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Cloud Computing: A Shift From IT Luxury to Business Necessity

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Cloud computing may be defined as location independent computing whereby shared servers -- for the purposes of this article, external to the enterprise -- provide resources, software, and data to computers and other devices on demand. Cloud computing may have started out as an emerging trend that only IT professionals could get excited about (or fear), but it has quickly become one of the most important paradigm shifts in business today. C-suite executives on both sides of the supply chain, investors, and government agencies now recognize the potential that cloud computing has to change how organizations operate at the highest level -- from staffing and revenue models to their relationships with and expectations of customers, employees, shareholders, and more.

As such, it should come as no surprise that industry analyst firm Gartner predicts spending on cloud computing applications to increase at an annual rate of 20 percent, growing to a market of $150 billion by 2013. Organizations from The Brookings Institution to MITRE to the GSA are exploring and promoting the topic, and Vivek Kundra, the first federal Chief Information Officer, recently implemented a "cloud first" policy for the federal government. Understanding and embracing cloud computing has become an imperative.

Silicon Valley-based Appirio, a cloud solution provider that has helped hundreds of large enterprises adopt cloud computing, has had its fingers on the pulse of "the cloud" for the last four years. The change, over even the last two years, has been dramatic.

A few years ago, cloud computing or Software-as-a-Service was simply a means of lowering costs at a time when the economy was frail and budget increases were nowhere to be seen. That necessity resulted in highlighting cloud computing as a way to do much more -- to become more agile, innovative, and competitive. Previously, cloud projects were primarily driven outside IT on an ad hoc basis. Now IT is -- and will continue to be -- the owner of cloud success. And now that cloud computing is outside the small realm of early adopters, we are seeing the extraordinary business potential it has to offer -- and the new challenges it will bring.

A recent study from Appirio, conducted by an independent third-party market research firm, of 155 IT decision makers (at companies with >500 employees) who had already adopted one or more cloud applications provides some empirical evidence along these lines.

Cloud Computing is a Business Imperative, not an IT Luxury

Cloud computing is changing the way businesses run -- not just the processes enabled by specific applications, but businesses themselves. Eighty-two percent of cloud adopters in the survey report that cloud computing helped them achieve a specific business objective. In a world where most IT projects do not deliver, this is astonishing. Eighty-three percent of cloud adopters agree that cloud solutions have helped them respond more quickly to the needs of their business. Critical from a structural perspective, cloud computing makes businesses more agile by, for example, dramatically decreasing the marginal costs of engaging particular services on an on-demand basis. Business agility has become the number one reason that companies migrate to the cloud, easily outpacing each of the following: cutting costs; enabling a mobile workforce; reducing the costs of technology ownership; and converting capital expenditure to operating expenses. This shift in philosophy -- centered around cloud computing as the path to new innovation and corporate growth -- signifies that cloud computing has "tipped" irrevocably into the realm of those technology solutions that must be factored into business strategy.

Cloud Computing Allows IT Decision Makers to Drive Business Strategy

As was recently argued in The Huffington Post, in order to become pivotal business leaders, CIOs must promote tighter alignment between IT and organizational business units, downplay marginal cost cutting as a metric of success, and constantly think about the long-term growth of the enterprise. Cloud computing can play a big supporting role in these objectives. Seventy percent of cloud adopters in Appirio's survey agree that cloud applications and platforms have changed the role of IT within the enterprise, making it a true enabler of growth. And when asked who drives cloud decisions, 30 percent responded that the traditional C-suite (CEO/CFO/COO) pushed the ball forward, with IT identified by the remaining 70 percent as the primary driver (79 percent said IT will be the primary driver in the future). As stated above, the distinction between IT (e.g., the CIO) and business strategy itself will continue to collapse such that the CIO and the traditional C-suite will work in tandem, with the latter often deferring to the former.

Cloud Adoption -- It's Still Early in the Game

Cloud computing maybe be top of mind for many, but to be clear, it's still early in the game. We've already seen the tenor of conversations changing now that cloud projects are getting proven out. Much of the early cloud coverage centered on traditional IT concerns such as security, fear of vendor lock-in, availability and reliability of solutions maintained beyond the firewall (i.e. outside IT's control). But as Appirio's survey illustrates, cloud adopters have a considerably different view. When asked about each of the issues mentioned above, a compelling majority of cloud adopter respondents said cloud applications were either better or "significantly better" than their in-house alternatives. Experience breeds familiarity and confidence, both critical to debunking exaggerated misconceptions.

It makes sense. Someone who has traveled by airplane has a different view of the world (literally) than someone who has not. And the traveler's experience enables him to debunk common misconceptions and fears about myriad aspects of the journey.

However, cloud computing isn't a panacea. Cloud adopters will want to improve the security, manageability, integration and data quality of their cloud applications and platforms -- just as they would with on-premise systems (although one could argue large cloud providers like Google, Amazon and Salesforce.com have more money to invest in these areas than the average IT department, and more to lose if something goes wrong). In addition, with companies adopting more and more different cloud services, issues like cloud-to-cloud integration and the re-emergence of information silos across different cloud providers will need to be addressed. Companies will also need to focus on improving access to cloud apps and use productivity across different devices now that smart phones and tablets are gaining ground on PCs in the work world.

Of course the cloud isn't new, it's just new to business. As consumers we experienced the benefits of massive interconnected systems many years ago with the rise of the Internet. All of a sudden we could tap into resources far beyond ourselves to find out how to get to dinner, buy products at better prices, make smarter investments, share photos and video, and even connect more effectively with our social networks. While traditional business software vendors failed to make the connection, Google CEO Eric Schmidt began evangelizing the cloud for business as early as 2006. Since then we've witnessed a new generation of non traditional enterprise software leaders--companies like Google, Salesforce.com, and Amazon--rise and change the world for businesses all through the cloud. Businesses are now unlocking the extraordinary potential of the cloud - almost as fast as you.

Narinder Singh, is CMO and Head of Products at Appirio, a cloud solution provider that was named by Bloomberg BusinessWeek as one of America's Most Promising Startups and by AlwaysOn as On-Demand Company of the Year. A co-founder of Appirio, Narinder brings more than 15 years of software and business innovation experience and plays a key role in keeping Appirio at the forefront of cloud computing. Learn more from Narinder at http://twitter.com/singhns.

Ben Kerschberg is a Founder and the Chief Operating Officer of Consero Group LLC. Mr. Kerschberg has a Bachelor of Arts in Foreign Affairs and German, summa cum laude and Phi Beta Kappa, from the University of Virginia and a Juris Doctor from Yale Law School, where he was as a Coker Fellow. He clerked for the Honorable Gilbert S. Merritt, Chief Judge of the U.S. Court of Appeals for the Sixth Circuit.

Consero's Government IT Forum will take place March 6-8, 2011 in Clearwater, Florida.

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