IT strategy: Clouded vision

It is said that every cloud has a silver lining, but it is still unclear if
finance directors should accept that this upbeat aphorism applies to the rather
nicely named “cloud computing”. Though recent hype surrounding it has been
intensive, fundamental questions remain over what cloud computing actually is,
yet alone what business benefits it can potentially deliver and at what cost.

At its most basic level, the concept of cloud computing is a return to a
centralised model reminiscent of the days when mainframes ruled the IT world,
but now executed over the internet. For a nice analogy, imagine that the web is
a cumulonimbus cloud raining down its stormy arsenal to nourish the ground for
the propagation of life, or in our case, information. Cloud computing sees IT
resources such as centrally-hosted applications (software as service, or SaaS)
and other services delivered to clients over the internet.

But beyond this basic definition, confusion still reigns (or rains) as cloud
computing means different things to different people, and this disagreement is
creating confusion in the market, denting cloud computing’s uptake. Industry
experts say that it is imperative both technology end-users and IT vendors
understand all the different perspectives and set proper expectations to obtain
the anticipated benefits. But to say the term itself is nebulous could be argued
as linguistically, symbolically and technically accurate.

Research house
Gartner
says the term has already split into at least two “very different”
things. For the first definition, the focus is more on the cloud than on local
computing, the emphasis on access to services across the internet. The second
interpretation focuses on computing services delivered by the cloud, rather than
centering on the cloud itself. Basically, the former would access information
inside the cloud via the net and the latter would be using an intranet-style
cloud which only covers their own organisation and no third-party service
providers.

Whatever the agreed definition, cloud computing has now come of age with the
arrival of persistent, reliable and fast internet connectivity, say the
technology’s proponents. Google has long been crowned king of cloud computing
and Microsoft’s recent adoption of cloud computing shows this is more serious
technology trend than fad. Microsoft has long eschewed the cloud computing
concept and, indeed, the whole idea of internet-based computing. This stands to
reason because it makes billions of dollars in revenue from selling traditional
boxed software and would have the most to lose if the cloud model went
mainstream. But the launch of Microsoft Live, offering the software company’s
applications over a Microsoft-controlled cloud, signals the reluctant arrival of
the company at the cloud computing party and goes some way to backing up the
idea that it could be marketable and profitable. Microsoft has even said it is
developing a version of Windows tailored specifically for cloud computing.

So the concept has powerful backing, but this hasn’t made cloud computing any
easier to comprehend.

And besides, what can the cloud actually do to help your business? Many of
the arguments will spark a distinct sense of déjà vu for finance directors who
previously grappled with the idea of outsourcing business services. As with
traditional outsourcing, the cloud model means companies do not have to budget
for a large upfront capital expenditure for hardware, software licences and
implementation services. Nor do customers have the ongoing expense of
administering in-house hardware and continuously updating software. This means
companies can be more agile with their IT, only paying for what they need and
buying extra capacity when required. So companies can benefit from a
predictable subscription or pay-as-you-go pricing model backed up by a service
level agreement. This could be a useful offering in the current economic climate
for many companies focusing on cash management and limiting expenditure.

However, against these advantages, significant concerns remain over the loss
of control of potentially business-critical systems. Experts warn that questions
around performance, availability and, crucially, security of cloud-delivered IT
services need answering. Integration of relatively inflexible cloud services
with existing in-house systems is also a potential barrier to adoption.

Parallels between cloud computing and outsourcing are striking and it is
clear that the cloud is lagging some years behind traditional outsourcing in its
development and adoption cycle. Gartner recently predicted that cloud computing
will hit the corporate mainstream in two-to-five years. Analysts
IDC
agree the cloud currently remains the preserve of a small number of
early-adopter companies, forecasting it will take three years to “cross the
chasm” from hype to adoption.

The question facing FDs is whether cloud computing will rain on their
business parade or deliver a solution to wash away several IT infrastructure and
management headaches. As it stands now, the answer for the vast majority of
companies, is that it is just too soon to call the weather on this one.