While cost savings are drawing companies to the cloud, are they underestimating the security risks and challenges?
In an age when corporates seek every edge in an uncertain economic climate, businesses clearly recognise the transformational effect that cloud can have on corporate balance sheets. Indeed, traditional IT costs, such as servers, software, staffing and maintenance, are considerably reduced by the move to cloud.
Cost savings are the overwhelming driving force behind cloud implementation, according to 150 chief executive officers and chief information officers in the UK, France and Germany. In an FT Remark survey for Oracle, 30% of respondents say that lower operating cost is the key driver, with a further 30% saying that infrastructure costs was the main motivator for adoption.
“By implementing cloud, we end up paying a low, predictable, flat-rate monthly fee per user for the software that we use, which means that we can scale up or down as our business needs demand,” explains one UK-based CIO. “When we take on more staff, we can switch on new licenses immediately, and similarly turn off the tap if we scale down.”
It isn’t just cost that motivates cloud migration. Improved resource allocation is also an important factor for respondents, with 19% highlighting a more efficient use of people and processes as their main reason for adopting cloud. For IT departments, this implies a transition to new value-added roles. “The IT workload is reduced because of cloud and the team is able to focus on improving the company by bringing new ideas that could enhance our processes,” says a France-based CIO.
While there are significant areas of commonality between France, Germany and the UK, there are differences among respondents regarding the drivers underpinning cloud implementation. This is clearly seen with lower infrastructure costs: while 40% of French respondents point to this as the most important factor, only 20% of German respondents do so.
In part, these national variations can be accounted for by differences in maturity levels. Businesses in Germany are ahead of their counterparts in France and the UK in terms of cloud adoption, with 94% of German firms in the survey already using cloud. Based on our research, it seems that organisations tend to de-emphasise the importance of lower infrastructure costs once they start using cloud, with firms shifting focus to new areas of differentiation.
Another key area of variation is resource allocation. The UK and Germany place similar emphasis on this, with 24% of respondents from both countries selecting it as the most important factor. But only 8% of French respondents agree, with respondents incentivised by more obvious cost-saving factors.
This indicates that some respondents may be underestimating the potential of cloud computing in improving resource allocation, or are discounting it entirely. Variations in labour market flexibility might also be a factor, with French, German and British companies having different policy approaches to workforce changes.
The cloud divide
Respondents identified cost-related factors when asked to choose a single most important driver. However, a different picture emerges when a wider range of relevant drivers is taken into account.
Firms that are about to embark on cloud, and those already using it, have significantly different ideas about what the most important factors are, especially where performance is concerned.
‘Faster implementation’ is a case in point. For instance, no firms about to embark on cloud choose this as the most important driver, while in the case of firms already using cloud, the proportion jumps to 7%.
This suggests that firms on the brink of cloud implementation are systematically underestimating the importance of key performance benefits: many organisations appear to be making the initial shift to the cloud on cost-saving grounds, rather than as a business transformation project.
“Cloud implementation is low on cost and is chargeable based on the number of users. Cloud providers look at maintenance, setups and upgrades, thereby easing the pressure on the domestic IT Team and reducing direct costs to the company,” says a UK-based CIO.
