June 05, 2012

Article at MIS Australia

CIOs stick to cloud base while boards fly higher

Australia’s chief information officers are less enthusiastic than chief executives and finance directors when it comes to cloud computing, a KPMG report finds.

David Braue

Australia’s chief information officers are less enthusiastic than chief executives and finance directors when it comes to cloud computing, but executives at all levels still struggle to justify cloud-computing investments as the local industry takes its time to build up momentum, a KPMG economic model has found.

Conducted by KPMG with the support of sponsors including the Department of Broadband, Communications and the Digital Economy and cloud provider Salesforce.com, the report, Modelling the Economic Impact of Cloud Computing, analysed the present and expected take-up of cloud computing by Australian organisations.

By 2022, KPMG estimates that adoption of cloud services will have produced a long-term increase in Australia’s gross domestic product of about $3.32 billion a year, or 0.23 per cent of total GDP.

These figures assume adoption of cloud services across 75 per cent of “relevant ICT spending", capital expenditure savings of 25 per cent, and operating expenditure savings of 50 per cent. If adoption levels were only 50 per cent 10 years from now, the GDP gain would be adjusted downwards to an estimated $2.16 billion per annum, or 0.15 per cent of total GDP.

Report author and KPMG director of economics Nicki Hutley admits the forecasts – generated using KPMG’s “MM900" in-house Computable General Equilibrium economic model – are highly speculative as it proved difficult to find companies that could point to real benefits they had already seen from adoption of cloud computing.

Of 200 companies approached for the survey, just 29 had any cloud story to share. Of these, six came from the financial and insurance services industry; five represented information, media and telecommunications; and three each came from property and business services, manufacturing, and education and training.

This limited response rate was “not nearly the extent that we would have liked", says Hutley. “And of those 29 not all could quantify their savings. Many would say things like ‘we’ve had about a 30 per cent increase in productivity’, but these were based on vague ideas that a person who used to take three weeks could now do it in one week."

Such soft benefits reflect a lack of hard data about the cloud’s benefits, and what Hutley says is a “quite surprising" lack of cost-benefit analysis around cloud investments. It also exposes an unexpected rift between CIOs and other executives, who turn out to be more excited about the shift to cloud computing than their IT-focused peers.

“CIOs see cloud as something that is potentially cannibalising their own work and opportunities, and tend to be less supportive," Hutley says. “CEOs and CFOs look at the economics and say, ‘we ought to give this a go’. CIOs might appreciate the technology but they don’t want to see themselves out of a job." This led to “a pulling down of the shutters in some quarters with people saying ‘there’s no such thing as cloud in Australia’. [This is] clearly not true".

Those cloud adopters who see benefits – usually through adoption of private rather than public cloud services – tend to be “almost zealous" in their support of the cloud-computing model, and “fiercely" defend their decision to embrace it. “It was really quite startling," says Hutley. “As you got to the adopters, they couldn’t speak highly enough of the benefits."

The report cites enthusiastic cloud adopters including Arclight Investments, which provides cloud-based messaging, calendaring and document management to 7000 staff across 1000 Ray White real estate offices and has trimmed ICT-related capex by $25,000 a year and opex by $10,000 per year, per office.

These benefits motivated Arclight to mandate that all future software investments be delivered as cloud-based software as a service (SaaS).

Printing services organisation Ricoh Australia moved its public website to a public cloud and claims its investment in the cloud-based Salesforce.com system means employees spend 40 per cent less time updating customer data in the office. Cloud computing also helps Ricoh improve collaboration, idea sharing, analysis of won and lost sales opportunities, and sales forecasting.

But Hutley’s research led her to find that Australia’s cloud market is in its “embryonic stage" and that local companies – which trail their counterparts in Europe and the United States– are held back by a lack of knowledge about real offerings in the local market.

Perceived barriers around governance were nominated, as were security, disaster recovery and location of cloud-hosted data; and the early stage of the national broadband network , which is seen as an enabler for cloud computing because it will provide high-speed, two-way communications for seamless cloud services.

“In terms of the number of firms that say they’re interested in the cloud, Australia is way ahead," Hutley says. “But the number of companies . . . implementing it is right at the other end of the spectrum.

“We’re still struggling with the balance between the doubters and the zealots, but we’re moving toward the zealot end of the spectrum as the message gets out."

[Original here]