Defining the Value of Change around the Move to the Cloud

Article by Karan Kirpalani

Will it make Sense for your Enterprise?
-- David S. Linthicum

The growth of cloud computing is clear in the market today. GigaOM Pro research estimates that the addressable market of cloud computing will reach $160 billion by 2014 (see Figure 1).

In 2013, the addressable market will be about $125 billion.

Growth of Cloud Computing in Market - 2011 to 2014

Figure 1: Total estimated worldwide addressable market for cloud computing in billions of dollars for 2011 to 2014 (Source: GigaOM Pro/Robert DeFrancesco)

Some recent statistics on cloud reveals that Indian businesses will spend 36 percent more on public cloud services this year to lower costs and increase business flexibility.

Research firm Gartner Inc. in February forecast the global public cloud services market will grow by 18.5% to $131 billion in 2013. The highest growth rates for cloud services come from emerging Asia-Pacific countries (led by Indonesia and India), China and Latin America (led by Argentina, Mexico and Brazil), it said. As per Zinnov Consulting, the total size of the Indian cloud market will cross $4.5 billion by 2015 from a paltry $110 million in 2010; this would be almost 12 percent of the projected IT market in the country by then.

Does this mean cloud computing is right for your enterprise? What is the value of changing to the cloud? To answer those questions, you have to look at the value of cloud computing, and if it makes sense for your business.

The motivation around moving to cloud computing has many layers, including:

  • Speed to Market
  • Ability to Adapt
  • Cost Efficiency

Speed to market - When leveraging cloud-based resources, it’s easy to allocate the resources you need to get a business moving quickly in the right direction. This is true no matter if you’re a new upstart looking to get the right systems online to support new business processes, or, if you’re a large enterprise that’s looking to quickly bring a new product to market.

Cloud computing’s value is all about the ability to provision the resources you need NOW to run the business. We’re moving away from the practices of waiting for weeks or months for hardware and software to show up, bolted into the data center, configured, and then released into production.

Clouds are huge amounts of on-demand resources, sharable among those in the business who need to move the business along quickly. This translates into millions in additional revenue, as well as the ability to capture and lead markets considering that the latency around standing up computing resources has largely been removed.

Ability to adapt is a bit different than speed to market, in that we’re talking about the ability to change, versus the speed of changing. For years, businesses have been dealing with an IT infrastructure that’s unable to change, and that costs huge amounts of dollars.

Business agility becomes the primary reason to move to cloud computing, more so than the other value points defined in this blog. The ability to change the nature of the business is where enterprises typically find the value. This considering that the business now has the ability to adapt quickly to take advantage of new business opportunities, such as the release of a new product into the marketplace before the competition.

Cost efficiency of cloud computing is the ability of the technology to utilize money effectively. Again, this is really a secondary cost benefit of cloud computing with agility typically being the core benefit of moving to the cloud.

There are a few areas to consider around cost efficiency in the context of cloud computing, including:

  • The ability to operate at a lower cost of production, meaning that we’re able to operate applications, databases, and support end-users at a much lower cost of production than before. Cloud computing does a much better job of sharing resources, and the more resources that are shared, the lower production costs go.
  • The ability to avoid risk. This is really the ability to push risk onto the cloud computing provider, in the case of public clouds. This is much like we push risk onto our power companies and water companies for their services, businesses we don’t want to be in ourselves. We merely want to consume the services, and pay for only those services we consume, without taking on the risk of running our own power company or water company.
  • The ability to shift around technology changes, which is a bit different than business agility. This means that, as technology changes over time, we have a much better platform to keep up with those changes, perhaps abstracting enterprise IT from dealing with those changes directly. In the case of public cloud computing, this is rather obvious, considering that public clouds are different each and every time you connect to them for services. They are constantly upgrading software to provide better services, or expanding capacity. This occurs automatically, typically without the involvement of enterprise IT or the cloud user.

Clearly, cloud computing has value for the enterprise, and most enterprises can benefit from changing to leverage at least some cloud-based services. The next steps are for you to consider these value points along with your specific enterprise needs. It should be an enlightening experience.