The Dark Side Of Cloud Computing

by drjim on November 10, 2010

There Are Two Sides To Every Cloud…

There Are Two Sides To Every Cloud…

If IT was a game show and you were a contestant on it, right now it sure seems as though you could correctly any question that you were asked by replying “cloud computing”. That’s because cloud computing, basically outsourcing parts of your company’s IT infrastructure and applications, sure seems like a great idea. However, early reports back from the front lines by other CIOs are starting to paint a different picture…

…And Why Are We Talking About Clouds?

The reason that we’re talking about cloud computing is because it’s ushered in an era of “software as a service”, or SaaS if you want to be cool. The reason that CIOs like to talk about SaaS based applications that run in the cloud is because they offer an opportunity to save the company a lot of money.

A single user’s subscription to a SaaS application generally costs a CIO about $10 – $50 per month. The beauty of this approach is that that cost includes maintenance, support, and even the hardware that the application runs on. Oh, and all of a sudden your users can log into the application from anywhere – they don’t have to be in the office to do work.

Just How Big Of A Deal Is This?

SaaS (and Cloud Computing) is growing like a weed right now. The folks over at Gartner are telling us that in the business software market, SaaS offerings make up about 9% of what’s out there right now and it’s expected to hit 16% by 2013 because it’s growing at about 20% per year.

This is where CIOs are starting to see problems pop up. Since the whole SaaS market is growing so fast, even the people who work in it are finding themselves unable to keep up. This means that CIOs are starting to run into sales people who really don’t know what their company’s product can and cannot do. This is where problems with SaaS offerings start…

What’s Wrong With SaaS?

Unlike the glowing brochures that you’ll get from SaaS providers and the industry rag articles that are falling over themselves saying that Cloud Computing is the “next big thing”, CIOs who are on the front lines are reporting that SaaS is not a silver bullet and has its own set of problems.

In fact, some companies that went down the SaaS route are now pulling back. Gartner reports that the top reasons that CIOs have been deciding to discontinue their SaaS deployments are:

  • Difficulty in integration with existing applications
  • High cost of services
  • Lack of agility provided to the business
  • Level of investment required
  • Lack of robustness
  • Poor track record of provider
  • Poor client references
  • Inadequate security, privacy, or confidentiality
  • Didn’t meet technical requirements

Bottom Line Issues

In the end, it all comes down to money. One of the biggest attractions of SaaS is that it offers hard-pressed CIOs a way to stretch their IT budgets farther. However, CIOs that have implemented SaaS solutions are reporting that the benefits may not be so clear after all.

In the initial years, yes – the IT department will save on having to make the big CapEx spends that they would normally have to make in order to create the infrastructure to support another enterprise application. However, what seems to be missing is the ultimate reduction in headcount and infrastructure costs over time.

What All Of This Means For You

The world of IT keeps changing all the time and as CIO you’re going to have to move fast in order to keep up. SaaS offers many benefits; however, there the drawbacks are also starting to show up.

CIOs on the frontlines of SaaS deployments are reporting that they are running into issues with integrating the SaaS applications with their existing enterprise applications. Additionally, many of the economic benefits appear to be only in the first few years with the long term benefits not being nearly as clear.

Right now Cloud Computing and SaaS are hot topics that every CIO should be looking into. However, look before you leap as the saying goes…

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: Do you think that IT headcount reductions should be a benefit of a SaaS deployment?

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What We’ll Be Talking About Next Time

When you become CIO, one of your main jobs will be to lead the IT department though changes. However, here is where you may run into a problem. Considering how many layoffs, cut backs, and canceled projects most IT departments have had, the last thing that your IT staff really wants is more change. What’s a CIO to do?

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