Study foresees CIO-CEO conflict over cloud computing
- 15 February, 2009 22:00
IT managers will be pushed by their CEOs to adopt cloud computing strategies in a bid to reduce costs during the recession, according to a leading IT consultancy.
BroadGroup is advising CEOs to embrace cloud computing, at the same time analyst group Gartner has said enterprises should avoid major cloud projects for two years because the market is immature.
Gartner predicts it will take seven years for the cloud industry to fully mature into a mainstream IT solution.
In its report on cloud computing, BroadGroup said compelling cost arguments will lead to CEOs to drive IT managers and CIOs to adopt cloud platforms rapidly, while technology departments resist the change.
"Technology departments may need some pressure to migrate to cloud at a reasonable pace, because the change involves a loss of control for them, but their buy-in will be essential because there are numerous risks and problems to manage along the way," according to the report.
Cloud computing is "the ultimate recession technology", says the report. The cost arguments for moving to cloud are becoming "more measurable and concrete", as "big-iron" providers of IT products and services start developing cloud offerings.
"For companies that are considering deploying enterprise software, it [cloud computing] can offer potential savings of up to 25% of the total cost," states the report.
Cloud also cuts development-related costs, while making it possible to bring in new products and services to market quickly, says BroadGroup.
The report cites a McKinsey Quarterly article by Abhijit Dubey and Dilip Wagle that calculates potential cost saving examples. Overall, the consultants found that on a 200-seat CRM application, the on-premises cost would be US$2.3 million (NZ$4.3 million), while the SaaS cost would be $1.6 million.
BroadGroup's report says "tipping-point is approaching", at which the wider community of corporate users will switch to cloud.
Despite these arguments, IT managers will resist the shift to cloud platforms, BroadGroup says.
"To a CIO who runs a large fiefdom of staff and datacentres, with significant capex and frequent CEO access, the most obvious worry is that cloud is a profound threat, like outsourcing, that raises the possibility of reducing the size of his or her empire and influence," the report says.
But the report says cloud computing could actually give IT managers more control.
"The move to enterprise-wide cloud solutions — whether at the infrastructure end with datacentres or at the user-facing end with, for instance, customer-relationship management applications — may actually leave the IT department in firmer control than before, given the possibility to have much greater centralisation of instalment decisions and functionality than with, for instance, desktop software," it states.