Oct 14th 2011
The vast majority of senior executives said their organizations have already moved at least some business activities to the cloud and expect their 2012 investment to skyrocket. Some companies are planning to spend more than a fifth of their IT budget on the cloud next year, according to a KPMG International report, Clarity in the Cloud: The Impact, Opportunity, and Risk of Cloud.
"Clearly, these findings proclaim, 'the cloud is now,'" said Lynne Doughtie, Vice Chair-Advisory at KPMG LLP. "As cloud adoption begins to accelerate among organizations around the world, clearly the cloud is transcending IT and widely impacting business operations, as a full third of survey respondents said it would fundamentally change their business, which is significant considering many organizations are still developing their cloud strategies."
In a KPMG survey of organizations that will use the cloud, as well as companies that will provide cloud services, economic factors were cited by 76 percent of both groups as an important driver for cloud adoption. However, a number of other considerations were equally or more important: 80 percent said the switch to the cloud was driven by efforts to improve processes, offering more agility across the enterprise; 79 percent of users and 76 percent of providers said they saw it as having technical benefits, in some cases improvements that they otherwise could not gain from their own data centers; and 76 percent said the use of the cloud would have strategic benefits, possibly including transforming their business models to gain a competitive advantage.
Most user respondents to the KPMG survey (81 percent) said they were either evaluating the cloud, planned a cloud implementation, or had already adopted a cloud strategy and timeline for their organization, with almost a quarter of them saying their organization already runs all core IT services on the cloud (10 percent) or is in transition to do so (13 percent). Fewer than one in ten executives said their company has no immediate plans to enter the cloud environment.
"Cloud adoption is quickly shifting from a competitive advantage to an operational necessity, enabling innovation that can create new business models and opportunities," said Steve Hill, Vice Chair-Strategic Investments at KPMG. "As this rapid adoption curve continues to gain momentum amid a struggling economy, it is important for corporate leadership, directors, and boards to be informed and engaged in strategic discussions about the cloud's impact on their long-term growth opportunities and competitiveness."
Hill, who previewed the KPMG survey findings this week during Oracle OpenWorld 2011, Oracle's global conference in San Francisco, pointed out that the role of the corporate cloud leader remained contentious. IT executives see migration to the cloud as their initiative, while operations executives believe the CEO should lead the change. "Enter the Chief Integration Officer, as the traditional CIO's role expands to break down potential silos and integrate internal and external business needs, systems, and partners," said Hill.
IT business executives differ moderately on cloud expectations
Executives whose companies would use a cloud strategy agree that spending will rise significantly in 2012.
According to the KPMG survey, 17 percent of corporate executives said cloud spending would exceed 20 percent of their total IT budget in 2012.
Half of the IT executives at companies where the cloud is or will be adopted said that security is the most important challenge or concern, compared with 42 percent of the business unit executives, while 51 percent of the cloud provider community said security topped its list. Business unit executives (29 percent) shared equal concerns about performance with their IT counterparts (30 percent). In addition:
- IT governance was a top challenge among 22 percent of IT leaders but cited by just 17 percent of business users.
- Nearly a fifth (19 percent) of IT executives said loss of control over customer data was a perceived top challenge, compared with 14 percent of respondents among their operations counterparts.
- Regulatory compliance was a top challenge among 16 percent of business executives, compared with just 10 percent of IT leaders.
The survey also found that approximately 45 percent of respondents had not evaluated the tax implications of the cloud or do not know if these factors are being evaluated. "Ignoring tax issues has never changed the responsibility of the payer, which makes taxation a critical issue for those wishing to evaluate all implications of the cloud environment," said Hill.
Cost savings is a key factor in moving to the cloud
Respondents agree, however, that the cloud must offer a number of benefits before it can gain full momentum in their organization. For example, 75 percent of total respondents globally said they need to show a cost savings to justify a move into the cloud. More executives from Asia-Pacific countries (86 percent) required a cost savings than their counterparts in Europe, the Middle East, and Africa (72 percent) or in the Americas (71 percent).
Almost half of respondents (45 percent) said that to make the cloud worth the investment, IT savings would need to be from 1 to 10 percent from current spending, 34 percent said such savings would have to be from 11 to 25 percent, and some 10 percent said IT savings would need to be in excess of 25 percent.
The KPMG survey was conducted in fifteen countries from February to April 2011 and canvassed 806 senior executives – nearly 50 percent of them from the C-level – in companies that use or plan to use the cloud as well as 123 executives from cloud service providers.