Gartner has come up with an interesting prediction saying “a fifth of enterprises will hold no IT assets by 2012 as cloud computing and virtualization become commonplace.”
Obviously Gartner benefits from making controversial pronouncements... still we wonder.
Looking at approximately 28,000 SMBs in North America, is it far-fetched to think 20% would take their data centers to cloud for cost savings and hold the provider accountable?
Will it happen? Yes. Will it happen in 2 years? Maybe. SMB/SME's will, and already are, moving to the cloud as the cost of ramping up internal IT is expensive and slow.
Some musing on the topic...
The basic cloud applications (e-mail, storage, collaboration, etc.) can be setup and running in hours, not days like it would be for a small company with limited IT resources. The more complex applications (ERP, CRM, etc.) take much longer due to their complex nature.
Smaller companies tend to move around as they grow out of their space. Moving IT is a huge headache that the cloud addresses quite well. ByteGrid has helped many companies move everything into the cloud. Essentially all that changes is Internet, phone, and printers. Pretty simple. When SaaS-based phone services become more common, moving will be even easier.
Companies will still need on-site IT personnel for quite some time. The business still needs people to build the IT environment (application development/customization, help desk/PC support). End users still prefer the option of seeing a real person show up for a meeting, or to fix their PC. Yes, many companies have already outsourced these functions, but that usually translates to an outside vendor providing on-site personnel.
Cloud companies are not focusing on providing a consulting practice (although some are beginning to look into this service). Business will need people to provide the interface between the business and the cloud provider(s).
Customers (especially the smaller companies with < 1,000 employees) should take an honest look at SaaS as a valid option for many, if not all, of their corporate and productivity application deployments.
Yes there are security, availability, and performance issues to consider. That's part of any infrastructure or application development process. One key offering that the cloud provides but an internal solution cannot -- a binding contract. SLA's for internal solutions are not worth much. An SLA with another company is a different situation. You can actually get money back from a vendor if they do not live up to the SLA. For an internal solution all you can do is reprimand, or fire, the people involved. That does not help solve the problem, now does it?
Cloud computing is here. Just like any other service, it's up to the business to decide what/when/why/where to deploy a cloud-based solution.
The market is a key indicator to watch to see if Gartner’s prediction is correct. The bare metal vendors have not and are not selling much hardware these days... (review bare metal manufacturer forecast and stock prices over the past few years and now).
We think you will find very little if any growth in the hardware infrastructure sector. I also think you will find the businesses with capital to spend on IT infrastructure are the cloud computing data center service providers.
Today most non IT businesses are struggling to find capital. Not a surprise in today economic climate; which means they are not upgrading their aging infrastructure. If IT is not a core competency to your business then why would you not look at the cloud to provide services versus spending what little capital you may have on upgrading or replacing IT technology?
Trust is good- control is better. But control can be expensive.
In today’s economic climate business are looking for ways to shed costs and IT is and has been spending a lot of time on the chopping block. These businesses are learning how to “trust” and manage the SLA the best they can.
As more and more firms move in this direction, will the service providers be able to meet the terms of their SLA's? If not, are small organizations going to have the recourses to fight the provider to ensure they are made whole? Probably not. Better yet, what if the issue is not with the cloud providers but the ISP? I am sure ISP’s will start raising their rates to help mitigate some of this risk.
More importantly, when you are talking about SLA's, who is now responsible for supporting all of the thousands of applications that businesses use? Is it going to be the Cloud Service Providers? Are we also going to assume that for every application hosted the services providers have architected the solution properly to ensure systems scale up and out seamlessly? What about legacy systems, home grown apps, and mainframes; will these systems reside in the cloud as well? If so, what will be the means of application delivery?
I don’t feel the cloud providers are doing an adequate job at answering these questions. I get the sense the providers expect us to believe all of this stuff is going to magically happen and we will never have to worry about this again. Now if ice cream could just cure cancer we would all be set. I feel these companies need to be sending the architects, designers, and engineers out to answer these questions and cut back on the never ending marketing rhetoric and ROI promises.
It's not just compute and storage but really the economy of datacenters with redundant power, cooling and bandwidth plus factors such as ongoing maintenance costs, etc that make delivery from "the cloud" make sense. Otherwise why outsource?
Consider having a couple of 45U racks with 8Kw of redundant power/cooling paired with 100Mb of multi-carrier, blended Internet access for under $3K per month each. Try doing that in your own datacenter for the same money!
But should You Move Your Small Business to the Cloud?
Commonly cited concerns about cloud computing for SMBs are:-
- Data loss
- Data mobility and ownership
- Tool robustness
Cloud computing isn’t all things to all people, but small businesses looking to cut computing costs and improve efficiency during this long recession are finding the many benefits of Internet-based software and services increasingly attractive. In fact, companies with 100 or fewer employees are expected to spend $2.4 billion on cloud computing services in 2010, up from $1.7 billion in 2009, according to Ray Boggs, vice president of SMB research for IDC.
Law of Disruption - Technology changes exponentially, but social economic and legal systems change incrementally. As the new world runs increasingly ahead of the old, social systems break down, only to be dramatically reinvented to better suit the new environment to which human beings have already relocated. Periodic upheavals are unavoidable; unexpected and unintended phenomena are natural byproducts.
The fact is cloud computing is a signifacant trend driven by Moores and Metcalfe's laws (abundant resources, technology deflation, zero marginal costs) coupled with exponential network growth. These are profound disruptive forces that are the backbone to cloud computing trends, and most of the other modern day phenomena that we have witnessed over the past decade.
The reality of cloud computing is that a startup or small company can leverage what was not available ten years ago in application technology (back office, payroll, CRM, revenue tracking, etc) without installing one piece of hardware in their office or place of location.
I would argue there is a class of businesses that were born into and continue to only know of cloud computing as their "IT" department.
It is the larger, established mature enterprises that have only known the traditional IT departments internally hosted and located. Even today and even in healthcare, there are pieces of the IT portfolio that are moving to the cloud. Albeit, nothing in the realm of legislatively protected data. But one can guarantee that all traditional companies are at all times looking at and evaluating the correct path for their organizations cloud computingsolution. Ignoring this in face of the disruptive technology trends would be much more dangerous from a competitive standpoint then to acknowledge and weigh out the options.
As to Gartner’s prediction of 20% by 2012, it seems aggressive or overly optimistic, but in 5 years time, it would not surprise me at all.
Great book on the subject - The Big Switch. It parallels the commoditization and utility of IT against the early days of the electrical grid. Much like IT shops of today, early industry generally had their own electrical power plants to support operations, as it was much more stable then the nascent network electrical grid. Point being, 100 years ago, no respectable business would imagine doing business without its own internal electric generation plant. Today, that is a forgotten memory. Anyone who manages an internal IT department should read the book. It has some very incredible parallels and points to the forces at work today to make cloud computing a very compelling solution in the not so distant future.
So is Gartner right? We consider, you decide...