While study after study indicates adoption of cloud computing services is occurring at a measured pace, CIOs are starting to concede that they can’t really compete with external service providers in terms of total cost.
Historically, an internal IT organization needed to essentially break even in terms of return on investment, while providers of outsourcing services needed to make at least eight percentage points of profit on every deal. That gave the internal IT organization a competitive advantage. But cloud service providers are now operating at a level of scale that internal IT organizations compete with.
At the 2012 Chief Information Officer Leadership Forum this week, several CIOs acknowledged that the time has come to accept that new IT reality.
Nathan Boylan, head of IT operations for Lord Abbett & Company, a financial services firm, says it is far more expensive for him to deploy virtual infrastructure than a cloud service provider. That doesn’t mean every application workload is moving to a cloud service provider. Boylan says there are still security, compliance and risk management issues to consider, and legacy applications will be running on premise for years to come. But when it comes to new application workloads, cloud service providers have economies of scale that are just too hard to ignore.
As a result, Vittorio Cretella, CTO for Mars, says the time has come to start taking advantage of that critical mass of investments in IT that cloud service providers are making. Despite some well-publicized outages, cloud service providers are more reliable than on-premise systems managed by internal IT organizations, and the ability to easily run four live copies of data around the world addresses any concerns there might be about availability.
Gabrielle Wolfson, CIO for Panasonic Corp. of North America, adds that as long as your organization has reached a sufficient level of standardization, cloud services are a viable option, especially when the organization moves into new markets. Wolfson says Panasonic would prefer to rely on private rather than public cloud services; the most important thing to remember is that sound enterprise architecture rules still apply in the cloud.
To various degrees CIOs are trying to reassert control over the cloud. Thus far, the adoption of cloud has been driven primarily by line-of-business units that either contract directly with a cloud service provider, or replace an enterprise application with a software-as-a-service (SaaS) application with little input from IT. The opportunity for IT now is to come up with an expanded definition of IT service and data governance management that spans both on-premise and cloud computing resources.
Of course, that will require IT organizations to finally address some long-standing issues, many of which created the opening for cloud service providers in the first place. But rather than fight a losing battle against cloud service providers, it appears the time for internal IT organizations to start making a strategic withdrawal to higher ground is finally at hand.