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A Look at Why Businesses Buy Cloud Services?

Peter HJ van Eijk

If you are a cloud provider, whether you are pure play or an internal IT department, it is very interesting to know who is buying cloud services, and why.

In a recent survey by PB7 sponsored by EuroCloud Netherlands and others, a group of Dutch companies was interviewed about their motivations and hesitations around cloud computing. The survey's results were quite a bit more interesting than the usual lot. In this article I have cherry picked a few observations from the larger survey. The full survey is reported on in http://www.slideshare.net/peterthuis/ecm12-ghgg (in Dutch).

The majority of companies are using cloud computing these days, and this includes government organizations by the way. That adoption rate is not growing so fast anymore. The growth is in the number of cloud applications that are being deployed (and presumably also in the number of users of those applications).

How does cloud computing fit business strategy? Companies change for a number of reasons and objectives, and cloud computing as a driver is no different. Some organizations innovate using cloud computing, but from the survey it appears most are just optimizing business process, or even just substituting current solutions.

Substitution happens when an existing solution is replaced by a cheaper one. Examples of these can be seen across the board. As you can expect from a wide survey, the most common applications are mail, messaging, document processing, sales, marketing, distribution, HR. One striking category though is field service where a lot of adoption is going on. Inhibitors for these types of applications include are the value of current investments ("the server in the closet has not been fully written off").

Optimization involves process change: doing things differently. This could involve people inside the organization as well as outside the organization. From anecdotal evidence, we know that collaboration tools are on the rise, in particular when they serve to communicate over organizational boundaries. Think procurement, project collaboration and marketplaces. These are the 'cloud native' apps so to say. The other category involves empowering the current workforce, especially if it is mobile already, a trend we see happening in airlines and retail. Cloud productivity solutions allow the inclusion of staff that was not equipped with computers before. This is clearly a big market for horizontal application suites such as Google Docs and Office 365. Vertical applications areas include HR and e-learning.

The less predictable the workload, the bigger the advantage becomes that cloud applications have over non-cloud applications. About a tenth of the researched applications have a 'rapid growth' workload pattern, i.e. new applications, new business. For these categories cloud is by far the preferred solution.

These trends align very well with two important cloud characteristics: elastic scalability (especially from a financial perspective), and broad network access (anytime/anywhere/anydevice). Broad network access allows the inclusion of users that are not within the corporate firewall.

Infrastructure as a service (IaaS) is definitely on the rise across the board: small/large enterprises as well as governments. It is expected to increased penetration to 30 percent in 2014, a twofold increase in two years. Still, this is a lot less than the penetration of SaaS.

As the number of cloud applications per organization rises, integration concerns increase. From the survey, it appears cloud consumers are seeing three different avenues to address these concerns. They call for open standards, they turn to cloud brokers to do the integration for them, and they hope to see ecosystems such as app stores providing this integration for them.

Other concerns are security and privacy in general, though it is unclear to what extent these fears are actually translated into action. It is peculiar in this respect that only 40% of cloud users has a clear exit plan.

There are quite a few implications for service providers in these findings. The biggest demand for cloud services is for rationalizing existing IT systems, and if they are internal, expanding their use cases to include mobile employees and business partners. As an extension of these, inclusion of more people and partners can allow business processes to be reengineered. Partnering with consultants to help effect these changes might make sense.

Potential clients are concerned about integration and security risks. Conceivably, adequately addressing these concerns can be a selling proposition. For the mechanics of that, have a look at another article I wrote (see Can we simplify cloud security?). A lot of these concerns (including integration) are expressible in terms of the CSA Cloud Control Matrix (Disclosure: I updated some of these controls recently as a CSA volunteer).

If you are a cloud provider and wonder how to improve your offering, you may be interested in having a look at www.cloudcomputingundercontrol.com where I have outlined a Governance, Risk Management and Compliance roadmap.

By Peter HJ van Eijk, Cloud Computing Coach, Author and Speaker. Peter HJ van Eijk is one of the world's most experienced independent cloud trainers. His website can be visited here.

Related topics: Cloud Computing

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