19 May 2011
Analyst firm Gartner has warned IT chiefs to beware the hidden costs of cloud computing as increasing number of businesses look to switch their models of IT delivery.
While many cloud service providers promise lower up-front costs and switching costs, IT chiefs need to be mindful that the risks associated with cloud computing are often unclear or overlooked in contracts, said Alexa Bona, an analyst with Gartner.
Many cloud offerings today are based on unsophisticated models – essentially offering enterprises a bare-bones deal on processing capability or storage for a fixed price.
“Many cloud providers appear reluctant to negotiate contracts as the premise of their core model is a highly leveraged approach,” said Bona. “The starting point contractually often favours the vendor.”
IT chiefs should ensure that critical issues such as uptime guarantees, security, business continuity and disaster recovery are adequately addressed in the contracts.
Such issues have been in the spotlight after a recent systems failure at Amazon’s cloud services resulted in scores of its customers losing data.
Meanwhile, a new report from analyst group TechMarketView underscored the appetite for cloud services within the UK.
TechMarketView predicts that UK firms will increase their spending on business process services by seven per cent between 2010 and 2014 – with adoption of cloud services fuelling that spending.
The shift towards cloud services will cement the move away from the “out-dated lift and shift” IT infrastructure outsourcing model, said John O’Brien, research director at TechMarketView.
As a CIO in a multinational, I have had solid real world commercial and technical experience in implementing private cloud and integrating it with public cloud in the enterprise since the mid 2000s. The sentiments on this article are very true – that the reality has sometimes no bearing on the 'hype' of quick, easy and cheap in many cases in the enterprise computing world.
It was only after I transformed the organisation's entire IT cost base to a per user per month per application (PUMPA) equivalent, did I prove that the 'low cost' SaaS CRM system was one of the highest per user per month costs for all enterprise apps. It was more expensive on a PUPMA basis than the BI system, and well above the ERP system. Mmmm. Not to mention the complexity and effort in managing the SaaS system's governance to meet minimum SDLC change control criteria.
Also ask your SaaS provider if they can implement an Escrow arrangement in case they go out of business (and some will). Some can provide some sort of Escrow, others just cannot.
Moreover, the 'commodity' computing - electricity grid analogy is only vaguely true (at this stage in the maturity of Cloud) as, unlike the real utility companies, the interchange barriers for Cloud are rich with cost, risk and governance challenges for the unwary. The analogy is like having to re-wire all or part of your house if you wished to switch electricity utility providers!
Proceed in haste, count the cost at your liesure, or you may be lucky and hit your goal first time. Most importantly, know which questions to ask, and of whom - nearly all of the 140 questions that I pose in my soon-to-be published book are non-technical and directed to stakeholders other than IT - this should form the basis for good due diligence for most organisations moving to SaaS.
In the right hands, and with the right due diligence, SaaS has the potential to be extremely powerful, high value and even transformational, however it's not the answer to the world's IT problems (in the enterprise, at least. at this stage)
Feel free to drop by my website and read some of my Blogs http://www.rob-livingstone.com/category/cloud-computing/ , or get some insights on my book “Navigating through the Cloud – a plain English guide to surviving the risks, costs and governance pitfalls of Cloud computing” http://www.rob-livingstone.com/rla-cloud-assessment-framework/ due out July 2011
I also tweet a daily thought leader on Cloud http://twitter.com/rladvisory
Posted by: Rob Livingstone 22 May 2011
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