Definition: “Cloud computing provides on-demand network access to a shared pool of configurable computing resources that users can rapidly provision and release with minimum client or provider interaction.” — From Cloud Sourcing for the Corporation by Ben Trowbridge, CEO, Alsbridge
“I think there will be an explosion” in the near term, predicts Steven Morris, senior business architect, business architecture + transformation for Wipro. Mike Capone, CIO of ADP, says “we are at an inflection point.” He says “even the hold outs are pushing things into the cloud because the economics make so much sense.”
By 2016 Abhay Chitness, CTO of L&T Infotech predicts “almost all enterprises will want to put their core applications in the cloud.”
When will the tipping point happen? Chitness predicts “when cloud-based offers priced at a fraction of the cost threaten established players like SAP and Oracle.”
- Speed. This is the primary driver, according to Koushik. “Clients ask us, ‘How can I bring products to market faster? How can I develop applications to improve the customer’s or citizen’s experience faster?’” he reports.
- Consumer pressure. Morris points out people used to smart phones and iPads believe that kind of mobility is preferable. “Business users are starting to ask why can’t I get my expenses on my iPhone? Why do I have to be tethered to a corporate computer?” he reports.
- Cost. Always a factor in outsourcing
Who will benefit?
In the short term, Chitnis says small-to-medium businesses will benefit from using software as a service (SaaS) and business processes as a service (BPaaS) more than large enterprises. That’s because large businesses typically don’t have standardized business processes, preferring to customize their apps. Companies “must standardize before they can leverage the cloud,” he says. Customizing a SaaS application is costly and can create “another set of monsters.”
Instead, large enterprises will turn to private clouds “to optimize their internal information.” Chitness predicts buyers will want a seamless experience including:
- A single sign on
- Secure data
- Consolidated billing
- The ability to review SLAs across various solutions
- Single help desk
- Documentation management
- An integrated platform for data
What will move to the cloud?
Trowbridge says the early adapters moved easy processes like email and contact management to the cloud. Koushik, who is responsible for cloud, mobile and modernization services at HP, says workforce tracking is another good process to test the waters. “You can move these processes to the cloud quickly,” he says.
Trowbridge notes in the near term the recommended methodology is to complete a series of pilots using specific point-to-point solutions. “Then work your way from there,” he suggests. Shantanu Ghosh, senior vice president, Genpact, agrees that at the outset “there will be a steep adoption in point solutions.” He also says enterprises will carve out specific parts of a business process before they send the entire process to the cloud.
Trowbridge adds a good way to learn how to work in the cloud is to start with a new line of business. Ghosh says starting something from scratch is the easiest way to implement cloud solutions; “trying to change a legacy model is much harder,” he observes.
Morris predicts “we will see more of what’s inside the organization move outside.” He says companies have been talking about it since there has been a cloud but he predicts “a large scale migration” in the near term.
For example, Morris predicts integrated business planning will be one function slated to move to the cloud in the next 24 months. Sales directors want integrated information from both sales and production when they ask, “How are we doing this quarter?” He says this is difficult to do because the company has to be able to draw the data from divergent sources. Koushik adds that companies will want to “loosely couple their applications in the cloud.”
Capone agrees that “companies will run both core and mission-critical applications completely in the cloud” in the near term.
Chitness says buyers will use SaaS solutions in isolation in the near term. Platforms will mature in the longer term, he adds.
Koushik says many companies “are fascinated with mobility.” “They want their applications to work any time anywhere on mobile devices. This requires a seamless integration with cloud-based services,” he continues.
What may never go to the cloud
Morris believes there are some functions that will never move to the cloud: Things that are super niche. Nuclear waste management is one example. “I can’t imagine anyone wanting an app for that on their iPhone,” he says.
Chris Pattacini, director of Alsbridge’s ProBenchmark, estimates today up to 15 percent of any enterprise’s applications are non-standard, which makes them not cloud-ready. “Not every application can be delivered through a cloud solution. That means IaaS can only cover a portion of the buyer’s needs.” He says applications that follow a standard industry stack (such as Windows) are the best cloud candidates.
Pattacini says industries with “industrial-strength regulations” often have issues with security and back-end integration requirements that cloud solutions just can’t address currently. However, he predicts that over time cloud offerings will mature and “provide the security and the other services these customers need.”
1. Security. These include data encryption, isolation and authentication plus the worry of malicious attacks. “We have to tackle these issues and develop confidence in the buyer’s mind,” says Chitness.
Application developers can do this by now “consciously thinking about security.” Before the cloud, nothing left the walls of the enterprise. Now developers “have to architect security into their application,” says Koishik. Since this is now happening, he doesn’t think security “will be an inhibitor to cloud growth” going forward.
However, Chitness says part of the security issue is pure perception. “Is this data I really need to worry about?” he asks. He proposes corporations classify their data and only worry about info that needs to be highly secure.
2. The changing role of the IT organization. Koushik says departments can go to an application service provider directly and bypass the IT department. “The IT people are scratching their heads and wondering what their new role is. This is an evolving discussion,” he says. He predicts these pressures will cause “the role of the IT department to change” in the next two years.
One new skill they will have to hire is an integrator. And Koushik thinks the CIO of the future “will be more of an IT broker than a builder of IT services.”
3. Interoperability. Capone says “this is a big issue.” He notes companies want cross-platform reporting. Koushik adds that companies want to get away from an IT environment built of components. “Today the environment has to be a lot more nimble and much easier to use,” he posits.
4. Risk management. New questions arise as BPaaS becomes more commonplace. Koushik says enterprises have to look at business continuity and risk management differently. And “what happens when something goes wrong?” he wonders.
5. The need to archive. Pattacini says cloud providers will have to archive data that users can then audit or search for legal recovery.
6. Change management. Chitness adds enterprises have to make business processes “ready for the cloud.” This may mean changing the way they do business. “Adopting cloud technology does involve change management,” he points out. And without good change management policies, moving to the cloud will be like any other outsourcing: it may have as many failures as successes, he predicts.
The view three to five years out
Koushik believes “the true power of the cloud” will happen in this time frame because then providers will be able to help their buyers “integrate across the enterprise.”
He believes the cloud computing phenomenon “will reach its full potential when we think about it producing business outcomes.” Outsourcing buyers will ask different questions. Instead of trying to find Java programmers for $55 an hour, they will ask, “What’s it worth to enter a market three months ahead of our competitors?”
Both buyers and providers need this longer term to determine the correct unit of consumption so service providers can charge buyers appropriately. Koushik uses loan processing as a service as an example. Is the unit of consumption the number of loans written or the number of calls answered?
An opportunity for outsourcing buyers
Ghosh says buyers for the first time have the opportunity to leverage a solution that combines:
- Cutting-edge technology
- The ability to improve process performance
“Cloud is a game-changer for buyers,” he says. Cloud especially changes their investment paradigm, he adds.
An opportunity for service providers
Morris adds that business user pressure will create new opportunities for outsourcing providers. He says corporate IT departments are becoming swamped with requests for such applications. Whatever they write, it will have to work on iPhones, Android phones and Blackberries. “The easy answer is for them to go to a provider who has done this before,” he believes. This becomes easier yet if the service provider is already running the company’s back-end systems.
The only thing that we know for sure “is this space is changing rapidly,” says Capone. “There are no easy answers,” concludes Ghosh. “But we will see a lot of progress.”