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Monday, 07 December 2009 08:26

Australian enterprises prefer Australian cloud

Enterprise appetite for cloud based computing services is significant and growing – but some opportunities are going begging because too many cloud computing services are either based overseas or have only immature offerings, leaving Australian cloud adoption lagging the US by as much as 18 months.

A survey conducted by professional services firm KPMG found that there are already Australian enterprises pursuing a “zero software strategy” and some organisations now rent up to 90 per cent of their software needs. But author Dr Bruce McCabe believes even more companies would make the move to the cloud if locally based cloud services were available, or if the local offerings were more robust and mature.

“One of the big findings was that larger Australian companies have a very strong desire for companies to provide hosting within their national boundaries,” said McCabe who is director of technology innovation in KPMG’s IT Advisory group.

“One reason that we are behind is that there is a lot of perceived risk in offshoring the procession of software and IT services – a lot of new dependencies.”

When the subject of data sovereignty is raised with cloud computing vendors who operate their data centres overseas – and mainly in the US - most claim that few Australian customers are overly concerned at where their data is stored. McCabe however says the issue is not a furphy – and while Australian businesses may be happy to use long established US based services such as those offered by Salesforce.com, there are real concerns with some of the newer, less well established overseas clouds.

McCabe said that while this was less of a concern for smaller companies which were prepared to move to cloud based computing and “crash through”, enterprise class customers which had to navigate a series of regulatory hurdles including privacy issues, in order to be able to use offshore hosted computing clouds were less enthusiastic about sending data overseas. Many were also uncomfortable at having their data housed in US centres where their information could theoretically be scrutinised under the US Patriot Act.

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Although Australia was presently 12-18 months behind the US in terms of cloud computing adoption rates, McCabe still believes that “This is the biggest shift in computing – although for a lot of companies it may take 5-7 years.”

He said that there were potentially significant first-mover benefits for cloud computing vendors which developed local, and mature services, or which partnered with established overseas cloud providers such as Amazon – “who will they partner with – will they partner?” mused McCabe.

According to the report, Cloud Computing: Australian Lessons and Experiences, most organisations expect that the initial benefit of moving to the cloud will come from having more cost effective IT. However it reveals that many enterprises which make the move find that bigger benefits are derived in terms of improved business flexibility, agility and collaboration opportunities.

What remains a challenge however is articulating the return on investment. The report admits; “Most respondents could not quantify the savings that they had achieved. Estimates that were volunteered all clustered around a 30 per cent reduction in annual IT expenditure.”

It also noted that enterprises which were developing their own virtualised clouds internally were also reaping returns on investment around the 30 per cent mark.

Despite the challenges in tracking ROI, the KPMG report which focusses mainly on early adopters of cloud computing, rather than the market as a whole, found that “All the aggressive adopters are all ecstatic with the results – despite their regulatory concerns,” according to McCabe.

“They love it but the landscape from the providers’ perspective is not nearly as mature as they would like from an enterprise point of view.”

While SMEs were less concerned about the location of the cloud based data centres, and were prepared to just “crash through”, this was not the case among larger enterprises which were more cautious and strongly preferred to have their data and applications hosted locally.

What the report also uncovered was an apparent IT governance glitch being prompted by cloud computing. Some organisations reported that cloud based services were occasionally being bought by the business users in what they considered to be deliberate attempts to outflank IT departments.

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