How the UK enterprise market sees the cloud
Antonio Piraino, The 451 Group
We recently attended Cloud Computing World Europe in London, and were interested to learn just how many large enterprises were already making use of cloud services from external providers. One of the most interesting themes that constantly bubbled to the top of most discussions was that IaaS and PaaS were not necessarily the only things that enterprises were looking for when it comes to cloud services. The comfort level with substituting heavily configured architecture to these environments was not the most palatable thing in the world, for many, in the short run.
Rather, it was the applications as a service and SaaS that was seen as the arrowhead to the cloud – extracting just the internal applications that did not necessarily contain very private or security-sensitive data that was first in line to be migrated, such as email (hosted exchange), CRM and other external applications that were specific to one's business operations were all strong candidates. But databases and core processes, otherwise termed 'the crown jewels,' were not (yet).
Attendeeship at the event was around the 120 mark, and although a small event, had some significant representatives at the C-level all offering suggestions on their path to the clouds. Reuters, General Motors, Schumacher Group, Barclays Bank, GlaxoSmithKline, CTOs and CIOs were all eager to define their use of the cloud, and missing elements that they were looking for. One such attendee with a close affiliation with the UK government, for example, harped on the fact that too many clouds were lacking in the S part of SaaS – which the services and associated support was not adequate for the complex kinds of migrations and maintenance of complex systems that enterprises were looking to place in the cloud.
On the services side of the house, Verizon Business, SunGard Availability Services, Reliance Globalcom, Interxion and Salesforce.com were all in attendance. Despite the need for clarity in the enterprise sector, SunGard, although making a strong showing of its new managed hosting services, is attempting to blur the lines between managed hosting services and cloud services. Despite lacking the elasticity in its services, SunGard may have a point in its approach to the market. Enterprises are asking questions about the cloud and what cost benefits, flexibility and agility it can bring to their business. If the end solution can deliver those elements effectively then the enterprise will be satisfied by a managed service, be it cloud or not. Maybe.
Verizon Business would argue that assessment. Having spent 18 months working on its cloud platform, the company is beginning to see the fruits of its labor across Europe and now even more so in Asia. Its computing as a service (CaaS) comes with a contract that contains a variable cost component, and can take 3-5 days to deploy, but that is due to the type and size of IT environment that is being moved to the platform.
Force.com has also seen immense popularity in Europe and Asia. Salesforce.com was highly vocal in displaying its maturity in this sector – and it has a right to do so, having illustrated some sizeable deployments from the enterprise (and federal) sector on its platform. Among the debates around what IaaS and PaaS really were, the company summed up the situation by using the DOS-to-Windows example. It further asserted that IBM had been taken by surprise by Microsoft in the early days, because it did not foresee that a software company could dictate the standards and infrastructure in the market by starting at the consumer applications end of that infrastructure. And this is where Salesforce.com believes the winners in this space will come from – those that offer services that abstract as much of the infrastructure, middleware and applications management as possible.
Salesforce.com was exemplified a number of times through enterprise users of the platform, including the Schumacher Group – a $300m (estimated) health care service operators. One of the biggest takeaways from the company is that it started moving to the Force.com platform in 2006, and ultimately had an 87% turnover in its workforce from doing so. This is one of the first use-cases showing a blatant lowering of labor need from a move to the cloud. The company also runs its own private datacenters for the about 25% of its business, that includes a number of databases with private details, and some bespoke applications. With that benchmark, it has calculated that using Salesforce.com gave it an employee ratio of 1:4 (cloud to datacenter operator), and with the applications running on force.com the ratio was 1:3, meaning a substantially decreased need for sysadmins. Speed of delivery on the platform increased 2.5 fold.
Another enterprise, SHL Group Limited, that was responsible for testing services across the UK, transitioned from manual paper-and-pencil testing to online testing. The move resulted in a 50% annual growth on usage over the past few years, having almost immediately overtaken manual testing from the outset. Most surprising was that this enterprise had its IT staff knowingly making use of Windows Azure with a credit card to run the national testing facility. Although marginally uncomfortable to the organization's board to accept, the larger issue from a management perspective was the acceptance of a change in balance sheet. There is a good lesson in there for enterprises with private equity funders – that decreasing EBITDA margins can actually be a good thing – but from a political perspective, the concept of moving to the cloud needs to be carefully orchestrated.
While some enterprises and even the federal government in the US are stealthily moving many core applications to the cloud in highly secure fashion, the UK enterprises are not yet giving up the crown jewels. Traditional UK telecom companies, turned managed service providers, BT Group and Colt, are both working on new innovations to their cloud platforms, finding that it's not always about the cost element, but often about the agility and flexibility on offer. The largest issue seems to be around integration of legacy infrastructure with new cloud architecture. And this is where the carriers tend to believe that the networking component of the infrastructure becomes core to the solution.
Others, however, believe that it starts at the other end of the aaS stack – with the builders of end-user interfaces being the winners in all of this. Google applications, collaborative applications, exchange, CRM and even voice applications (including sms) were all applications now moving to the cloud. With all this in motion, the rhetorical question thrown into the air by Salesforce was not whether or not all Microsoft applications would one day be moved to the Azure platform – but just a question of when Microsoft would create the path there.
