Cloud fails to deliver promised cost savings, CIOs say

Cloud technologies are offering businesses agility but not the cost-savings they expect, a survey of senior IT directors has found.


Cloud technologies are offering businesses agility but not the cost-savings they expect, a survey of senior IT directors has found.

The survey of 50 senior IT decision-makers, including CIOs, IT directors and heads of IT, at UK companies with more than €1 billion (£0.85 billion) turnover, found that while 74 percent of respondents expected to see operational cost savings by using cloud, only 41 percent actually achieved these savings.

Alsbridge, the sourcing advisory firm that commissioned Coleman Parkes to conduct the survey, said that the mismatch of expectations with reality was because businesses were looking at cloud as a technology rather than at the problem that needed fixing.

“In our experience, many organisations have a technology-driven view of cloud and as a result of this, operating models are not fit-for-purpose and business objectives are not being met,” said John Sheridan, director and head of IT outsourcing at Alsbridge.

“Suppliers and IT leaders need to see cloud as part of a hybrid business operating model - not just technology - and work together to define and understand objectives, a realistic change journey and achievable targets.”

The survey also found that 59 percent of respondents expected efficiency savings, and 74 percent expected software cost savings, but in reality, only 35 percent and 63 percent, respectively, saw these benefits.

Cloud budgets are still small

Meanwhile, cloud is still a relatively minor part of large businesses’ IT budgets. The survey found that externally-managed cloud computing accounts for just 20 percent of annual IT budgets on average.

Furthermore, while 92 percent of companies are using cloud, most (70 percent) are using software-as-a-service. Significantly fewer are using Infrastructure-as-a-Service (IaaS), with only 20 percent adopting cloud compute and 14 percent adopting cloud storage.

“There is still caution beyond its wider adoption [of cloud] beyond SaaS and ‘sand-boxed’ platforms,” said Sheridan.

“Cloud may be a good fit for a small to mid-size business model, but our study reveals that IaaS (infrastructure-as-a-service) cloud adoption at a large, corporate level is in fact still relatively low.”

Barriers to cloud adoption

Companies are planning to increase their spend on outsourced cloud, to 26 percent of annual IT budgets on average in the next 12 months.

Data sovereignty and privacy were still top concerns for 65 percent of respondents, but Sheridan was concerned that businesses were underestimating the challenges of migrating to the cloud.

Just 10 percent cited legacy applications as a barrier to cloud, five percent cited integration with existing systems and five percent reported a lack of skills.

He advised companies to “get back to basics”.

“Understand what your business problems are. Identify where the gains and the pain points are. Look at different aspects of that requirement. Don’t jump on the cloud bandwagon as the solution for all your issues,” said Sheridan.

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