Why the cloud will never (entirely) replace in-house applications

Why the cloud will never (entirely) replace in-house applications

Summary: Cloud computing might have momentum behind it, but that doesn't mean every business is going to be making the leap — at least, not yet.

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Cloud computing, with its promise of cheap, easy access to enterprise-class applications via the internet, is a seductive concept for many cash-strapped organisations as it seems to offer state-of-the-art infrastructure without the need for epic IT integration projects — or expensive staff.

At the moment cloud still accounts for a relatively small slice of enterprise IT spending — perhaps no more than five or six percent of the total software market, although one prediction sees this climb to 20 percent by the end of the decade.

That's partly because companies remain cautious about the new technology, but also because they have significant investments in their existing on-premise IT infrastructure, both hardware and software.

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"Is there a future for on-premise enterprise software?"

Indeed, the rapid growth of cloud (and Software as a Service in particular) has made some question whether on-premise applications have a long-term future at all, or whether all applications will eventually be cloud-powered.

But it's also possible that on-premise applications still have some use — and some fight — left in them, at least as far as CIOs are concerned.

 When asked "Is there a future for on-premise enterprise software?" the TechRepublic/ZDNet CIO Jury voted yes by a margin of 11 to one, with security and reliability two of the key areas where the panel said on-premise will retain the edge over cloud applications.

John Gracyalny, VP IT at SafeAmerica Credit Union said: "I don't consider the internet stable enough for truly critical functions. I'm also reluctant to trust a third-party datacenter's security."

Ibukun Adebayo, director of IT at social care organisation Turning Point said: "As more organisations begin to trust and subsequently invest in cloud applications, this is slowly beginning to translate into a gradual decline of on-premise enterprise software."

But she added "sectors that are required to comply with stringent data protection and privacy regulations such as the financial services sector, plus organisations keen to protect proprietary applications developed as their intellectual property are unlikely to see any reason to retire such on-premise applications in the short-to-medium term at least."

Decisions about cloud versus on-premise come down to the level of complexity in your IT infrastructure, said Michael Hanken, VP of IT at Multiquip: "For the regular 'bread and butter' processes there is no compelling reason to have it on premise; however if you are tightly integrated with important real-time components and/or very high data volumes there is still a case for on-premise ERP."

Jerry Justice, IT director with SS&G Financial Services said that the way on-premise applications are built will change as a result of the cloud: "There will still be reason for on-premise, localized, cached and/or hybrid delivery of pieces of technology services, but the pieces that make that up will be different."

And the impact of cloud is also likely to affect the way on-premise software is sold, said Mike Tonkiss, IT director at Neopost: "There will still be an opportunity where firms have invested in their own facilities, but any new firms will probably prefer the flexibility of the subscription model. However, notwithstanding this, software vendors may need to be more entrepreneurial when it comes to on-premise pricing to compete and survive."

There is absolutely a place for cloud services, but for large organisations these are likely to be add-ons to on-premise enterprise software, according to Jeff Canon, CIO of Fire and Life Safety America.

That's because the enterprise has much more control over its use of on-premise software — also, with on-premise software, "I get to add back the depreciation expense related to the software license purchase. I don't get to add back the monthly recurring cost for cloud services," said Canon.

Mike Roberts, IT director at The London Clinic said: "In specific specialist areas such as process control, manufacturing and health, the relationship between the application and the physical system still requires some application element to be local." Smith C Scott, director of technology at 32Ten Studios added: "Clients/vendors can be very superstitious about data living in the cloud."

Today's TechRepublic CIO Jury was:

  • Richard Storey, head of IT at Guy's and St Thomas' NHS Foundation Trust
  • Dan Fiehn, Group Head of IT Markerstudy Group
  • Tim Stiles, CIO at Bremerton Housing Authority
  • Mike Tonkiss, Head of IT, Neopost
  • Mike Roberts, IT director The London Clinic
  • Ibukun Adebayo, director of IT at social care organisation Turning Point
  • Gavin Whatrup is group IT director at marketing services company Creston
  • Jerry Justice, IT director with SS&G Financial Services
  • Steve Williams Director of Information Systems and Services Newcastle University
  • John Gracyalny, VP IT at SafeAmerica Credit Union
  • Neil Harvey, IT director, Sindlesham Court
  • Delano Gordon, CIO at Roofing Supply Group

Want to be part of TechRepublic's CIO Jury and have your say on the hot issues for IT decision makers? If you are a CIO, CTO, IT director or equivalent at a large or small company, working in the private sector or in government, and you want to join TechRepublic's CIO Jury pool, or you know an IT chief who should, then drop us a line at steve.ranger@techrepublic.com.

Topics: The Evolution of Enterprise Software, CXO, Cloud, Enterprise Software

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9 comments
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  • People forget

    Server consolidation in the the cloud can be done just as easy onpremis either by private cloud solutions or even simple virtualization. This has the effect of reducing the size of corporate data centers at a rapid rate as a result. Smaller datacenter footprints means reduced costs which can and will keep up with any cloud infrastructure outsourcing percieved cost benefit.
    ammohunt
    • Real time...

      If the processes are controlled in real time by the ERP system, then an off-premises solution is not acceptable. There is too much latency and if some bright spark digs through the comms cable with a digger, the whole production stand still, losing the company millions of dollars an hour, because the IT can't control the production line any more.

      You might get away with a hybrid system, where the real time controlling is on premises and synced to the cloud when it is available, but you still lose out on continuation work, once the current production run is finished and the Cloud is not back online.

      At least if you sever your own cables, you only have yourself to blame... And if power to the whole plant goes, well, that isn't your fault. ;-)

      Also legal considerations, as mentioned in the article (a first for such articles I've read on BYOD and moving to the cloud) mean that for many industries, it is just plain impossible, as the law and regulations currently stand.
      wright_is
  • "cheap, easy access to enterprise-class applications"

    Cheap? Whey you’ll be paying for them forever instead of a one-time purchase price? Cheap? When you factor in increased bandwidth costs? Easy access? When you depend on the Internet, a known source of downtime, hacking and other security and reliability issues?

    The cloud has some uses, but those businesses who are jumping into it feet first will find the water is deep.

    Have a nice, cloud-free day,

    Doc
    Doc.Savage
    • One time purchase?

      Have you ever run a data center? One time purchase of the software, maybe, but you still have the monthly maintenance fees and annual renewals, upgrades etc.

      It offers reduced captial expenditure, and as long as you would upgrade straight away with your on-site solution, you might be better off financially. It also depends on whether the cloud solution's price expands and contracts with your business or whether it is a fixed fee.

      If you need 200 extra workers for a 6 month project, you'd need to buy additional licences for a traditional system. If the cloud solution allows you to add 200 users and only pay for them for the 6 months, that is a major cost saving.

      There are too many variables and too many solutions to make a clear cut decision either way.
      wright_is
  • Been in the cloud for the past 5 years

    We have run our software through the cloud for the last 5 years. It has been reliable and we only had one major outage when an ISP lost a major internet router. When we setup a new location to connect we make sure to lock down the router and use OpenDNS to help keep the junk sites down. And once inside the cloud it is a very sterile sandbox environment. We have well over 100 locations doing this and they are using major software such as accounting and inventory software. The management has been very pleased with the cloud setup.
    spikey289
  • Let's get this strait peopleS!

    It's not a new technology, the so called cloud is how computing started. When working at Ford Motor Co Australia we had two systems, one was our local server located in Australia and all the PC were linked into that. Had to log in and most data was stored on the mainframe. Second system was linked to all Ford plants around the world, the "CLOUD" is just clever? marketing!
    martin_js
  • Those Who Do Not Learn From History Are Doomed To Repeat It.

    I started my career submitting stacks of punch cards to the data center and waiting a half hour for the results. I bled and sweated my way through the personal computer revolution, one of the ONLY populist and truly free market movements in recorded history. As soon as there's enough critical mass locked up in the new "Big Iron" you'll see massive attrition of smaller suppliers and contributors, and through acquisition and patent trolling you'll see one (or a small few) lumbering dinosaurs emerge with total control. Suddenly the prices will skyrocket and there will be no choices; only what they tell you to do and to pay. It's the American way.

    Steve, I'm glad to see there are still some voices of wisdom and caution on this topic. Judging by most of the other "cheerleader" articles about the so-called cloud in your publication, I'd become convinced that there are enough young, ignorant, full-of-themselves fanboys in the industry today to allow my scenario to happen.
    InspectorGadget
  • Why the cloud

    each company that use the cloud need to go to jail they lied to us saying the cloud is safe but it is not safe at all they not stopped hackers from stealing our info and now they say the cloud is safe but it is has dangers they have not said any thing about and again they do not care about you just you money
    ttx19
  • Flat Earth Society

    Wow! There's still a bunch of CIO/IT Director types out there working with analysts to try and preserve the on-premise computing model. What a bunch of bullshit.
    Being Guided