Opinion: Cloud computing in NZ — there's something in the air

Ill-defined and over-hyped as it is, the cloud is the next long-term wave of computing

Like many Kiwi kids, I whiled away summer hours trying to see shapes and meaning in the clouds. I quickly learned clouds are shape shifters – defined one minute, transformed the next. And what I saw as a ship or dragon-shaped nimbus was a fairy or castle to my friend.

I get the same feeling with the debate on cloud computing. It feels … ephemeral. Every vendor or supplier has a slightly different version of what cloud is and why their offering is a cloud innovation — little wonder it has become one of the most ill-defined, mislabelled and over-hyped topics in ICT.

Nonetheless, it is the accepted title for a trend IDC believes will transform how we access and consume information over the next 20 years, putting aside all of today’s hype. And whilst it is an immature market in New Zealand it will become increasingly important to the whole ICT sector, including telecommunications.

So, firstly an effort to define the term “cloud”.

IDC globally (after much debate) makes a distinction between cloud services and cloud computing. Cloud services are virtually any business or consumer service that is delivered and consumed over the internet in real time.

Cloud computing encompasses all elements of IT and network products and supporting services that enable the development, delivery and consumption of cloud services. Cloud has many layers, including software as a service, platform as a services and infrastructure as a service.

There are certain components that need to be present to qualify as a cloud service: it must be a shared, standard service, built for a market rather than a single customer. It must be delivered online with usage-based pay-as-you-go or subscription pricing.

The service should offer dynamic and fine-grained scalability. And the access, integration and management need to be via web services application programming interfaces and available to users over standard user interface technologies.

A lot of the attention today is in the private cloud environment, where companies can get the benefits of scalability, but within their own shared resource environment where services are designed for and access restricted to a single enterprise.

Public cloud is where the service is open to a largely unrestricted universe of potential users – Google Apps is one example.

So just how big is the cloud opportunity? Herein lies the first reality check. IDC’s global forecasts shows cloud services generate just 4 percent of IT service revenues in 2008, forecast to rise to 9 percent by 2012. That may seem insignificant. But the cloud compound growth rate is 27 percent versus just 5 percent for more standard IT services. In a nutshell, it is the growth potential that offers the attraction.

In New Zealand, care must be taken to distinguish between the hype surrounding a few trophy moves and reality. IDC’s 2009 IT Business Ecosystem Survey of 254 businesses shows 39.4 percent of New Zealand companies are unfamiliar with even the concept of cloud computing, compared with Australia (12.5 percent).

Cloud services penetration here is 6.8 percent, compared with Australia where penetration is 17.9 percent as an early adopter market. It means there remains a journey from concept to conviction for business in New Zealand.

Having said that, whilst 75 percent of Australian respondents are familiar with the concept, 33.3 percent find it interesting but are likely to resist adoption versus 19.5 percent in New Zealand. Furthermore, New Zealand respondents were more positive about the likelihood of cloud driving IT change – 56.7 percent of local respondents believe cloud will improve the business operating environment.

This compares with Australia where 45.3 percent of respondents perceive cloud as a cost saver and cheaper alternative. But overall, the opinion still remains that cloud is either a hype or too immature for companies to judge its real potential.

So it is not surprising in terms of the level of cloud adoption that 65.9 percent of respondents are not using cloud computing and are also not considering its use in the future. We have a long way to go before we reach the inflection point, where cloud begins to be accepted as a serious business tool.

Looking through these survey results, it is hard to see how the current cloud rhetoric is justified by reality. However, as Bill Gates has notably said: “We always overestimate the change that will occur in the next two years, and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction.”

We believe cloud represents the next long-term wave of computing. It will not be an entirely disruptive substitute to current IT services – we expect rather to see hybrid implementations where cloud services are used where they best meet a company’s requirements.

There are multiple obstacles to be overcome, not least issues of security, availability and performance, and ensuring cloud services are backward compatible to work with legacy systems as well as easy to integrate or remove.

It is a immature market and it will inevitably fail to grow in quite the way or at quite the pace we predict.

However, there are also clear drivers in an economic climate where organisations seek alternatives to suit their lower budget and cost-management initiatives; cost savings and the business benefits of shifting upfront software and systems expenditure into operating expenditure; the pay-as-you-go – and grow – nature of cloud; and the speed of deployment and scalability cloud services offer.

Despite the hype, the potential of cloud is far more substantial than its name.

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