Between the Lines

Larry Dignan, Andrew Nusca and Rachel King

Cloud computing in the enterprise: What's the holdup?

By | October 20, 2010, 5:04am PDT

Security, compliance and auditing, contracts and service level agreements appear to be keeping 70 percent of companies with more than 1,000 employees from starting a cloud computing initiative, according to Gartner.

That tidbit was one of the big takeaways from a presentation on the cloud computing outlook. Here are the biggest concerns about cloud computing via a presentation at Gartner’s Symposium in Orlando:

  • Security;
  • Lack of compliance and auditing;
  • Quality of service;
  • verifying cost savings;
  • Failure remediation.

In a nutshell, companies want custom contracts, something that doesn’t really apply when operating a public cloud service. Honestly, I was a bit surprised to see the security thing as a big worry. Cloud providers can probably do security better than your company can.

Nevertheless, Gartner’s findings illustrate why there are so many vendors talking about private clouds—also known as data center upgrades.

Other key tidbits worth noting:

  • The global market for cloud services was $58.6 billion in 2009 and will hit $148.8 billion in 2014.
  • Over the next five years, companies will spend $112 billion cumulatively on software, platform and infrastructure as a service.
  • North America will be the largest market for cloud services for the foreseeable future.
  • Through 2012, companies will spend more on private cloud than public cloud services.
  • Few existing technology vendors will transition from a licensing to a cloud model.
  • Accounting is a big hang-up for cloud computing. Say you’re an EBITDA company that focuses on earnings minus all the bad stuff like depreciation, interest and taxes. Well cloud computing is a real problem? If you can’t capitalize your equipment—and you can’t if you go cloud computing—there’s a financial hit. Rest assured no big EBITDA happy media company is going to go too bonkers for the cloud.

Managing cloud computing providers is going to get complicated. So complicated that you’ll need a brokerage. Gartner is pitching the concept of cloud computing brokerages. Here’s how this brokerage concept would work:

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Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

Disclosure

Larry Dignan

Larry Dignan has nothing to disclose. He doesn’t hold investments in the technology companies he covers.

Biography

Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.

For daily updates, follow Larry on Twitter.

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RE: Cloud computing in the enterprise: What's the holdup?
Gauravko 20th Oct 2010
I believe, Enterprises are in exploratory and transition mode towards cloud services. As true with any new disruptive idea/technology/business model, there is bound to be some resistance to change the things, as they are.

On Security, it should be easy for the vendors/SP?s to justify their stand, as they are the guys who are providing them security even in a private network, which at some point, interfaces with public network anyway. It is more of a question of educating the customer about how the security is ensured, providing bit insight into the functioning to alleviate the jittery.

On Compliance and Auditing, for obvious reasons, there can not be a central regulator, certifying the services and approving the models etc. However, I am not sure if there is any understanding among vendors/SP?s to certify the service with putting different checkpoints to monitor and providing some sort of report to customer for the services he is using. Your views pl?

Accounting concerns mentioned here, is a very interesting find (even though from a pure accountant view), but, who does not want faster ROI, Lower Capex at the same time.

Net-net: It is just a matter of time, cloud services will start to get more acceptance. The main question is not whether it will be adopted or not, but, who will be making money out of it. Basically, it will be Vendors/SP?s with customized delivery models, pricing and most important, who delivers and controls more Value in the food chain as compared to the rest.
On the security question, I do think that probably the cloud vendors could do a better job. The problem is you the customer don't always know what kind of security you are getting and you don't know what level of service or what level of compensation you will get for the occasional breach. Plus there is a psychological element to security. If you are doing your own security on your own infrastructure and something goes sideways, blame can be assigned and a solution can be implemented "in house". If someone else is responsible for the security and you don't have direct access and control, you probably need to rely on the local court system and lawyers.

I have seen some TOS and licenses from cloud vendors that don't even mention what security they use, how it is implemented and how a breach is handled on the customer side of things. Obviously a smart business doesn't do business under those terms but it does have a chilling effect on all cloud vendors.

What I am most curious about is the issues presented in this blog are still relevant. Why hasn't the cloud community addressed things like security, compliance, quality of service, and failure remediation.

From a consumer's point of view, it's a mine field of these issues where some vendors offer some solutions and features to address some of the issues but not others.

As for cloud service brokerage, you have just traded a possibly highly competent IT staff for a staff of account managers who might end up not as technologically skilled and will give company managers excuses like "I know our e-mail service is down right now but I have called Google and they won't talk to me at this time." What kind of answer is that? Instead of being able to call up the IT department directly and chew someone out until the problem gets fixed, you are forced to wait until the vendor gets around to fixing the problem. People want answers in a crisis, not excuses. A vendor manager will only really ever be able to deliver excuses.
0 Votes
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The Cloud for Enterprise is a Farce...
trickytom3 20th Oct 2010
...and for all of the reasons that the author lists: security, QOS, lack of compliance, and cost.

The Cloud is simply not ready for primetime.
0 Votes
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It will never be ready
wackoae 20th Oct 2010
@trickytom3 The cloud is a failure by design. There is no way to have a secure cloud when companies don't have control over access and location of the data.
0 Votes
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What's the holdup? SECURITY
wackoae Updated - 20th Oct 2010
Unless you are a total moron, by now you should know that the lack of real security is the #1 reason the cloud is a failure by design. The other items in this article are just the icing in the cake.
There is no holdup. Gartner is talking about why the glass house IT group isn't buying cloud. But the business units are buying cloud without IT's knowledge - as another Gartner survey (http://www.gartner.com/it/page.jsp?id=1438813) found. This is the only way new technology gets into the enterprise.
@Robin Harris
Thats sort of like the teen buying something without the parent's knowledge because the teen bought into the marketing and it sounds really good. But like all things IT that business units buy and tells IT "oh don't worry you will never have to manage it, we'll do it ourselves now". That is never the case. Eventually IT will have to provide some level of support and implementation. Its always like that because people always want customization.

But in general, I would guess the biggest holdup is the economy. Its not like companies have big budgets to blow away. And initial investments in anything is always costly with return on investments down the line. Budget crunchers always shy away from scenarios like that.

Second, this is one of those things that companys would rather see someone else do it first so that they can learn from the other group's mistake. Again, even more so in a bad economy because chances are they have one shot to make a good impression before it gets thrown back in the closet.
I'd agree with Robin here, customers are using cloud applications, and yes this is very often at a business unit level. Users are focussed on finding a solution, and want to see ROI - fast.

Cloud vendors aren't blind to this happening outside of IT's purview: many are heavily investing in infrastructure that supports integration with existing enterprise infrastructure (SSO, legacy business application integration). They're also investing in security infrastructure and process, such as 3rd-party SAS70 Type II audits.

Business units need IT's support in understanding which vendors are taking this seriously, and how to meaningfully leverage the above.

While the line of business may be acting like a "naughty teen", IT acting as a supportive and guiding parent, rather than overly authoritarian, would likely yield the best results - a healthy and productive engagement with vendors.

Daniel Chalef - KnowledgeTree
0 Votes
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In a recent survey we did encompassing companies from 50 to over 1,000 employees, we found that "not understanding the cloud or related benefits" was the number one reason for folks not moving to the cloud. Security is not the first question, as typically the conversation starts with the company looking for solutions that solve a business problem, and that's the right way to look at it. Once they have found the right solution, if it IS a cloud-based solution, then security questions follow. And in spite of the comments above, any cloud vendor worth their salt should have a security story that puts all customers at the highest common denominator. For smaller companies especially (but even large ones) a proven cloud platform or solution should provide defense-in-depth and compliance to meet the strictest requirements. @hubspan.com
I pretty much know nothing, and that's why my comments are never anything of value.
I believe, Enterprises are in exploratory and transition mode towards cloud services. As true with any new disruptive idea/technology/business model, there is bound to be some resistance to change the things, as they are.

On Security, it should be easy for the vendors/SP?s to justify their stand, as they are the guys who are providing them security even in a private network, which at some point, interfaces with public network anyway. It is more of a question of educating the customer about how the security is ensured, providing bit insight into the functioning to alleviate the jittery.

On Compliance and Auditing, for obvious reasons, there can not be a central regulator, certifying the services and approving the models etc. However, I am not sure if there is any understanding among vendors/SP?s to certify the service with putting different checkpoints to monitor and providing some sort of report to customer for the services he is using. Your views pl?

Accounting concerns mentioned here, is a very interesting find (even though from a pure accountant view), but, who does not want faster ROI, Lower Capex at the same time.

Net-net: It is just a matter of time, cloud services will start to get more acceptance. The main question is not whether it will be adopted or not, but, who will be making money out of it. Basically, it will be Vendors/SP?s with customized delivery models, pricing and most important, who delivers and controls more Value in the food chain as compared to the rest.

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