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Some CIOs are hesitant to move critical applications and data to the cloud, but an increasing number are beginning to deploy a variety of cloud computing applications to replace less strategic products and functions.
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CIOs' growing confidence -- some might say it's more a growing curiosity -- about cloud computing applications stems from a combination of constant industry chatter about cloud over the past few years, cloud's potential for significant cost savings in tough economic times, and the prospect of using cloud to gain competitive advantage in their respective markets.
"Large organizations are adopting cloud services at an increased pace, but will they rip out their old data centers and go with cloud services right away? Probably not. But 52% of organizations with more than 1,000 employees use cloud services in some fashion," said R. "Ray" Wang, a partner at San Mateo, Calif.-based Altimeter Group.
Companies dipping a toe into the cloud computing application water for the first time are focusing on transporting no-frills, off-the-shelf versions of their enterprise resource planning (ERP) and customer relationship management (CRM) applications.
They also have shown a preference for adding cloud services to replace meat-and-potatoes, internal-facing applications dealing with human resources and accounting.
"Companies are taking specific off-the-shelf applications out of the data center and replacing them with cloud-based apps and services, things that don't have a lot of custom elements to them like ERP, human capital management and sales force stuff," said Dana Gardner, a principal analyst at Interarbor Solutions LLC in Gilford, N.H.
Cloud still on the horizon for enterprises
Larger companies are steering clear of replacing heavily customized applications or chunks of complex infrastructure with cloud services. Many say they will do so eventually but are waiting for cloud architectures that are more flexible in accommodating these applications, more competent security technology, and the necessary financial and organizational commitments to deliver meaningful cloud services.
"CIOs are OK with moving commoditized things like CRM, email systems and websites out of their data center. But if handing over an SAP installation or database, even to a managed services supplier, proves too complex, they tend to stay away from cloud services and manage it themselves," said Antonio Piraino, a vice president and research director at Tier 1 Research LLC in Bethesda, Md. With corporate accounts edging application by application into cloud computing services, CIOs are forced to manage hybrid environments with some pieces living on-premises and others in the cloud. Consequently, one increasingly hot cloud service is monitoring software that can keep a watchful eye on both worlds.
One company offering such a monitoring cloud service is Cloudkick, which wasacquired by Rackspace Hosting Inc. in Dec. The company's service provides a unified application programming interface that works across both cloud and non-cloud servers. Likening it to a "Swiss Army knife of IT management," according to a company spokesman, the product contains tools for fault detection, data visualization and trending, and ops tools that work with any cloud or non-cloud server. Because it's a service, it's easier for users to get access to a steady flow of new capabilities, the company says.
"We have several critical applications we can't just pick up and move to the cloud or have interact with cloud services, due to a number of government regulations and compliance issues. But as we start to add services to some of our lower-level applications as a way to save money, it is monitoring services that will be at the top of the list," said Eugene Lee, an IT administrator at a large national bank based in Charlotte, N.C.
Cloud computing applications taking off in the midmarket
Most large banks are creeping toward a meaningful cloud computing applications strategy, but some small and medium-sized banks are bounding forward. One such bank is Vineland, N.J.-based Sun National Bank, which, thanks to cloud services, delivered a mobile banking service to customers in just four months.
Using smartphones and other mobile devices, the bank's customers now can access its mobile website and use texting to get account information. They also can download another application to get one-click access to the site.
Cloud services, along with choosing the right services provider, can allow a midsized bank like Sun National to be first to market with a product like its mobile service. It also can help such organizations compete with larger banks, according to Angelo Valletta, the bank's senior vice president and CIO.
"When you have companies like Google and Amazon helping manage things on the infrastructure side, mid-tier companies can be perceived as a little larger than they are, giving them more time to decide if they want to bring it in-house. It can be a game-changer because it allows some organizations to be flexible and have scale from a product perspective but also from a negotiations standpoint as well," Valletta said.
Valleta is a strong believer in the business advantages cloud computing applications can bring, he said, but Sun National remains very much a hybrid shop that will bring in cloud services only where they make sense, he added. For instance, the bank was considering moving the management of its CRM application to an external services provider. Doing so, however, would make it difficult to connect other internal programs that work hand-in-glove with the CRM tool, including the bank's operational expense program, sales programs and a rolling 12-month revenue performance program.
"There were too many hurdles for us to do all that externally, and we would not have the control we needed, given what we wanted to do," Valletta said.
Cloud computing application development trending
Already hot, in the past year cloud computing application development has turned white-hot.
Cloud computing can be a game-changer because it allows some organizations to be flexible and have scale from a product perspective but also from a negotiations standpoint as well.
Angelo Valletta, senior vice president and CIO, Sun National Bank
Just two or three years ago, according to experts, cloud development services were more popular with IT managers doing preliminary development for projects for internal use. Managers would say they liked cloud development services because they helped avoid in-house squabbles among developers fighting for scheduling time on in-house servers. Such services also helped them reduce the backlog of requested applications faster.
But, according to experts, IT shops not only have started developing and testing more sophisticated applications for both internal and external use, but they also have begun staging them in the cloud, which is one step short of going into production
"There has been a huge swell of [IT-sponsored] services going into staging over the past six to 12 months. A lot of managed service providers are telling me they expect many of these staged projects to go into full production mode, which would take cloud services development up to a new level," said Tier 1 Research's Piraino.
Enterprise shops also are getting more actively involved with cloud services through such collaboration applications as project management. They increasingly are using Software as a Service in the front office for CRM, according to Jeff Kaplan, managing director at ThinkStrategies Inc. in Wellesley, Mass. "Many are also using Infrastructure as a Service from companies like Amazon and Rackspace to augment their internal data center capabilities or handle a seasonal demand spike, or for development and testing situations," he said.
The bottom line: Money
What has slowed delivery of a planned cloud service in some enterprises, or even resulted in the service being canceled, is internal budget battles over who is going to pay for the project and which department gains ownership and responsibility for it. Few companies have funds specifically earmarked at the beginning of a fiscal year for cloud services projects. That typically means monies must be pulled from a variety of budgets controlled by the CIO, IT department, and line-of-business managers, to name a few.
"There is a lot of consternation going on in enterprises, where some people are lobbying hard for cloud services and others who push back, saying, 'Who is going to pay for it?'" Interarbor Solutions' Gardner said. "IT is under pressure to keep the existing systems up and running, and will tell a CIO they don't have time to develop and test a cloud service, and tell them to find someone else to do it."
The only sensible way to conceive of, craft and deliver critical cloud-computing applications is to gain the support right from the start of all the departments that will contribute to the project. That includes chief financial officers and CEOs, particularly if the project requires monies that will have to spread out over more than a year.
"To make these [cloud services projects] work, there has to be a working partnership between IT and the business side of the house. And the third partner in the project should be the users that the services are primarily aimed at. A lot of people tend to forget that," bank IT administrator Lee said.
Even when there is harmony among all departments, most CIOs advise putting a single project manager in charge. Such a manager must have a skill set that bridges the technical and business sides of the project both in-house and out. That combination of skills often is not easy to find. If a project has two or three managers with equally shared responsibility, time-consuming political battles are inevitable.
"You need a relationship manager to orchestrate the effort. If you want it all managed by an infrastructure or development group, you are setting yourself up for failure. You need someone who knows how to navigate all the technology parts, can negotiate contracts, who understands
how to deliver partnerships from an organizational standpoint, and who knows when to pull the trigger and when to put the gun down," Sun National's Valletta said.
Let us know what you think about the story; email Ed Scannell, Executive Editor.