Cloud Adoption Study Cloud computing is gaining momentum

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1 Cloud Adoption Study Cloud computing is gaining momentum

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3 Contents 4 Cloud is gaining momentum due to its business impact. 6 Public SaaS dominates the cloud offerings 7 Market understanding is lacking 8 Business is ever more involved 10 Cloud computing is here to stay 11 Conclusion

4 Cloud is gaining momentum due to its business impact In April - May 2011 Deloitte and CIOnet performed a cloud adoption survey using the CIOnet Platform in Europe. The objective of the study was to better understand the use and the potential of cloud computing within the CIO Community. The survey confirmed that the business is taking a leading role in adopting cloud. This is because ever more they realise that cloud computing is helping to achieve business goals. It clearly showed that public software-as-a-service (SaaS) is the dominant cloud type in use and that platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) are catching up. The understanding of the market with respect to cloud computing is lacking and confusion exists on the service descriptions. What is nevertheless clear, is that cloud computing is here to stay. In which face of implementation are you currently? 95% of the surveyed organisations are currently using cloud computing or have plans to use it in the near future. The main reasons provided for the adoption of cloud computing are: Higher flexibility Cost reduction Accelerated deployment Better functionality or capability than with existing solutions The organisations that adopt cloud computing do so mainly because of the clear business case and the quick realisation of the business goals. We decided against the use of Cloud Computing Solutions for the following reasons Insufficient data security/availability Open compliance or legal issues 12% 10% 6% Risk of losing governance or control Doubts regarding a long-term availability of the offering Risk of a Vendor lock-in 35% No financial benefit Unclear licensing Other 0% 5% 10% 15% 20% 25% 37% Pilot Established Live Implementation Evaluate 20% of the responding organisations have not yet adopted cloud computing and the main provided inhibitors why they do not use cloud computing are the following: Insufficient data security and risk of data availability Open compliance and legal issues The risk of losing governance or control over data Doubt in the long term availability of the cloud computing solution 4

5 From a functional perspective, the IT, Sales and HR functions traditionally remain the largest consumers of cloud computing within organisations, closely followed by supply chain management and the finance function. Please specify your motivation that led to the usage of cloud computing solutions Business case 40% There were no significant differences in the position towards, and usage or adoption of cloud computing between the respondents in the different countries. Clear business goal Other 14,2% 30% Reason to act 10% Exploratory mandate 5,8% 0% 10% 20% 30% 40% 50% About the survey The survey had a total of 159 respondents from Belgium, France, the United Kingdom, Spain and the Netherlands Most of the respondents are active in the public sector and health care, followed by financial services and telecom. The majority of the respondents organisations had a revenue between 201 million and 1 billion, followed by organisations with a revenue of over 2 billion. Revenue of surveyed organisations Industry classification of surveyed organizations >2 Bn. EUR 23,5% 1-2 Bn. EUR 6,9% 201 Mn. EUR - 1 Bi. EUR 36,3% Mn. EUR 18,6% <50 Mn. EUR 14,7% 0% 10% 20% 30% 40% 50% Public Sector/Health Care 29,5% Financial Services 12,5% Technology, Media & Telecommunication 12,5% Manufacturing 11,6% Consumer Business & Transportation 8,9% Professional Services 5,4% Energy & Resources 4,5% Legal 2,7% Real Estate 1,8% Other (please specify) 10,7% 0% 5% 10% 15% 20% 25% 30% 35% Cloud Adoption Study Cloud computing is gaining momentum 5

6 Public SaaS dominates the cloud offerings The survey reveals that each cloud computing model has a different level of awareness and business acceptance. At the moment, software-as-a-service is confirmed as the most popular service model by the CIOnet survey. This is supported by the uptake of CRM, Collaboration and other applications in the cloud by businesses. However, platform-as-a-service and infrastructure-asa-service are making significant inroads as business usage of cloud computing solutions becomes more sophisticated. Specify service type of your organisations current cloud projects In terms of cloud computing type, the public cloud type was most used by the respondents of the survey, likely caused by the prevalence of such solutions for the last years covering different functions, such as CRM, collaboration and others. Specify Cloud type of your organisations current cloud projects 60% 50% 40% 35% 30% 30% 57% 25% 20% 15% 10% 20% 10% 0% Public 29,1% Private 14% Hybrid 5% 0% BPaaS Other Google Microsoft Amazon Salesforce IBM SaaS PaaS IaaS Private clouds are popular largely because they give businesses the most direct control and the greatest confidence in data security and information assurance. As organizations become more comfortable with cloud computing, they will increasingly seek to capitalize on the different advantages of each cloud type and related architectural models. Overall, the business-process-as-a-service type is least used. This is probably because of the fact that this service type is the least known compared to the other service types. BPaaS combines the application elements of cloud computing with a human aspect. The main difference from traditional Business Process Outsourcing is that the human resources providing the BPaaS service are pooled between different clients, just as the application elements. 6

7 Market understanding is lacking Today, the business understanding of the cloud computing market is lacking. Many organisations, business managers and executives get bombarded with lots of messages on cloud computing from vendors. The cloud terminology and product offering is nevertheless not always clear. A key element playing a significant role in business misunderstanding of the cloud market, is the concept of cloud washing. Cloud washing is using the terminology of cloud computing as a marketing or commercial vehicle to cover services which do not qualify as cloud computing. Mistakenly, legacy application service provider services could be branded as a cloud offering, but may not include all cloud characteristics, such as pay as you use or ubiquitous access. Such inappropriate branding causes confusion in the client market for cloud computing services. The CIOnet survey confirms this misunderstanding as multiple respondents indicate for example the wrong type of cloud service type for a certain cloud provider. The survey indicates that many cloud providers - Microsoft, Amazon, Google - are known by the respondents, but the understanding of their cloud offerings is often wrong. When asked to indicate the type of cloud service type these organisations offer, wrong service types are chosen. Which companies come to mind as cloud providers and what are their respective service types? As an example, Salesforce does indeed have a softwareas-a-service and platform-as-a-service type offering but no other service type (BPaaS, IaaS) at the time of the survey. Another observation is the fact that multiple respondents indicate they see cloud computing fit as a solution for a certain function like finance management, but when asked to name a vendor or cloud product to support that function there are no names. Which business units within your company are currently using cloud computing solutions? IT Sales HR Finance Marketing Service Production Logistics Other Controlling 5,4% 5,4% 4,5% 6,8% 8,6% 8,1% 10,4% 13,1% 17,1% 20,7% 0% 5% 10% 15% 20% 25% This indicates there is room for improvement with respect to clarifying cloud concepts and offerings from the vendors. Google 6% 40% 29% 25% Microsoft 9% 43% 32% 16% Amazon 5% 11% 36% 48% Salesforce 11% 52% 30% 7% IBM 13% 33% 29% 25% 0% 25% 50% 75% 100% BPaaS SaaS PaaS IaaS Cloud Adoption Study Cloud computing is gaining momentum 7

8 Business is ever more involved On average 10 to 20 percent of IT spending originates from business departments outside of the IT department. With the increasing adoption of cloud computing, it becomes ever easier to implement IT solutions without IT support. Especially software-asa-service solutions allow for easy and straightforward implementation, as in most cases these solutions need no specific IT assistance with regards to installation, configuration and deployment. All one needs is an internet connection and a recent internet browser. Based on the results of the CIOnet survey, we notice that 35% of the cloud initiatives are led by business departments. In the majority of these cases (31%), IT was involved in the implementation of these cloud computing solutions. Only 4% was implemented without any IT support at all. As it becomes ever easier to implement applications for business using cloud computing, there is a risk that IT might be excluded from implementing IT solutions in the organisation. This risk is especially valid in organisations where there is dissatisfaction with IT, for example due to an inefficient IT solution delivery, bad business alignment or lacking overall support. On the other side, the survey reveals that when IT is involved, this involvement is in the first place to ensure the chosen cloud solution gets properly integrated with other applications and systems or that IT provides proper application support. Are the Cloud Computing Initiatives within your company usually IT-driven or business-driven? What role did IT play in the implementation of cloud computing? 4% Advisor of solution 27,9% 31% Technical support in the configuration or in the integration with other systems Assistance on contract negotiations 22,1% 25,6% Enabler of application support 19,8% Other 4,7% 65% 0% 5% 10% 15% 20% 25% 30% 35% Business-driven without IT involvement Business-driven IT-driven 8

9 This validates one of the important roles of IT: ensuring proper data integration between applications and systems and preventing incompatible solutions to be acquired and implemented. When an organisation fails to implement proper data integration between cloud computing and other legacy solutions, there is the risk of creating departmental data silos. Such silos surface when one department implements a certain solution and another department another incompatible solution which are hard or impossible to integrate. A typical example would be different departments acquiring different collaboration and document sharing solutions from different cloud vendors. As, quite often, transferring data from one cloud service to another is not an easy process this leads to sharing deficiencies. In the case IT is unaware of the installation and use of a certain cloud computing solution in a business function; they are unable to support that application. In case there would be a need for urgent assistance, IT would be in a bad starting position to provide the requested support, leading to frustration of the business users and a waste of costly time. The disruptive effect cloud computing has on business and how we interact with IT, confirms that CIO s need to be revolutionaries more than ever. They need to ensure they clearly position IT towards the business, have a good understanding of the business needs and above all, become true business partners to implement and execute business strategies. About cloud Typical attributes for a service to be regarded as Cloud-based: Technical abstraction: Users of services have limited or no visibility of the technology (both hardware and, where appropriate, software) used to provide the service. Pay per use: Costs are incurred as revenue rather than capital expense, based on a utility metering model. Rapid elasticity: Service volumes are elastic, being readily scalable both up and down in volume to suit changing business demand. Ubiquitous network access: IT services are made available over the network using standard mechanisms which support a wide range of client devices (e.g., desktop, laptop, PDA, phone). Cloud computing services are offered most commonly in the following ways: Software-as-a-service: On-demand use of software over the Internet. This type of service has been on the market for several years, and has the greatest uptake so far. Platform-as-a-service: Tools and environments to build and operate cloud applications and services. This is newer in the marketplace, but adoption is expected to increase significantly over the next few years... Infrastructure-as-a-service: Storage and computing resources as a service. The main advantages are lower costs, increased flexibility, and the ability to rapidly start up and shut down services. This type of service also helps to moderate capital expenditures by reducing the need for on-site data center infrastructure and computing systems. Business-Process-as-a-service: This service type combines the application elements of cloud computing with a human aspect. The main difference from traditional Business Process Outsourcing is the fact that the human resources providing the BPaaS service are pooled as well between different clients. There are several distinct models for business use of cloud computing, including: Public cloud: With this model, cloud computing services are provided by vendors and are accessible over the Internet or a private network. This model uses one or more data centers that are shared among multiple customers, with varying degrees of data privacy and control. Private cloud: Private cloud computing architectures are modeled after public clouds, but they re built, managed, and used internally by an organization. This model uses a shared services model with variable usage of a common pool of virtualized computing resources. Data is controlled within the organization Hybrid cloud: This is a mix of public cloud services, private cloud computing architectures, and classic IT infrastructure, forming a hybrid model to meet specific needs. Cloud Adoption Study Cloud computing is gaining momentum 9

10 Cloud computing is here to stay An increasing number of organisations is looking at the option to implement cloud computing today or has already done so. Over the last years, cloud computing technology has known a significant growth and many of its services have come to maturity, especially in the software-as-a-service and infrastructure-as-a-service service types. As an example the SME market where smaller organisations can operate and maintain a CRM platform for no upfront investments. As a benefit of cloud computing, this CRM solution scales with them when they grow. In the past the upfront investments in a CRM platform would have stopped a small organisation from using a solid CRM platform. Do you currently use Cloud Computing solutions or do you plan their usage within the near future (6 months 1 year)? 20% 80% From an IT perspective, cloud computing enables a transformation on how information technology is managed and used. By using a combination of cloud computing with traditional, brick-and-mortar IT, organisations can achieve new levels of agility and flexibility allowing to deal with the rapid changes that the current economy requires and to better support the business. For instance, development and testing activities could be performed on a public or private infrastructure-as-a-service platform, further reducing the lead times for new solutions through rapid instantiation, replication and shutdown of the development platforms compared to building a bricks-and-mortar testing environment. Yes No Cloud computing allows organisations to realise their strategic agenda by shifting the focus from dedicating time and resources to commodity services and processes to their core value-generating processes, especially using public cloud services. Furthermore, organisations will be able to shift responsibility and the management of non-core IT capabilities to cloud providers. As an example, a significant number of organisations are using a cloud computing solution for enterprise collaboration and no longer have to maintain these systems freeing up resources to focus on key processes. From a business perspective, cloud computing offers the potential to bring more flexibility in business processes. The potential to scale the cloud platform rapidly while paying only for the actual usage provides organisations with the possibility of rapid and flexible scaling of capacity for critical business processes. In economic volatile times, this allows organisations to better manage demand and supply based on the current conditions. From an employee perspective, cloud computing and related technologies have a significant impact on the way we work. Through the use of public and hybrid clouds, data and application access becomes ubiquitous as long as an internet connection is available. This allows employees to work from remote locations without much trouble getting access to their data and applications. Building on the CRM example previously given, the CRM client data can be accessed from any location without need for complex or complicated connections to systems at the office, having full access to the relevant data. Another example of how cloud computing is helping businesses would be the Indy 500 website, Indy500. com. This site is storing and serving more than 100,000 images. They do so by using services from Amazon s cloud computing platform, allowing for massive scaling during race periods of increased traffic. 10

11 Conclusion The CIOnet Survey confirmed the fact that cloud computing is rising in terms of adoption, and that more organisations are looking at implementing cloud computing. While cloud computing still poses some challenges stopping a minority not to implement or consider cloud computing, it has definitely progressed and is now becoming mainstream. The anticipated business benefits in terms of business case, financial value, strategic direction and flexibility provided are appreciated by organisations worldwide and the current adoption curve confirms that cloud computing is here to stay and has a potential to transform business and IT. While cloud computing has been a hot topic in IT the last couple of years, it has now also caught the attention of the business as they are ever more involved in the discussion, the decision on using cloud computing and the implementation of the solutions. From a vendor side, we notice there is still work required improve the understanding of cloud computing as the market is missing a clear and universal understanding of what cloud computing is, the different types and the different services. The results of the CIOnet survey clearly indicate that the concept of cloud computing is better understood and that both business and IT departments are involved. The current levels of cloud computing adoption support this. However today the breadth that cloud computing offers is not yet completely used as many organisations make their cloud move on the most obvious offerings. This is likely caused by a lack of complete understanding of cloud computing and the different cloud computing offerings and terminology. We expect that as maturity increases and offerings get clearer, organisations will further expand their cloud sourcing and vary the models they use. Patrick Callewaert, Deloitte Technology Practice Leader Hendrik Deckers, CIOnet Managing Director CIOnet (www.cionet.com) is Europe's largest and most active community that empowers CIO s & IT Managers to network more efficiently and effectively for business. Operational in the United Kingdom, France, Germany, Italy, Spain, Norway, the Netherlands, Ireland and Belgium. Cloud Adoption Study Cloud computing is gaining momentum 11

12 Contacts For more information, please contact Patrick Callewaert Aleksej Choukhman Steven Plehier Deloitte Berkenlaan 8C 1831 Diegem Belgium Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's approximately 170,000 professionals are committed to becoming the standard of excellence. October 2011 Deloitte Consulting Designed and produced by the Creative Studio at Deloitte, Belgium.

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