 7.6% and 9.3% over 1, 3 and 5 years respectively. As a former Senior IT leader with budget responsibility, I recognize that 5.6-9.3% budget savings aren’t easy to come by, and certainly add up as savings, or provide an alternative source for strategic investments.
So, all good. Until you review the Average (Mean) line of the projected spend question. That line shows on-demand service expenditure as 5.6%, 8.0% and 10.2% of budget over 1, 3 and 5 years respectively. Comparing the spend against savings, you’ll see the spend is equal to, or greater than, the projected savings.
Ok. Initial years IT spend outpacing projected savings isn’t exactly a newsflash. IT is a long-term investment, and return isn’t immediate. Certainly, if respondents are building on-premise cloud computing environments, you would expect a longer time period to savings, with a more sustainable savings stream.
However, this survey focused on “on-demand services”, as in ‘from away’:
“The way most CIOs define cloud computing today is as a Software-as-a-Service-like arrangement where your company does not own the software, hardware or any specific equipment run by the provider. Access to the cloud vendor’s systems takes place over the Internet in some secured way and for that access, customers pay a subscription fee that rises or falls with the level of use. Cloud computing offerings are often referred to as “on-demand services”, “cloud services”, “Software-as-a-Service (SaaS)”, etc.”
Translation: a subscription (rental) economic model. If that’s the case, then this survey shows that on average, organizations are paying more in rent than they expect to recoup as savings. Obviously, no CIO is consciously making that call, spend $1.00 to save 90 cents, indefinitely. Something is missing, and I don’t think it’s me.
Rather, there are business value benefits the survey didn’t consider, such as shortening time to value, increased focus on core capabilities, extending a value chain, or even the creation of short-term business innovation spaces.
So, this is a long-winded way of saying, do benchmark analysis, but then do your own math. In doing that math, don’t limit your sights to the IT side of the equation.
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business drivers,
CIO Magazine,
enterprise considerations
Posted by brenda michelson at 5:21 pm in 100-days, Cloud Watch, adoption, economics | Permalink
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After a short break for some client work, I’m back to my cloud computing survey list. This afternoon, I’ve reviewed the Google Communications Intelligence Report, October 2009, Rackspace’s No More Servers, November 2009 and F5 Networks’ Cloud Computing Survey, June- July 2009. The Google and Rackspace surveys were interesting, but small and midsize business oriented and therefore not relevant for my enterprise considerations project.
The F5 Networks survey presented findings in 5 areas:
- Confusion about the definition of cloud computing
- Cloud computing has gained critical mass
- Cloud computing is more than SaaS
- Core technologies for building the cloud
- Influencers go beyond IT
The section I found most interesting was the last, which covered the business drivers for public and private cloud computing adoption, as well as the organizational areas leading the adoption charge.
Business Drivers:
“77 percent of respondents reported that efficiency is a driver for public clouds. Additionally, respondents claim that reducing capital costs (68 percent) and easing staffing issues (61 percent) are key drivers behind public clouds.
For private cloud computing, respondents listed reducing capital cost (63 percent), agility (50 percent) and easing staffing issues (50 percent) as drivers.”
In a supporting chart, the remaining drivers of public cloud computing: agility (58%), make it easier to add/remove services (57%), avoid over provisioning (55%), infinite scalability (53%), reduce operating expense (51%), Green (51%), better choice (47%), and reliability (45%).
From the same chart, other drivers of private cloud computing: ease staffing issues (50%), infinite scalability (46%), efficiency (45%), reduce operating expense (45%), better choice (44%), make it easier to add/remove services (43%), avoid over provisioning (38%), reliability (37%), and Green (35%).
Although respondents might be confused about the definition of cloud computing, they clearly understand the benefits, and in particular how the benefits change between public and private cloud computing. In a private cloud computing environment, assuming on-premise ownership and management, the benefits for staffing, over provisioning avoidance, reliability and green still exist, but in smaller amounts.
Business Influencers:
“According to respondents, the top influencers for public clouds include IT (45 percent), application development (41 percent) and LOB business stakeholders (41 percent).
On a similar note, respondents claimed the top three influencers in the implementation process for private clouds are IT (45 percent), LOB business unit stakeholders (36 percent) and application development teams (24 percent).”
The accompanying chart describes the 41 and 36% business influence bars as “Drive the Initiative”. While the report doesn’t specify the types of initiatives, it’s not far fetched to imagine many of those public cloud computing adoption scenarios are business involvement only. In other words, the next wave (tsunami) of end-user development. Are you prepared?
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business drivers,
citizen development,
end user development,
enterprise considerations,
F5
Posted by brenda michelson at 6:15 pm in 100-days, Cloud Watch, adoption, economics | Permalink
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Each time I think I have my cloud computing survey list set, another is released. The latest is from Enterprise Management Associates, in a report entitled The Responsible Cloud. The report price is outside of my price range, but Data Center Knowledge provides a good summary.
The survey sample:
“Enterprise Management Associates (EMA) interviewed 159 enterprises with active, or immediately planned cloud deployments, and reports that 75 percent said private cloud is the preferred model. Fifty two percent are implementing both on-premises and off-premises clouds…”
The key findings, according to Data Center Knowledge:
“Of the enterprises already running cloud computing, lowered IT capital costs (hardware, facilities, licenses, etc.) was cited by 61% of respondents. One quarter of all respondents reported that they had reduced both capital expenditure and operational expenditures such as staff, power, rent and maintenance costs.”
“Other benefits include freeing up strategic resources (49%), enabling disaster recovery/business continuity planning (46%), and increased flexibility and agility (46%). Overall, 89% of customers reported multiple outcomes, with just under half of all enterprises (46%) reporting five or more significant outcomes.
The report also found that the single most common level of OpEx reduction (from a sample of 79 respondents) was in the range of 21-30 percent. However, across all these respondents, cloud computing returned an average 22 percent OpEx saving.
Of the 76% of cloud customers that also reported real, measurable cost savings, the single most common level of CapEx reduction was between 11-20%. The CapEx return across all these respondents was 26%.”
Given the mix of public and private cloud and early adoption stage, it’s not surprising the CapEx reduction is in the 11-20% range. As more use cases (workloads) shift to a cloud computing environment, you’d expect the CapEx reduction to increase. Those CapEx reductions will further increase as use cases shift to a public cloud. However, some of those savings will be offset by OpEx increases, as pay-as-you-go is a new OpEx item, and in-house personnel are still required to manage cloud computing deployments and business service levels.
Suffice to say, ROI calculators will become an important tool for cloud computing adopters and prospects.
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business drivers,
capex,
Data Center Knowledge,
enterprise considerations,
Enterprise Management Associates,
metrics,
opex
Posted by brenda michelson at 12:19 pm in 100-days, Cloud Watch, adoption, economics | Permalink
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Given my longstanding background in SOA and my current work in Cloud Computing, I’m often asked how the two complement each other, particularly from the business benefit perspective. Briefly, here are my thoughts and observations.
From the SOA Side
The immediate benefit of combining SOA and Cloud Computing is time. Reaching out to the cloud for business or technology capabilities, allows SOA initiatives to compress time to value.
In the longer term, the benefits include improved collaboration, customer satisfaction and business growth. By offering SOA based business capabilities to the cloud, businesses can improve interactions with business partners and existing customers, and/or generate new revenue streams.
From the Cloud Side
The immediate benefit of cloud computing is financial. more >>
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popular post,
soa
Posted by brenda michelson at 4:06 pm in Blog, adoption, economics, enterprise architecture, services architecture | Permalink
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McKinsey just published a new premium report, Time to raise the CIO’s game. According to the report, the post downturn “new normal is marked by persistent uncertainty, tighter credit, lower consumer spending, and greater government involvement in business.”
The report continues:
“For executives who run major IT organizations, the implications are clear: they will have to make the IT function dramatically more productive, use IT more effectively to meet larger company goals, and embrace disruptive technologies that will shape the new economic terrain.”
The full report speaks to improving business-IT alignment, making fundamental IT changes, as well as embracing technology-based innovation. The report is supported by a recent survey and focuses on Europe. However, as the report states, much of the advice can be applied globally.
Finally, the “Cloud Watch” piece. In a section on “Closing performance gaps”, McKinsey shares the following:
“Since the downturn began, many CIOs have scrambled to control costs by delaying investments where possible and pushing service providers to cut prices. Some CEOs are raising cash through the sale and leaseback of assets such as data centers. But as competition intensifies, a more fundamental restructuring of IT operations will be in order.
Certain companies are rethinking their current approaches to procurement in hopes of replacing the current model of capital spending on infrastructure with a more flexible approach to operating expenditures. Cloud computing and software-as-a-service, for example, allow companies to purchase computing power and application services that scale with demand and thus to avoid large capital outlays on infrastructure capacity to meet peak loads. The cash savings from such efforts can be critical for self-funding additional IT investments: shifts in certain basic IT operations, for instance, could finance a streamlined IT architecture that will improve long-term productivity.”
[emphasis is mine]
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CIO,
economy,
McKinsey
Posted by brenda michelson at 5:59 pm in Cloud Watch, economics | Permalink
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In a September article, published on AlwaysOn, Irving Wladawsky-Berger shares his perspective on Cloud Computing and how IT is entering its Cambrian age. While making the Cambrian age case, the article discusses a variety of computing models, and corresponding business drivers. As the article concludes, Wladawsky-Berger shares why Cloud Computing is relevant for most companies and institutions:
“At its essence, Cloud computing is about delivering a wide variety of consumer and business services to large numbers of clients around the world, as well as operating highly scalable, well engineered, efficient data centers to deliver those services with high quality and reasonable costs. That’s what businesses generally do. Clouds are thus relevant to most companies and institutions in one way or another, as providers of services, – in-house or through a Cloud service provider, – or as users, – individuals, small businesses or large enterprises, – availing yourself of the services they provide.
Once more, standards like SOA will make it possible to integrate new Cloud optimized workloads and platforms with a company’s existing infrastructure. And, once more, innovations like those described in the Warehouse-Scale Computing paper will find their way into legacy systems and applications and transform them over time.
When all is said and done, Cloud computing is introducing not just a major new model of computing, but, even more important, a new model for conducting business and interacting with clients, employees, partners and all stake-holders of the institution. This new Cambrian stage of IT is already giving rise to many new innovations, not only in classic computing but in many of the new life forms that now incorporate digital components, software, and are connected to the Internet. It is very important for companies to learn how to leverage these new innovations in their business.
In evolution, it is very costly to be left behind. So, it is very important for all companies and institutions, regardless of age or size, to figure out what this new model of computing means for their particular industry and how it best applies to them. And, like with e-business a dozen years ago, they should all get on the learning curve by doing some marketplace pilots, learn from their experiences and ensure their ability to continue evolving into the future.”
Read the full article. [Also available on Irving Wladawsky-Berger’s blog.]
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business drivers,
IBM,
Irving Wladawsky-Berger
Posted by brenda michelson at 11:43 am in Cloud Watch, adoption | Permalink
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