The Future of Cloud Adoption

During the past year, IT leaders have been bullish on cloud adoption and data center outsourcing. In fact, according to a recent Gartner survey, organizations using cloud services will grow from forty percent to more than eighty percent by the end of 2015. With cloud adoption growing across all “as-a-Service” (-aaS) models (i.e. Infrastructure-as-a-Service, Software-as-a-Service, Platform-as-a-Service and so forth), we list some key trends to watch for in the future.

Cloud Adoption Rates Continue to Increase

Cloud adoption has reached an all-time high across “aaS” models. Infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) are experiencing a run-rate of 85% while software-as-a-service (SaaS) is narrowly outpacing them at 88%. Some of the factors driving cloud adoption include:

  • Fast and easy access to resources
  • The ability to bypass long, drawn-out procurement cycles
  • The need for standardization and simplicity of IT assets
  • The desire for something new
  • Executive mandate
  • The potential to save money

While all of these are valid reasons for considering the cloud, a key challenge facing organizations in the near future will be access to resources. Within the next three to five years, it is estimated that nearly five million IT professionals, primarily baby boomers, will retire. And while robotics and automation will bridge some of this talent gap, there will still be a significant shortfall of qualified IT talent. End-user companies will ultimately compete directly with service providers for IT talent, while offshoring will become more relevant. Therefore, it’s important to align with a cloud service provider (CSP) that has a deep bench the of IT professionals who possess the expertise to address an organization’s specific business needs – now and in the future.

Cloud Adoption Risks Remain

Many new vendors have recently entered the cloud services space – some with less stable business models than others. Others don’t have complete infrastructures, security processes or disaster recovery (DR) plans in place. So it’s no surprise to hear about CSPs going bankrupt, experiencing a severe data outage that impacts customer data, or simply exiting the business without giving its customers proper notice to secure the services of another CSP. These factors, combined with future mergers and acquisitions, will contribute to industry compression. Gartner estimates that by the end of 2015, market consolidation will displace up to 25% of the top 100 IT service providers.

In light of these risks, organizations should carefully evaluate their short list of CSPs from both a technical and business perspective. The organization’s internal IT team should have a cloud strategy plan in place that not only includes a detailed migration plan, but also a contingency plan for moving assets out of the CSP’s data center in the event of a service disruption or business event, such as bankruptcy. The following blog posts can help organizations develop these plans.

Contract Structures for Cloud-Based Solutions Vary

Some say there are nearly as many contract structures as there are CSPs. While that may be a slight exaggeration, organizations entering the cloud need to be cognizant of some of the different elements that can appear in contracts for cloud services. At a recent U.S. Outsourcing Summit, Gartner researchers gleaned the following insights from clients regarding some of the issues they’ve encountered with cloud-based solution contracts.

Limitations of Liability

In the traditional model of outsourcing data centers, the limitation of liability outlined in a contract was usually one year’s worth of revenue – three to five times revenue at the highest. With the advent of digitalization, more revenue is dependent on cloud solutions. If a cloud-based ecommerce solution goes down, the revenue losses can be in the millions. Therefore, it’s critical for organizations with a retail or ecommerce application to fully understand the limitations of liability in their potential CSP’s contract and ensure it covers an adequate amount of revenue loss in the event of an outage.

Intellectual Property

In some of the CSP contracts today, vendors are claiming that intellectual property doesn’t exist in the cloud based solution. Other contracts for cloud-based solutions that simply state that the CSP has equal ownership of the organization’s intellectual property and doesn’t protect intellectual property in their cloud-based solution. While the issue of intellectual property rights and protection is relatively new, companies need to examine CSPs’ contracts carefully to ensure they receive the right level of protection while maintaining their full ownership stake.

Pricing Models

Gartner recently conducted a study regarding IaaS and PaaS offerings across 25 cloud services providers. Here is what they found:

  • 15 definitions for IaaS
  • 12 definitions for PaaS
  • 9 different pricing models for IaaS
  • 8 different pricing models for PaaS

The market for cloud-based solutions is still in its early stages. Therefore organizations need to carefully research potential CSPs, and ask detailed questions in order to gain a clear understanding of each provider’s solutions, services and pricing models.

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