Recent research suggests the endless hype surrounding cloud computing services has yet to convince many organisations of the model’s merits.

Cloud computing promises several benefits, the biggest being improved alignment of IT budget with system use, allowing firms to adjust capacity in line with demands on applications.

But confusion over terminology, issues with pricing models and problems relating to infrastructure are deterring many potential users.

Pricing
One reason why many companies have not yet embraced cloud services is cost.

A new study by software company GFI found that 44 per cent of SMEs felt cloud services were too expensive. Respondents said that their needs were met by their existing set-ups.

Asked what factors would be likely to drive adoption in the future, 43 per cent said “better vendor terms and pricing”, while 40 per cent said “no lock-in terms”.

Multinational construction company RMD Kwikform has looked into using cloud services but has held back on deployment partly because of cost.

The company’s head of IT, Bansh Mistry, said he looked at using a hosted version of Microsoft Office Communications Server but had found “the pricing too prohibitive for us to even consider it”.

Infrastructure
Although UK-only companies are unlikely to face problems with the communications infrastructure needed to connect to cloud services, the same cannot be said for multinationals.

RMD Kwikform operates in Chile, South Africa, the Middle East, Australia and Asia-Pacific. “The best leased line we can get in South Africa is 500Kbit/s – that’s a problem,” Mistry said.

“You can have cloud infrastructure of the highest resiliency but, if the in-country infrastructure is not there or not good enough to support service continuity, you will not receive the level of service you need,” he said.

“Moving everything to the cloud means having the right communications infrastructure in place,” added Mistry.

Lack of understanding
GFI’s research highlighted another major hurdle facing firms looking to explore the potential of cloud services: many senior business managers have little or no understanding of the concept.

In its study, only 10 per cent of senior business decision makers said they fully understood what the term cloud computing meant. Thirteen per cent said they had heard of cloud computing, but did not know what it meant, while 50 per cent had never heard of cloud computing.

But the problem is largely in the name “cloud computing” because, when asked whether they had heard about managed services and hosted services, only 15 per cent said they had not heard of it.

“Cloud services are not this mysterious new thing; they’ve been around for quite a while. Before we invented this term to encapsulate and categorise managed and hosted services, people were just getting on and using them,” said David Bradshaw, IDC European SaaS and cloud services research manager.

According to IDC research among SMEs with 50 to 99 employees across Europe, about 50 per cent use some sort of cloud service in at least one area.

“Cloud services are everywhere now. If you’re using an email filtering service, that’s a cloud service, Salesforce.com is a cloud service. Webex is a cloud service. If you use online banking, that’s arguably a cloud service as well,” Bradshaw said.

Business model
It is not only some user organisations that are having trouble adjusting to cloud computing, some enterprise software vendors are struggling too. Their main problem is in finding a way to offer cloud-based applications without undermining their existing revenue streams.

“Those incumbents are still sitting there with a ‘maintenance for life’ model, and moving to a cloud subscription model is stressing their brains quite heavily,” said Clive Longbottom, service director at analyst Quocirca.

IDC’s Bradshaw added that Microsoft has a big opportunity in cloud services, but also the biggest challenge, given the huge stake it has in on-premises systems.

“That’s why I think it’s brave of Microsoft to embrace this model,” said Bradshaw, adding, “I don’t want to come across as some kind of Microsoft fan, but I think it is handling this transition much better than Oracle or SAP.”