Do business leaders understand the scale of cloud computing?

Enthusiasm for cloud computing is catching steam, especially amongst developers and IT departments. Yet, how much of this trend is being looked at from a business angle?
Written by Rachel King, Contributor

Based on what was said by many of the panelists and insiders at GigaOm's Structure conference last week, it's generally agreed upon that cloud computing is just in its nascent stages. Nevertheless, energy and enthusiasm for this next era of IT is catching steam, primarily amongst developers and IT departments.

Yet, how much of this trend is being looked at from a business angle? Business leaders are certainly becoming more intrigued by the cloud - but to what extent?

According to a new study by Forrester about the ROI of Cloud Apps, "as firms spend more and more of their closely guarded IT dollars on cloud applications, sourcing executives must scrutinize the long-term value of these investments."

With the exception of start-ups and small businesses, some analysts feel that not enough C-Level executives (with the exception of the CIOs and CTOs) and employees in other departments are familiar with or understand the costs and benefits of cloud computing.

John Hagel, a director at Deloitte Consulting LLP and co-chairman of Center for the Edge, explains:

There’s an unfortunate view of cloud computing that is taking shape in executive boardrooms. Many non-technology executives are concluding that, when you strip away all the hype, cloud computing is just another form of lower cost IT outsourcing with the added benefit of increasing variability to what used to be a fixed cost expense item of running data centers. Otherwise, it is business as usual.

Hagel continues that the entire C-suite needs to be educated on and involved in the switch to cloud computing to benefit the company overall.

However, maybe business leaders deserve a little patience here as many of them could be exercising warranted caution. Joe Weinman, head of the Communications, Media and Entertainment segment for Hewlett-Packard's Worldwide Industry Solutions department, argues that it benefits business leaders to know how to use IT to get ahead, and IT departments need to reciprocate by presenting the opportunities they can offer to the company's budget as a whole:

Cloud computing is still in its early days and everyone, including CxOs, are trying to separate the wheat from the chaff. There is a lot of “exuberance” about cloud, but the reality is that it is appropriate for some companies and some services/applications – and not others. Hence the hybrid model. Everyone, including CxOs, need to familiarize themselves with the tools that enable realistic cost-benefit analysis – so they can determine which services should go to the cloud.

Michael Skok, a partner at North Bridge Ventures, adds that "the benefits of cloud are only just beginning to be understood at any level," and that the most evident benefits and drivers right now are "unsurprisingly IT related," such as scalability and cost. However, Skok notes that there are certain industries, primarily those that revolve around information processing, where the benefits can be realized relatively quickly throughout the company, such as banking and even pharmaceutical companies.

Nevertheless, as cloud computing gains momentum, patience and caution lead to a slippery slope of just falling behind altogether.

Solomon Hykes, CEO of PaaS start-up DotCloud, asserts that businesses that took advantage of the cloud early are reaping the benefits faster when it comes to time-to-market speeds, efficiency and costs.

"For every winner leveraging the cloud, you have competitors scrambling to catch up," Hykes says, adding that cloud computing is "a trend that is incredibly valuable, and a lot of people agreed with that early on, but it took time to prove itself."

In order for other companies to join in and/or catch up, business leaders will need to acknowledge that cloud adoption isn't just transferring data and a way to cut corners - it could change the way the entire business functions altogether.

Anyone involved with or at least interested in the cloud needs to focus on more than just the technological advancements of cloud computing and discuss the financial impacts more heavily. Hagel concludes, "This is not just a CIO issue and viewing it solely through that lens will be very dangerous for large enterprises."


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