September 30, 2011

Numerous analyses conclude that cloud computing holds huge potential to boost efficiency and growth. By contrast, current empirical research shows that implementing cloud computing in broad areas of the economy is progressing more slowly than expected. To date only a few firms have actually switched over completely to cloud computing. There is no doubt that the topic is currently suffering from the inflated expectations often aroused for marketing reasons. Nevertheless the basic idea of cloud computing will in the medium term become established at the company level.

What is actually to be understood as cloud computing is often given an artificially broad definition and therefore often remains largely nebulous in the wide area spanning flexible provision of IT software und capacities right through to internet applications, collaboration software and video conferencing. Tied to this very broad interpretation of cloud computing are financial expectations that are frequently raised to excessive levels. Companies are being told that cloud computing can save them nearly 80% of their IT energy costs, for example.

With all the positive expectations, however, the actual idea behind the buzzword often gets lost. Cloud computing is thus basically a form of outsourcing in which the user can concentrate on his core competence and farm out other business activities to specialised service providers. Cloud vendors advertise that they can provide storage capacity and software via the Web whatever the user’s location and equipment and that they can rapidly adapt this depending on requirements. Cloud users can thus in particular reduce their IT capacity that is designed for the few moments of peak demand and convert a large proportion of these fixed costs into variable costs. This business model appears to open up special opportunities for newly founded companies that have yet to establish their own infrastructure and for SMEs that need to face up to the challenge of keeping their IT up-to-date.

Contrary to first impressions, however, empirical research points toward a definitely surprising degree of reticence about cloud computing – depending on a company’s size and its sector this varies significantly. According to a survey by the market research institute techconsult, just 1 in 10 small and medium-sized German businesses is already making use of cloud computing.

This pronounced reticence among SMEs is undoubtedly linked with disappointing evaluations of cloud computing projects following overblown expectations. Over 50% of the companies surveyed by the research institute Deloitte said they were disappointed with cloud computing (see charts). In line with this, the research institute Aberdeen Research points out that the savings made by companies are often negligible; while total costs for companies can even increase overall.

Unlike the SMEs large companies mostly address the benefits of cloud computing and test the features in limited business areas. Equally, numerous companies have major security concerns regarding the keeping of confidential data outside their own company on physical storage drives that can be located worldwide and also used by other cloud users. That is why the big companies tend to implement bespoke cloud computing solutions (private clouds) that come considerably closer to their own specifications – at least that is the perception.

In conclusion, it can be stated that cloud computing is currently no doubt suffering from the often overblown expectations incited for marketing reasons. It is therefore certainly possible that following the hype in a few years no-one will use the term “cloud computing”. All the same, the basic idea behind the buzzword of specialisation and concentration on one’s core business does have good medium-prospects of being implemented in a world with globally organised value chains – regardless of the term used to describe it.

See also:
Cloud computing: Preventing the sky from falling in