Is your business taking advantage of cloud computing? Maybe it’s time to bring down those final barriers and make the switch. You’ll never look back.
The whole world has gone cloud crazy… or so you might think. The reality, however, is that despite proven benefits which include reduced costs, improved scalability and productivity gains, cloud traction isn’t necessarily what the hype might imply.
There is a simple message, though, for those who haven’t yet shifted business systems into the cloud: you’re probably missing out.
While recent firm statistics on cloud adoption rates aren’t available for New Zealand, some strong hints are. In May, market researcher IDC New Zealand released data which shows steep growth rates for some cloud services in this country. That rapid growth implies relatively low market penetration; the company anticipates growth for hosted applications and infrastructure at seven to nine percent each year until 2019. And it expects cloud-based services to grow at a ‘staggering’ 15 to 27 percent compound annual growth rate until 2019.
However, IDC analyst Adam Dodds is reluctant to put a damper on cloud adoption rates, instead saying these numbers refer to the ‘next phase’ in cloud adoption.
“New Zealand is very mature in its cloud adoption in the Asia Pacific region, excluding Japan. Organisations have given cloud a go and now, in order to undertake a cloud-first approach, there needs to be considerable people, process and governance activities put in place,” he explains.
Another IDC study to which Dodds draws attention is focused specifically on small to medium businesses and shows that the number of organisations planning on increasing (or starting to use if not already using) the budget for cloud services typically hovers at around the 40 percent mark (see graphic). This doesn’t shed much light on adoption rates, but provides further room for speculation.
The issue is drawn into clearer focus through a Horizon Research study performed for Internet service provider Snap Business. Though somewhat dated (March 2014) it found that just one in three local businesses don’t yet use any cloud services (it also found that those businesses which do use cloud ‘love the experience’). And a further hint comes from Microsoft and its July announcement of ‘end of support’ for Windows Server 2003; on-premise software which is over a decade old. It estimated that up to 60 percent of local businesses might have at least one instance of the obsolete operating system still running.
And, while Australia isn’t New Zealand by any stretch of the imagination, its Government Statistics Office took the wind out of the technology industry’s sales by revealing that just 19 percent of businesses with an Internet connection currently use any form of cloud computing services.
Margaret Holmes, director at consultancy Engine Room, says reluctance to move to the cloud is ‘an interesting problem’. “We’ve migrated a huge number of clients into the cloud, some of them voluntarily, others involuntarily; certainly, the young ‘digital natives’ are very quick to adopt cloud, while the older ones are far more cautious,” she says.
Ross Hawkins, director at web technology company Ignition Development, believes there is plenty of headroom for local businesses to benefit from the cloud. “However, a lot are constrained by costs and an attitude of ‘if it ain’t broke, don’t fix it’. That’s why a lot of old [Windows 2003] servers remain untouched; as long as they do the job and don’t break, they don’t cause a problem,” he relates.
Not replacing something because it is ‘not causing a problem’ is understandable, but also probably not the best business case ever advanced. It can mean being caught in a technology time-warp, stuck in the amber of early 2000s technology. The industry moves rapidly, and what’s possible with modern software is very different from what was possible over a decade ago.
The question isn’t whether or not those with old technology should be updating it; rather, they should be evaluating the potential benefits against any costs.
Barriers to shifting into the cloud
The biggest objections to moving to the cloud, says Holmes, include disruption to the status quo and the difficulties of migrating ‘dirty’ data.
“Any business change comes with an interruption cost. It’s like moving house – it is rewarding when you’re done, but you tend to put it off because it’s not a pleasant thing to do.”
The absence of dedicated IT staff is a possible problem, as is the tendency for the cloud message to be pitched at technology leaders rather than businesspeople.
“We have a lot of five or ten person businesses in New Zealand which don’t have a dedicated IT team or individual, so it is a case of looking for ways to appeal to the owners of those businesses rather than at the CIO level. If there is no CIO, we need to be able to explain what the advantages of cloud are to the person running the company,” says Hawkins.
‘Cloud’ doesn’t just mean procuring technology-related services, either. It can also mean remotely accessing a range of professional services, such as those offered by Legal Documents (www.legaldocuments.co.nz). Director Helen Nathan says the biggest challenge is reaching the market, even in a country where Internet usage is pervasive.
“People are slow to get on to the understanding that you can access a range of services at lower cost and with far greater convenience by using the Internet – but once you get something and see how well it works, you tend to go back for more,” she notes.
Hawkins adds that an excessive focus on reduced overhead which characterises how cloud is taken to market today may need some tweaking; while cost is always an attention grabber, by far the more important metric for any business is the ability to save time and remove the necessity for manual, time consuming and ‘low value’ tasks and processes.
“The number of businesses running stuff off Excel and with processes which could be dramatically improved at relatively low cost is likely to be staggering. But those in charge will say ‘why change unless we have to?’
“But what if you could reach those people and say ‘if we streamline invoicing and save four or five hours at the end of every month, how much would that be worth?’”
There has to be a trust factor, too, Nathan adds. “We are used to buying things from people, not from screens.”
That observation is as valid for the provision of legal documents as it is for the sale of accounting software or online storage: in short, people buy from people, which is why companies like Xero have invested heavily in getting accountants on-side to resell its software.
“This [the need for ‘real people’] is a big limitation to accessing and using cloud services,” Nathan adds. “It is necessary, critical even, to maintain the human touch.”
Another barrier might be reluctance to let go of the ‘ownership’ model of IT; for some, the idea of a physical machine purring in a computer room (to be generous) or under a desk (more realistically) is comforting. However, Holmes says in her experience, this hasn’t presented any particular issue. “Our clients are accepting of the subscription model and, in any event, we’ve always advised clients to lease hardware as it becomes worthless very quickly anyway. Not having to get rid of it is seen as an advantage.”
While one is always reluctant to cast those in the regions as country bumpkins (though JAFAs don’t generally enjoy a reciprocal level of consideration), Holmes says she does see a difference in willingness to embrace the cloud outside of Auckland.
“In our Tauranga office, moving clients to the cloud is more difficult. Some of that may be down to the fact that we haven’t been an advisor to those clients for as long [Engine Room’s Bay of Plenty office was the result of a merger]. In saying that, though, a lot of forward-thinking small businesses leapt early, enticed by cost and security benefits.”
That’s picked up on by IDC’s Dodds: “[Among] the barriers to adoption is often the capability of the local provider to take the customer on the journey.”
While achieving ‘trusted advisor’ status is a crucial component of how IT service providers are able to add value to the businesses they serve, the issue can be sheeted home, at least in some instances, to that advisor not being up with the state of play themselves. Or, as Dodds explains, “Because an organisation has always been their [technology services] provider does not mean that they are best placed to take them into [the future].”
The next wave
Holmes says the ‘next wave’ (to which Dodds has referred) of cloud is coming from those companies which have more complex management issues, so building cloud solutions is becoming more complex, too.
“For startups, cloud is quick and easy and often comes at a cost of a few hundred dollars. Established businesses tend to have a lot of add-ons, often already have complex systems and migrating anything comes at a considerable cost. That causes the hesitation. That and having to unlearn things [staff] know well.”
There also tends to be a strong culture of leaving established systems be, particularly if considerable investment has gone into them, she agrees. And, “Sometimes cloud isn’t the answer, particularly where, for example, very large files are routinely accessed and used.”
But Holmes does believe that any business for which cloud services are suitable, viable and available, could be losing out on the advantages offered.
“Just one example is that you get way better security and information permanence in the cloud. If you own a business in a 1914 bungalow and believe paper files are safe and secure, just drop one cigarette and the 1914 bungalow and all the papers are history. Compare that with the cloud, where it is almost impossible to lose data.”
Try it and you’ll buy it
Hawkins says that just like the value of backup is usually only fully appreciated after a catastrophic data loss, so too are the benefits of cloud only fully appreciated in the aftermath of actually implementing them.
“It’s hard and not really pleasant to sell solutions on the back of doomsday predictions,” he says. “But generally speaking, you really get your money’s worth from cloud solutions, particularly in terms of being able to take advantage of the latest developments and updates, without having to worry about the overhead of managing hardware, operating systems and other infrastructure concerns.”
He agrees with IDC’s analysis that the move to cloud is accelerating, but what he is sure of is that for most companies, dipping a toe in is all it takes.
“Once customers see the benefits, it really makes a lot of sense. Nobody wants to come across as a pushy salesperson, so when customers become excited about what the cloud can do for them, they start to ask the right questions about how it can work in their environment.”
Donovan Jackson is an Auckland-based business technology writer. Email [email protected]