If CIOs sometimes struggled to successfuly outsource their IT operations, they should prepare themselves now for the potential pitfalls of cloud computing, according to an analyst with one of the industry’s biggest market research firms.
In the recent Special Report on Cloud Sourcing, Frank Ridder, reserach vice-president of Stamford, CT-based Gartner Inc., describes the cloud computing market as immature and fraught with potential hazards, but potentially offering more flexibility than the lock-in that traditional outsourcing sometimes creates. The report also covers emerging market trends, offerings, contracting, and pricing in the cloud market, and Gartner analysts will be discussing the issues in greater detail at the firm’s annual Outsourcing and Vendor Management Summit in Orlando this September.
CIO Canada: To what extent do you see cloud computing becoming simply another sourcing option along with traditional outsourcing, and to what extent will the cloud, in fact, displace traditional outsourcing firms with teams of people that take on various enterprise IT functions?
Frank Ridder: By 2015 30% of the IT services needs will be covered by types of cloud services (including SaaS, PaaS. IaaS, Infrastructure Utilities … etc.). There are still difficult areas to fix to increase adoption speed. For example, cloud service providers often do not provide any professional services around their solution. Services that would help you make the cloud service running in your IT stack. Also, organizations still need to learn how to manage the co-existences of traditional and cloud solutions in an IT shop.
CIO Canada: Can you give any examples of the ways in which cloud service providers’ terms and conditions need to mature in order for more CIOs to feel comfortable with the potential risks?
FR: Many cloud service providers do not describe terms for pricing, SLA’s or their acceptable use policies in the main terms and conditions document, but on separate Web pages.They also maintain the right to change the content of those Web pages at any time. This can be problematic as the new terms may no longer meet the needs of the buying organization (for example, if data retention after contract cancellation moves from 60 days to 30 days).
CIO Canada: The services sourcing life cycle includes four crucial elements: sourcing strategy, vendor selection, contracting, and management and governance. Are there any of these where you think CIOs may not be spending enough time when it comes to the cloud, or where they may be most likely to experience pitfalls?
FR: The sourcing strategy phase is where organizations lay a crucial foundation for the success of a sourcing endeavour. Here is where risk management starts – and here is where the quantitative and qualitative business case gets defined. Organizations often see the very attractive price points (15ct per GB or $2 per mailbox) and run fast based on that – but the total cost of sourcing is much more than these $2. The vendor selection for cloud these days has to be considered diverse: The IaaS area is packed and buyers have great choice, but SaaS and BPaaS provide much less choice, and vendor selection has to be done differently. Contracting – most cloud providers give standard contracts to buyers, and any deviation from that has to be negotiated tough – the cloud concept is based on HIGH standardization, therefore any deviation from that standard is hard to accept for vendors. Ongoing management – here the market has a lot of questions, and not yet a sufficient amount of answers. Key questions are how to manage service hybrids, how to manage a cloud provider next to a traditional provider, how much of the old relationship models work … etc.
CIO Canada: How do you think incidents like the recent Amazon outage will affect the comfort level of CIOs who are considering or already moving into the cloud?
Frank Ridder: CIO’s often trust cloud – they are concerned about security and compliance, but not really about stability and reliability. “When a cloud is down, we see it on the front page of the NYT – and this is VERY seldom!” Statements like that we heard often from CIO’s in the past and it can be assumed that now there is a more strong proof point that things can go wrong. As more and more enterprises leverage the cloud – more and more enterprises get affected by downtimes, This will force CIO’s asking for more commitments and it will force them to look behind the scenes and understand a bit more of the delivery models behind the cloud services.
CIO Canada: Are there any new skills or competencies for managing cloud vendor relationships?
FR: Needed! Not there yet! Cloud service providers have a standardized relationship model. The larger players invest more “care taking” services these days to cope with the enterprise needs, and enterprises increasingly understand that they need to accept more standardization in this area. The new norm will be where these two work streams (vendor invest and client accept) meet.
