The Business Magazine and Pulsant invited sector experts to the Royal Berkshire Conference Centre in Reading to discuss how cloud computing has evolved in our region and asked whether it is helping Thames Valley business to get ahead in the cloudIs the current industry message clouding customer judgement?
David Murray asked if the ‘cloud’ business proposition is clear, or are there misconceptions about what benefits cloud can offer.
Pulsant’s chief technical officer Matt Lovell explained that there were different levels of understanding within the customer base. “We are starting to see second and third generation usage of cloud, but there is an even bigger market that is yet to make that first step, still needing advice on making the best journey for their business.”
But, he agreed there was a need to provide a consistent industry message and greater clarity – what ‘cloud’ is, how it works, and how it can help businesses to improve performance. The beneficial message needed to be explained better to:
“It is up to us to elicit customer feedback and evolve cloud usage with our customers. It is not a one-stop product, it is a journey into the future.”
Most of the customer base is making good initial use of ‘public cloud’ facilities said Lovell. He exampled organisations using cloud for a cost-effective approach to customer development and product trialling, or as a strategic tool to extend partner collaboration, or to pilot a new tactical venture.
Some customers are looking for cloud services protected from the wider community. “Those with a typically IT-centric internal perspective, are recognising the cash benefits to their business of unlocking their IT assets and moving them out into a ‘private cloud’ of some description.”
Deloitte’s Eric Healing, who advises businesses about ‘cloud’ opportunities and risks, agreed there was variable customer knowledge of cloud. “It depends on where the business is in its cloud journey. For many startups, cloud is the obvious way to get into the market quickly and make an impact. Do they want to spend six months setting up an IT infrastructure or do they go to a cloud provider?”
Where infrastructure is showing its age, or a big capital investment is needed, organisations are also now viewing cloud very carefully as a viable option.
Westcoast’s Phil Leblond agreed there were misconceptions about cloud. “We have 4,000 customers that range from huge multi-million pound resellers to lifestyle businessmen and they are all trying to sell cloud. For us, it is about how we help customers on the selling journey, help them consume cloud as they want.
“Through partnerships with the likes of HP and Microsoft, we are trying to make things simple for resellers and their end-users. We are starting with the basics, things that people will feel comfortable to put into the cloud, such as Microsoft Exchange. From there, we can take them on the full cloud journey.”
Is cost-saving the key cloud driver?
“Actually it’s not,” said Ron Brown, who in his role with HP often advises Government departments. “We now regard cloud as just another IT services sourcing option.”
When cloud first sprang into the business world its proposition was largely:
Pricing transparency – enabling the move from CapEx to OpEx, with the benefit of itemised IT billing instead of a bundled bill.
Agility – a key reason for uptake by early adopters.
Today, collaboration is emerging as an unexpected benefit of cloud, revealed Brown. “The early adopters are finding that they have achieved enhanced collaboration internally and with their business partners just by using cloud technologies. It is much easier to share and extend your value chain into your partners.
“I think the jury is still out on whether cloud is cheaper. It probably is if you have a peaking demand.” He exampled seasonal retailers who could now avoid underuse and capital outlay on their own servers, by simply scaling up IT requirements through the cloud during their peak periods.
Darren Atkinson: “From the collaborative benefit aspect, some cloud-based services have pervaded the business environment almost without being invited. For instance, what we use for virtual conferencing today is not what we used historically. Cloud is giving us so many different collaborative methods for communication, but as yet not so many from a project perspective, because of compliance, confidentiality and confidence issues.”
Leblond said his clients, largely the reseller community, focused strongly on retaining their end-user customers, so Westcoast needed to sell cloud to resellers as a service through which they could add value to their customers’ businesses.
Murray asked if companies saw cloud as an extension to the SAAS model.
Martin Taylor argued that, whilst cloud was for many organisations still only an option to br reviewed alongside on-premise business and software solutions, it was at least being considered. “We find that if we can offer an initial competitive standalone cloud solution, then we proliferate through more economic second and third cloud options. Soon, a lot more of the client’s environment ends up in the cloud, because the benefits are incrementally greater the more services are run.”
Lovell suggested that a mindset change was required over the current use of cloud services – orchestrating them better to help overall business operations. “The problem is that the industry modelled itself on cloud’s cost benefits to get customer ‘stickiness’, and the benchmark has become some cheap marketplace offerings. But are those products now right for the actual needs of individual businesses?”
Taylor: “Unfortunately, cost-saving was the key cloud message during the recession. It was a marketing hook that will make it harder to deliver some of the more nuanced cloud benefits and the cloud-centric data model that can overlay a company’s infrastructure.”
Lovell: “Our industry horizons became short-term because of the economic climate, but that is now beginning to change.”
Look and learn: Take a dip, but don’t get too wet!
Magazine editor Bree Freeman believes a lot of SMEs need educating about cloud computing before trying to reshape their business operations. “Our advice is to find a provider and try out a small low impact project first. Dip your toe in, see how it goes.
“Cloud is still in its infancy, but it has so much promise. We are trying to educate our readership about cloud and demystify all the rubbish being put out about it. Yes there are risks, but small businesses simply want to know if moving over to something like Office 365 is OK for them or not.
“A lot of people don’t realise how much they use cloud computing already through social networking, but equally the IT industry needs to accept that small businesses can’t outlay on things like private cloud because they don’t have the money.”
However, Freeman suggested small businesses could easily move their telephone exchanges into cloud at relatively low cost. Collaboration with partners to produce hybrid reduced cost cloud systems serving like-minded companies, was also worth considering.
Is there a cloud of insecurity hanging over cloud?
Murray pointed out that NASDAQ and NATS, both data sensitive organisations, had recently moved to cloud. Are security issues still relevant, he asked.
Lawyer Tim Clark said security is still a number one concern, as evidenced by the recent Information Commissioner’s Office (ICO) paper.
The legal field was always playing catch-up to technological advance, he added, but it would gradually resolve any cloud legal issues, as it had done with software licensing over the past 15 years. “But, data integrity, security, and recovery is going to stay a concern for some time.”
Consumers of cloud services should consider where their data lives, said Clark. “Pulsant keeps all its cloud data in the UK but where providers put data storage out to other countries, different legal jurisdictions and security problems need to be considered.” The glib online acceptance of terms and conditions by UK companies could also present legal problems if the providers are based abroad. “At the end of a contract, for instance, how do you know the provider has given it all back, is it in a format you can use, are you sure it has deleted all copies and so on? And if you have a dispute, what does the contract say about where you will have to go to resolve it.”
Security issues would linger longer in organisations and professions that are “inherently conservative, regulated, or still required to produce paper evidence.”
Healing highlighted one notable resistance to cloud implementation. “It often comes from internal IT departments. Do they want to be turkeys voting for Christmas?” Self-survival tactics usually spotlighted the unknowns about cloud and corporate security worries.
Taylor felt the security argument was “often the lazy excuse of incompetent IT managers. They have built up and are proud of their IT empire, yet their on-premise infrastructure is probably less secure than what is offered in the cloud – they may have site resilience and multiple access issues. People who object to cloud security should look at their own arrangements in a comparative way.”
Freeman said sensationalism in the media was not helping cloud computing’s image and reputation in the risk and security field. “Things are being blown up out of all proportion in the press.”
Taylor’s company often secures data by keeping it within national boundaries. “We tend to roll out platforms into the geographic locations where customers need them.” But, foreign companies are also requesting secure UK storage because they don’t trust their local arrangements. “Our higher UK security standards (ISO 27001 minimum) can thus be used to our competitive advantage.”
Lovell confirmed the global recognition of UK security, exampling the data storage of Far East businesses through Pulsant’s Hong Kong hub. “An increasing number of companies are using the data bounce from Hong Kong into the UK in terms of read-only access. The financial services sector has actually been doing that with trading data for over 20 years, so for them private cloud is just an evolution of that process.
“In smaller enterprises where you have capital constraints, you can demonstrate higher more cost-effective security through cloud, and going into the cloud offers immediate benefits.”
Atkinson said his company, Prisym ID, worked in a high validation environment where cloud security was essential, “We have seen several customers using cloud applications which then become private cloud-based. We are excited to see more validated hosting providers coming into the cloud network, which would suggest there is a market demand.”
Evolution or revolution? And, can we break down the barriers?
Murray suggested the cloud scenario was not dissimilar to the business process re-engineering of the 1990s – “getting people to thinks of ways to operate more efficiently.”
Brown and Paul Hughes saw cloud servicing as analogous with today’s use of outsourcing.
Brown: “Two decades ago when outsourcing hit the market place, people queried it: ‘You want to take my IT stuff away where I can’t see it, photograph it and stroke it?’ Eventually the economic argument overturned those personal issues and regulatory compliance matters. Outsourcing has now become the norm, and we anticipate the same will happen with cloud computing. The good news is, second time around it might be quicker.”
Hughes: “Many organisations are now striving to improve their overall agility, by leveraging new technologies and as a major benefit gain significant competitive advantage. Agility, as it applies to organisations in general, is simply the capability of a business to adapt and react quickly to change in the market, and has arisen as a concept thanks to the constant disruptions we now see in the business world. It’s those agile companies that will be ahead of the game, that will deliver superior shareholder value and will be the players of the future. But, cloud is a journey and we are only at the start of it.”
Atkinson: “The barrier to cloud adoption is the investment by companies in the last 15-20 years in building their individual IT structures and solutions.” But, with continuing pressure on IT budgets, we are seeing a changing IT spend-trend and an industry move towards a dispassionate portfolio assessment of existing business technology.”
Lovell: “We need a mindset change to cloud adoption in some areas.” But, there were encouraging signs. Despite its compliance and regulation requirements, the financial trading sector, with its an ‘ebb and flow, peaks and troughs’ business nature, was already recognising the cost-efficiency of cloud services. Even the legal sector was now storing its paper-based signatures electronically.
Companies are using cloud where they don’t have to introduce radical change, said Atkinson. “If they took an overview of their entire IT structure, they would realise the true savings and wider benefits of the cloud. It’s a message that our industry has not got over to customers yet. We need to urge them to rethink; not to see cloud as just another local IT solution, but an entirely different way of approaching their global company requirements."
Too frequently, businesses recalled painful experiences when implementing previous IT upgrades and feared upheaval again. “They are letting their baggage constrain their thought process to the upside benefits of cloud.”
Also the audit mindset was still a prevalent barrier suggested Atkinson. The virtual operation of cloud provided some difficulty for those who needed tangible answers.
Brown suggested that from HP research there were two disparate drivers in the cloud market:
The level of regulatory compliance required by a business.
Whether the company makes its money from physical or virtual assets.
“If you are digital and poorly regulated then you have tremendous pressure to move to the cloud – most of your competitors are already doing it, because it’s easy. If you are heavily regulated and use physical assets, you have a lot of thinking time before you have to pitch up with your competitors.”
Navigating the learning journey through the cloud
Pulsant’s cloud customers come from all industry sectors, but Lovell queried whether customers simply needed generic usage case examples to help them understand cloud benefits, or specific individualised support in order to start the cloud journey with strategic aims?
He accepted that ‘cloud services’ could be a relatively faceless offering and wondered if the cloud industry should provide more consultancy support for its customers. “Having made the initial foray, companies tend to ask how they exploit the cloud offering to the full benefit of their business, and I think there is a large gap appearing in terms of that sort of advice and support.”
On the other hand, said Clark, there was a corporate comfort issue in handing over IT processes to external consultants. While it could be a relief for the workload to be handled by someone else, “if I was an SME owner-manager, I would be worried that my consultant might suddenly not be there because he had a more important client or project to deal with.”
Leblond: “SMEs are key to the future success of cloud because it’s harder for the big guys to move and SMEs are more innovative and flexible. SMEs will drive change but they’ll will need trusted advisers to help them along the way.”
Freeman said corporates with large IT infrastructures were already talking to cloud consultants and providers, and weighing their opportunities fully and carefully. SMEs, however, without the time and money to utilise cloud consultants, were worrying – but unduly in her eyes. “The problem is that people are getting hyped and pumped up, and want to rush into cloud. They just need to sit back, let it happen organically, and make small initial steps.”
Healing: “Clients are always looking for competitive advantage. If they see their market moving to cloud, they’ll want to get there first. Most do reason though that if they are going to be first movers, they should at least talk to someone who has done it before! But, generally the consultant market tries to transfer skills and move on, rather than embed.”
Lovell: “People are taking small steps and gaining confidence in cloud, but it is a learning journey. It is about understanding how your organisation can take cloud services and use them to benefit other functions, business units and partners in your supply chain. Technology providers almost have to play catch-up; helping customers to build an approach that will allow them to exploit cloud.”
This is not a weather forecast, it’s a fact: the outlook will be cloudy and bright
Healing quoted the Jevons Paradox of 1865: Technological progress that increases the efficiency of resource usage, merely increases the rate of consumption of that resource.
“As organisations move to cloud they realise its unlimited power. It expands their opportunities and so they consume far more, but they’re doing amazing things with that extra consumption. In the future organisation will be happy to pay more. It is not just about cost savings; it’s about new opportunities.”
Freeman: “Cloud is not a simple variation on a traditional IT service. There is a broad opportunity here for business model innovation. Most companies can find some use of cloud to improve their work.”
She revealed that according to Cloud Industry Forum estimates, 48% of organisations are already using cloud-based services. TechMarketView analysis shows annual cloud growth of 40% despite an overall IT sector decline. Last year the UK cloud market topped £1.2 billion. By 2015 it is projected to be £3.9b.
Workstyle change: Will cloud lead to blue-sky thinking?
Taylor: “Cloud is really just a reinvention of ancient ways of working and living.” And costs will fall, he said, just as they have with other technologies. “Cloud is liberating businesses because just as I can fly to Dubai and will rent a seat not buy the Airbus, so cloud is enabling relatively ordinary businesses to gain access to world-class facilities.”
Hughes: “Organisations are being driven into a different way of working through BYOD but also by flexible working, the need to reduce expensive office space, new regulations on maternity leave and so on. They are all business drivers playing well for the growth of cloud computing, which will be a big enabler in changing business models and the way we work in the future.”
Clark agreed: “When I first worked in a law firm the partners had two secretaries to take their shorthand-dictation, but now graduates joining us can do that themselves. When we need heavy-duty transcription we mail it to South Africa and it’s emailed back next morning. It’s taking those old jobs away but replacing them with other, new, opportunities.”
Freeman said cloud computing would be imperative for the future of small businesses. “Without cloud my publishing job would be so much more difficult. (She moved from London to Wales eight years ago).
"As a small business I work from home through my smartphone and online, and I don’t have the office overheads. I can send my magazine to the printers and see it to bed entirely online. Cloud has completely speeded up the publishing process and one person can now do the work of five. Having said that, as a journalist, I don’t think I could manage without writing things down in a notebook as well.”
Murray suggested: “Maybe one day ‘cloud’ will disappear as a word, because it will have become the business norm?”
Workstyle change: Going native in this digital world
Murray asked if cloud was a catalyst for the less office-centric workstyle of today.
Leblond: “Yes, the ‘digital natives’ will be bringing their own devices into work and multi-accessing stuff. The only way to be secure will be to separate the data from the local device. Cloud is perfect for this.”
Will BYOD cause real problems for the cloud? asked Murray.
Brown: “Yes BYOD will be a challenge. At CIO (chief information officer) forums that’s a number one topic for discussion and it’s being met by:
The Denial: over my dead body will BYOD happen.
The Let’s Embrace It: the security risks are no greater than they were before anyway.
The Halfway House: you can bring your acceptable device to work but use it under our terms.
Just listen to those children
Healing: “I joke that the single biggest influence on the BYOD market are the children of CEOs of companies. They go home and their children say that they need ‘one of these’, and the CEO goes into work and tells his CIO to make sure everyone has one.”
Taylor admitted: “Getting my iPad off my daughter to take to work is actually becoming far more of a challenge.”
Lovell: “The younger generation of workers are already asking why they can’t plug in their own devices when they’ve done so at school and university. The device is just the functional interface – but as long as the integrity of the data is secured, and we can validate where that data is when transient through the device, then I think BYOD will come in.” Significant cost savings could be made on office space and equipment, with the workforce becoming more mobile and flexible.
Atkinson: “This whole generation thing is a much bigger driver than we give it credit. It is interesting that a social technology driver has given cloud to the young generation rather than an educational driver. Why isn’t cloud a stronger factor through the early stages of education?” The world has moved to digital and generational schooling in cloud is the way to drive out the old school.”
Healing is a chair of school governors. “We must produce children who can write, but more and more a cloud-based virtual learning environment is becoming a feature of primary schools. I have seen a huge change and it is generally led by the children’s needs rather than the teachers.”
Children don’t harbour any of the security concerns about cloud that their parents do, said Lovell. “There are good reasons to police children’s online activities, but they are certainly more willing to accept different ways of working.”
Atkinson agreed that the younger generation adopts and adapts quicker. “It’s not just adult ignorance of cloud, but ignorance of potential different ways of working.”
Healing: “Organisations have been held back over the years by the IT security excuse. It is not IT functions driving the demand for cloud services but the users who can see a better way of doing things. My son doesn’t want to take a satchel of books to school, he wants to take a Kindle.”
Clark said he was genuinely worried about children losing their skills of concentration due to the intrusion of technology. They work with social media, on-line entertainment and instant messaging all going on and that must be a distraction to concentration.
Taylor added that because of increasing global competition, UK plc would need its future workers to concentrate more in order to provide better services and products.
Freeman said parents needed to take more responsibility for their children’s technology usage. “Children need to progress, but you need to find a suitable equilibrium.”
Atkinson: “Or are parents stuck in their old mindset about the cloud and not prepared to dispassionately view the new portfolio of cloud services available?”
What clouds are on the horizon for cloud?
Murray asked about growth and influences on the cloud industry. “How will the industry evolve in the next five years?”
Lovell: “The barriers to entry are incredibly low in the cloud industry, so choosing the right supplier and validation of their claims will be essential. Some companies are coming in with the right long-term attitude; some are just seeing the opportunity for revenue. No doubt, there will be consolidation in the future.”
Murray: “Where does the UK stand in the global cloud league table of adoption and reputation?”
Freeman: “I believe the UK is the global driving force for cloud computing. The USA has dominated the market for the past few years but we have the advantage at present. We do need to sort out industry regulation. We have the CIF (Cloud Industry Forum) but it is merely a Code of Conduct and there needs to be more regulation because so many more companies are flooding into the market”
Taylor: “Regulation will happen, we don’t need to ask for it. Lack of regulation allows the early bloom to flourish. It is a democratic industry because startup costs are low. Let there be thousands of startups. Some will grow, some collapse, great players will be created, there will be consolidation. Ultimately, this is a disruptive technology.
“Regulation is always a brake, and it’s important that it does not lay a dead hand on the industry.”
Brown felt regulation in the US was leading the way and the UK was in catch-up mode.
Lovell: “We are behind the US in terms of cloud adoption, and it is incumbent on us to help businesses gain more confidence in use of the cloud, help them catch up with those ahead of us.”
Atkinson agreed: “Cloud should not be a ‘buy it all or nothing’ proposition. You can take cloud services one by one, and build company confidence in it, knowing that there is a joined up map of services provision at the end.”
Highlighting that UK students are favouring work in USA, Asia and the Middle East, Lovell queried “What are we doing to generate cloud-focused students and businesses for the UK?"
Atkinson admitted that getting students with the right skills to enter the cloud industry was difficult.
Brown suggested the key future cloud skillset would be services integration and orchestration. “Businesses will want to run processes, not software applications. In a fully mature business environment, I believe 35% of services will be kept inside an organisation because they are core differentiators and need a high level of specialism. But, that still leaves 65% of services that could go to the cloud.”
Participants
Darren Atkinson: Operations director, Prisym ID
Ron Brown: Chief technologist UK & Ireland, HP
Tim Clark: Partner specialising in IT, Pitmans
Bree Freeman: Editorial & production director, Cloud Computing Intelligence magazine
Eric Healing: Senior manager, information & technology risk, Deloitte
Paul Hughes: Cloud product manager, Pulsant
Phil Leblond: Solutions manager, Westcoast
Matt Lovell: CTO, Pulsant
Martin Taylor: Director, Content Guru
David Murray: Managing editor and publisher of The Business Magazine, chaired the discussions
Resources: Pulsant website
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