Consider the Cloud as Conundrum

In several recent roundtable discussions with senior-level IT leaders representing a wide swath of Fortune 1000, and often Fortune 500, organizations, I've asked participants how they view "the cloud" and what plans they might have to leverage cloud infrastructure and applications. Having expected to hear much enthusiasm for cloud, the answers I received were rather surprising -- and paint a potential picture of IT splitting into cloud haves and have-nots in the not-so-distant future.

The "haves" are typically smaller companies and often operate in unregulated industries. These organizations enjoy the freedom allowing them to leverage cloud-based applications such as UC, CRM, and ERP to achieve greater agility, take advantage of the ability of cloud-based services to add new features, improve business agility, and in some cases, reduce costs. Our recent UC research shows that agility and flexibility now trump cost savings as key drivers for cloud-based services.

Have-nots, on the other hand, are in regulated industries. This group includes financial companies that are either not able to utilize or are severely restricted from adopting cloud-based services because of security and data protection requirements. And it includes utilities whose cost-allocation models require capital expenditures that they must recover via rate increases. For these organizations, the regulatory environments in which they operate do not yet support cloud.

With this marketplace split comes the potential for technology disconnect. As most all IT vendors rapidly shift their wares to the cloud, companies that are unable to use cloud-based services fear they will be left behind, unable to deploy technologies that will allow them to take advantage of emerging technologies like the Internet of Things, UC as a service, team chat collaboration, videoconferencing virtual meeting rooms, and more.

With IT heavyweights like Microsoft and Oracle seeing strong growth in cloud-based services, IT vendors in general are going to find it tougher and tougher to justify continued investments in on-premises solutions. When I speak with IT leaders who are unable to leverage cloud-based apps and services, they often express exasperation that they have no clear path forward as so many of their vendor partners move to cloud-first delivery models.

At the recent Oracle Industry Connect conference in Orlando, I had the opportunity to ask Oracle CEO Mark Hurd about this dilemma. Oracle is increasingly able to overcome cloud security concerns by showing that its cloud platform is more secure, with more invested in security, than its customers' on-premises environments, he told me. The utility issue is more complex, and will take time for regulators to modernize rate structures (or as Hurd noted, cloud-based vendors will have to create capex-based packages for customers to buy cloud-based services).

I agree with Hurd that the security angle may actually drive more use of cloud-based services. The Nemertes 2016 Security and Risk Management benchmark shows that 57% of companies are increasing security spend in 2016, while 79% plan to increase security spend in 2017, in both years the mean increase is just north of 42%. That's an astounding level of increase given the overall tightness we see in IT spending. The real drivers for cloud adoption could very well be an inability to sustain these increases and a business case that shows improved security, at lower cost, when going to cloud.

Fortunately it's not all gloom and doom for the non-cloud world.

Private cloud offers the opportunity for organizations to realize cloud's benefits in rapidly turning up new services and optimizing data center infrastructure, while containerizing applications and data on-premises. Hybrid approaches enable organizations to use cloud for specific workloads, say application development, while maintaining sensitive data on-premises. Solutions like Microsoft's Azure Stack enable companies to run their own private instances of cloud-based platforms.

Still, as applications like Salesforce, Cisco Spark, Office 365, and Slack see rapid upgrade cycles in the cloud, it is likely that those who can't embrace the cloud will fall behind.

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