Cloud Computing: Buyers Enthusiastic on the Concept, Weak on Capabilities

The potential benefits of cloud have been loudly touted by both pundits and providers, and much of the discussion has centered around the inherent challenges and risks associated …

Lepeak: Clouded thinking

The potential benefits of cloud have been loudly touted by both pundits and providers, and much of the discussion has centered around the inherent challenges and risks associated with issues such as security and data privacy.  Yet, there has been less focus on the practical enthusiasm of the average buyer organization towards cloud, or the skills and capabilities the typical firm has in place to address cloud opportunities and challenges.

KPMG recently released the results of its 2Q11 Sourcing Advisory Pulse surveys, which provide insights into trends and projections in end-user organizations’ usage of shared services, outsourcing, and the top global third-party business and IT services. The learnings – which include insights on cloud –  are gleaned from KPMG firms’ advisors, as well as from leading global business and IT service providers.

Service providers and KPMG firms’ sourcing advisors polled in the Pulse survey were asked to assess the typical level of “enthusiasm” for cloud computing among both IT and business professionals in end-user organizations. In general, both advisors and providers felt that most IT and business professionals were generally realistic about cloud computing, and maintain a healthy degree of skepticism.  Forty-seven percent of advisors and 53 percent of service providers (see Figure 1) polled described IT professional enthusiasm for cloud computing as “measured.”  Only two percent of advisors and no service providers labeled the typical IT professional as “very enthusiastic” (i.e., a cloud evangelist).

Business Pros See Upside

Business professionals were viewed as a bit more enthusiastic of cloud opportunities (see Figure 2).  Twenty three percent of advisors and 33 percent of service providers categorized business professionals as “enthusiastic.” And 5 percent of advisors cited business professionals as very enthusiastic.  Only 31 percent of advisors and 37 percent of service providers characterized the average business professionals’ enthusiasm for cloud computing as measured.

 

Graph 1

 

Graph 2

 

There is nothing wrong with being enthusiastic about the potential benefits cloud computing can bring to an organization, particularly one mired in expensive to maintain legacy IT systems that no longer adequately support key business and operational needs. The danger comes when enthusiasm “clouds” clear thinking, planning and assessment of cloud opportunities, or is substituted for the required investment in obtaining the capabilities and skills required to take advantage of and optimize cloud opportunities. Thus the findings from the Pulse survey are a bit concerning.

It is also important that buyers understand where cloud computing fits as an extension, complement or replacement to both traditional enterprise systems

Room for Improvement

KPMG also polled third-party business and IT service providers and the firms’ sourcing advisors to assess the skills of typical end-user organizations around various cloud computing capabilities such as understanding the  technical underpinnings of cloud computing or assessing the risks associated with cloud computing. Providers and advisors ranked typical buyers’ skills to perform seven different sets of activities using a one-to-five scale where one represents “very unskilled” and five represents “very skilled” (see Figure 3).   The results from these questions illustrate that there is clearly room for improvement in typical buyer cloud computing related skill levels.

The highest score given typical buyers by advisors, coming in at 2.39 on the one-to-five scale, was for understanding the technical underpinnings of cloud computing – “how it works.” Service providers only scored this skill slightly higher at 2.73. While organizations do not need to become experts in all of the technical aspects of cloud computing, they do need to become fluent enough to understand what is and is not viable when utilizing cloud services, which includes issues around security, integration or commissioning.

It is also important that buyers understand where cloud computing fits as an extension, complement or replacement to both traditional enterprise systems, such as commercial enterprise resource planning systems or traditional business process or IT outsourcing. Virtually all larger organizations will employ a mix of each of these platforms and delivery models for the foreseeable future.

On this point, service providers scored buyers’ skills at 2.81 for understanding how cloud computing options can complement or supplant traditional enterprise systems and/or outsourcing investments, while advisors scored this skill at just 2.03. The ability to determine where cloud computing fits into the service delivery continuum that includes shared services and outsourcing – delivery models themselves which that can embody cloud computing capabilities – is critical.

Coming in at the bottom of the rankings according to both advisors and third-party providers were skills relating to both sourcing and managing cloud computing initiatives, sourcing and structuring cloud initiatives and engagements, and navigating and assessing the cloud computing vendor and service provider markets and landscapes.  The last point is of particular importance as the number of pure play cloud computing providers grows, and some legacy software and services firms spin cloud stories and yarns.

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It is not surprising that many buyers possess limited cloud computing skills given the immaturity and fast moving nature of the market. The situation is not dissimilar to the early days of the Internet when buyers struggled to define and execute online strategies to exploit its business potential. It is critical, however, for buyers to leverage past experiences, particularly with outsourcing, to accelerate ramping up cloud computing skills and knowledge. Despite the potential of cloud, if buyers cannot successfully execute on its implementation, adoption could potentially create more problems than it solves.

Stan Lepeak is the director of research for KPMG’s Shared Services and Outsourcing Advisory group. A 20-year veteran of the IT industry, Stan is a noted commentator and frequent speaker on business and IT professional services, business process and IT outsourcing, and underlying supporting IT applications and systems. He can be reached at [email protected].

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