How CIOs should make Cloud investment

CIO India
Arup Das, vice president and lending product head (P&L Management) at Nucleus Software, says simply replacing existing solutions with their cloud equivalents is not the most effective or efficient way to gain access to the benefits cloud technology brings. CIOs must have a fully developed plan, where they carefully analyse the available options and then employ a ‘pick and choose’ modus operandi to maximize the benefits from cloud.

Pointers for CIOs

Before adopting any technology it is crucial to determine what problems the business is seeking to solve. Then CIOS need to articulate what the business impacts from the investment will be. Hence CIOs should be prepared to:

# Develop a holistic cloud strategy for the enterprise

# Analyse organizational need and align cloud strategy to it

# Develop ROI for a cloud case

# Identify cloud deployment model – public, private or Hybrid

# Determine the criteria to evaluate the right Managed Service Provider Partner

The hype surrounding cloud has led to countless enterprises entering the market as cloud solution providers. However, it is likely that the big four cloud providers – Amazon Web Services (AWS), Microsoft, Google and IBM – will dominate the market, with some focused players operating in niches such as Another important development in cloud, Managed Service Providers, has been growing steadfast, with emerging prominence in services like Backup and Restore; System security and Admin; Monitoring, Alerts and Escalation. The growth in cloud has been driven by the increasing capabilities of cloud providers and businesses increasing focus on core competencies.

Hybrid cloud, where a mixed environment of on-premises, private cloud and public cloud, has been increasing as different businesses have different strategies for cloud adoption. It paves way for a reduced TCO, thus maximizing the benefits and performance. And from technological point of view, hyper converged systems which combine compute, storage, networking and virtualisation in a single box. These solutions reduce the cost of running containers and workloads in the cloud.

Customer attitude towards cloud security

For customers, security tops their list of concerns, or to put it more appropriately – fear of data breach tops their list of concerns. It seems like every day there is some new data breach – from credit card hacks to the Panama Papers to celebrity photographs. These fears have been reaffirmed by Forrester’s Global Business Technographic Infrastructure Survey, 2015. On-premise and private cloud mitigate some of the issues, but even these come with a trade-off, with reduced economic advantages. However, over the past few years, cloud service providers have improved the security features significantly. These providers have a crucial need to withstand the ever growing number and sophistication of attacks, as the consequences are catastrophic, and undermine their entire business model.

There have been a lot of acquisitions and buyouts around cloud security, for example Microsoft acquired Aorato and Adallom, both focussed on cloud security. FireEye, Fortinet, Proofpoint, Qualys and CyberArk could be target acquisitions this year, according to market speculations.

Challenges in Cloud adoption:

Cloud washing  

While many software companies have started providing cloud solutions, only few are truly cloud offerings, while others get into the zone of ‘cloud washing’. This is one of the major dampers for enterprises to adopt cloud.

Technology enablers

In order for cloud solution to reach masses, there must be a proliferation of end-user devices that include PCs, tablets and smart phones.

Data Center Location

Due to myriad of rules and regulations, setting up data centers has become a cumbersome task. Moreover, incongruity in the regulations between nations has made the possibility of single window clearance or an international treaty very bleak.

Power and Bandwidth

In 2013 it was estimated that IT accounted for 10 percent of the world’s electricity consumption and that one data centre in the USA can consume enough electricity to power 180,000 homes. Uninterrupted power supply, not only for setting up large data centers and powering hardware resources but also for cooling and other support facilities, is a major issue. With a looming power crisis in India, meeting this need will be a serious challenge.

And of course to use cloud applications internet access is a fundamental requirement so with just 34.8 percent of internet penetration in 2016, there seems to be a long way to go.

Public vs private adoption

In a 2015 RightScale cloud report, 93 percent of respondent organizations used cloud, of which 88 percent are public and 63 percent are private and 58 percent hybrid. Even if we look at the revenue of cloud players, Amazon’s offering of public cloud outdoes private cloud by a dramatic margin. However upon closer scrutiny, there are several inferences that can be drawn out.

First of all, though public cloud adoption leads in absolute number of organizations, large organizations have private cloud leading in number of workloads. Moreover in 2016 Cloud Survey adoption of private cloud seems to be growing.

Secondly, taking revenue as an indicator of market scenario might be misleading. This is because many enterprises overestimate their cloud need and over procure it. Hence this gets factored into number of VMs used in public cloud and eventually the revenue.

However, on a broader scale Hybrid cloud seems to be the preferred strategy. The overall TCO reduces significantly, as business shifts from CAPEX to OPEX based model.

Measuring cloud ROI

There are several reasons for which a customer would want to measure ROI of cloud adoption. Some of them want to use ROI as the internal justification for their business case. Others want to see how they have fared in comparison to their On-premise solution.

Though reduced cost is the major and obvious factor of measurement, other areas need to be examined, including – Improved business performance, Future IT provisioning, End-user productivity, Migration cost and cost saving in IT department.

Enterprises must widen the scope of ROI metric and define the objective of ROI precisely, to find the true cost-benefit of cloud business.

Is the future cloudy for India?

With the expertise in IT, there is no doubt that India is capable of becoming a Global Cloud hub. The major sector benefitting from cloud would be SMBs (Small and Medium Businesses). With this, the job market is also set to soar in the cloud space in coming years.

Major industries where cloud would play a pivotal role will be the Healthcare and Educational sectors, Supply Chain Management and Government Policing.

A policy framework should be set up by the government that will define statutory compliance, data privacy and protection, data control, service quality and disaster recovery.

By Arup Das, vice president and lending product head (P&L Management) at Nucleus Software