At this point in the evolution of cloud computing, the public cloud is probably not IT's first choice when it comes to core enterprise workloads. But there's still a place for public cloud services, and it's up to IT to determine what that is.
Standing pat or ignoring the cloud isn't going to cut it, especially when application developers and groups running specific business apps are moving to the cloud, with or without IT knowledge and approval.
"We've all heard anecdotally that there's a lot of cloud going on at companies that IT doesn't know about, but can find through procurement or by going through people's expense reports," says John Barnes, CTO at Model Metrics, a cloud services firm that helps companies with their Amazon, Google and Salesforce.com deployments.
At one time, Barnes says, it was quite possible for Model Metrics to roll out Salesforce.com for a company without IT ever knowing. But that's changing, as "CIOs want to take control and put their stake in the ground," he says.
But first, CIOs need to get more comfortable with the different types of public cloud services available, to understand the differences and then figure out how each can best supplement what IT already is doing internally, experts say.
Scenarios for public cloud usage
A public cloud service can provide a cost-effective, no-hassle introduction to a business service that's currently missing in an IT portfolio, provide an alternative when an outdated app needs a refresh, and provide extra compute, storage or development capacity when needed.
Enterprise IT executives are starting to take advantage of software-as-a-service (SaaS), for example, to clear out their application backlogs, Barnes says.
"Instead of being the roadblock and having the business upset with them, they're looking at that backlog and their road map and picking point SaaS providers for the applications it doesn't make sense for them to do internally, like e-discovery or time and expenses," he says.
"Even if you're going down a private cloud route, you can pick off things that aren't core to the business, buy a nice SaaS offering, and meet some people's needs," he adds.
For larger enterprises, the public cloud's appeal is "at the edge," providing an entry point to new services or a refresh for the old, agrees Mark White, CTO for Deloitte Consulting's technology practice. Analytics, e-mail and sales force automation are increasingly popular public cloud starting points for larger enterprises, White says.
On the other hand, small and midsize companies are approaching public cloud services on a more all-out basis, he adds.
Research from IDC bears this out.
"When we look at the industries that are using the public cloud, most of the companies therein don't have enormous investment in applications or infrastructure already. So they tend to be smaller, midsize companies and the verticals that are either late adopters to new technologies or that don't necessarily have the margins to reinvest in larger platforms. They've been paper-based, and slow to move, and don't have so many security or regulatory concerns," says Ruthbea Yesner Clarke, program manager for Services Vertical Views research at IDC, which recently released its revenue forecast for U.S. public IT cloud services through 2014.
Clarke notes, for example, that a lot of public cloud activity crops up in the professional services vertical, where data security requirements aren't as stringent as banking or retail.
In general, SaaS is quite mature as far as the public cloud goes, says Clarke, citing IDC's research showing that applications account for 52% of public cloud service revenue in 2009. Over the five-year forecast period, however, that share will drop to one-third of market revenue as interest in infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) picks up.
IaaS use, in particular, will blossom, she says. "We'll see a 50% compound annual growth rate through 2014, compared to a 12.5% CAGR for applications - although those will still hold the largest percentage of the market."
Money, speed and specialization
There are three basic reasons to consider public cloud services, White says. The first is economic, with pay-as-you-go pricing weighed against upfront capital outlays and on-premises commitments.
"Would your business case benefit from an OpEx vs. a CapEx model?" he asks. If so, that'd be one reason to look into public cloud services.
The second reason to pursue public cloud opportunities is speed to solution, White says.
"If your business case needs a solution in days to weeks vs. weeks to months, then public cloud is your choice. There you have the ability to subscribe quickly, as quickly as it takes to make an American Express transaction on the Internet," he says.
The third reason is access to specialized or pooled resources, White says.
Rather than hiring an Oracle database architect, a company might instead choose to subscribe to a public cloud service, for example. "Behind that provider will be a database architect working on your behalf as needed and you can pay as you go that way rather than investing in personnel," White says.
Such considerations have turned Schaeffer Manufacturing, a midsized maker of specialized motor oils, fuel additives and specialty products, directly into the cloud, says Will Gregerson, CFO with the St. Louis company. "We've pretty much 'clouded out' all of our computing needs," he says.
From a SaaS perspective, that includes its ERP application, which the company now gets as a service from NetSuite. The SaaS application replaces a 25-year-old, IBM AS/400-based ERP system that had turned into a huge pain point, Gregerson says.
"We had come to the realization that we'd created this long before all the cool stuff of today and it hadn't been designed with scalability in mind. We couldn't add in electronic data interface, electronic bill pay or e-mailing for customer documents like invoices," he says. "The system was holding us back from continuing to grow."
Updating that system would require complete rewrites of some pieces, which would have meant hiring developers at a high cost. "We opted to look elsewhere and decided on a cloud service," Gregerson says.
The impact has been dramatic, Gregerson adds, citing a 50% cycle-time reduction in order processing and a 10% increase in business, but with three fewer people.