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@GigaomResearch Survey | Benchmarking #Cloud Expectations in 2014

Another wave of cloud technology investment is anticipated over the next 1-2 years

In 2013, there was increasing demand for cloud computing, with enterprise after enterprise committing to a rapid and vigorous redeployment of resources toward cloud-based solutions. Gigaom Research conducted surveys of both mainstream and leading-edge users in the second quarter of 2014 and results suggest that another wave of cloud technology investment is anticipated over the next 1-2 years.

In Gigaom's analysis of the survey, there were evident key drivers and inhibitors for cloud adoption, as well as workload migration patterns. Tech buyers surveyed reported the following:

  • Cost is a top driver identified by both mainstream and leading-edge users - 50 percent and 56 percent respectively. Scalability and then business agility are most often cited as the second and third drivers.
  • Security and privacy are the top two inhibitors to change for both groups, with security the runaway number one issue for mainstream users (63 percent). But while reliability is the third-most frequently named inhibitor to cloud adoption for the mainstream users, lock-in and reliability when combined are relatively larger concerns among the leading-edge enterprises - that is, those who likely have already found cloud reliability to be good but lock-in to be an issue.
  • Both groups said they were aggressively moving their web presence to the cloud, with other IT workloads like communications, disaster recovery, and IT services rounding out the top four.
  • On an application level, business analytics, sales and marketing, and other back-office functions are the top three priorities for both survey groups. Far more (50 percent) of the leading-edge users said they were migrating sales and marketing functions.
  • Over one third of leading-edge users (42 percent) said they were using the cloud for new business and/or to run the company (35 percent). Meanwhile, nearly half of the mainstream is focused on migrating IT functions that don't produce revenue, and 39 percent are prototyping back office apps. However, 34 percent of the mainstream is also prototyping revenue-generating apps in the cloud.

The analysis shows us that the newer and more tech-oriented firms in the leading-edge group are a bellwether for more mainstream enterprises, which will tend to follow similar priorities as they gain experience with cloud solutions. Technology decision-makers inside and outside of IT departments can compare their own company's practices with those surveyed, and benchmark themselves against mainstream and leading-edge users.

Here are the findings on three key questions:

Question: What do you believe are the most important business drivers for the adoption of cloud-computing hardware/software/services?

Half of both the mainstream and leading-edge respondents identified these business drivers:

  1. Cost
  2. Scalability
  3. Business agility/responsiveness

Innovation and competitive advantage were also each named by a 15 to 21 percent range between the two groups. So the more broadly related concepts of agility and innovation received the most aggregate number of mentions.

Agile innovation is now the overall greatest motivator for change. But buyers and sellers still need to make the cost argument in order to provide the assurance to make many cloud investment decisions. This dynamic will become more nearly universal as virtually all enterprises gain both experience with the cloud (thus coming to a better understanding of the "new TCO," or total cost of OpEx) and the functional and development advantages of the cloud become both more critical and better understood.

Question: What do you believe are the most important inhibitors to the adoption of cloud computing hardware/software/services?

Though cited as the most important driver, cost is also an important inhibitor to the adoption of cloud: 22 percent for leading-edge respondents and 26 percent for mainstream respondents. This percentage may even be surprising for some IT buyers who have not yet fully priced complex cloud solutions for the enterprise.

Cost can be an inhibitor to cloud adoption on two levels: either simply as an initial new system investment, when the IT budget is otherwise bogged down in maintenance costs, or because the overall ongoing cost of cloud investment is not deemed acceptable in the longer-term. But some cloud applications clearly provide a significant cost advantage, and more than three-fourths of both respondent groups do not identify cost as a significant inhibitor to cloud adoption.

Security remains the single greatest inhibitor to the adoption of cloud for both groups, including 63 percent of mainstream users surveyed. Moreover, both respondent groups identified concern over privacy as the second-most important inhibitor to cloud adoption. This could emerge as the number one concern for buyers of all mobile and cloud solutions for some time to come, even as cloud architectures and implementations are actually accumulating a greater, cumulative record for security all the time.

Other inhibitors will become less concerning through simple familiarity. For example, reliability was still an inhibitor to nearly twice as many mainstream respondents (29 percent) as leading users (17 percent). As more enterprises rack up experience with production-scale cloud applications the technology's reputation for reliability will continue to rise.

On the other hand, lock-in and interoperability are becoming concerns that grow with experience. Lock-in is identified as an issue by far more leading respondents (29 percent) than those in the mainstream (5 percent), as is the closely related concern of interoperability (19 percent versus 9 percent, respectively). Open source is becoming more mature and more accepted as a solution because of lock-in and interoperability concerns. The continued rise of open source is likely mitigating what we believe would be more of a sore spot among IT executives if open APIs and standards were not becoming the norm.

What are your company's near-term strategic objectives with cloud-based applications and services?

Among the stark differences between the mainstream and leading-edge users are their strategic objectives for cloud computing.

The top objective of the leading-edge group is to create new businesses and revenue streams (42%), whereas the mainstream is about two thirds as likely to prioritize (29%). And migrating non-revenue IT functions (47%) and prototyping back office (39%) are their top objectives.

These priorities will continue to be significant for mainstream users over the next several years, given that they typically have substantial back-office operations and that those are typically the last applications to be migrated to a cloud environment (e.g., ERP systems).

Companies will also increase their emphasis on new business, sales, marketing, and customer service applications, which now are typically, to some degree, cloud-based, once they free up more IT dollars from back office maintenance systems and can invest more freely in new, strategic solutions - often with new mobile and analytics capabilities.

More Stories By Gigaom Research

Founded in 2006, Gigaom is the leading global voice on emerging technologies. Our blog, research and events humanize technology and provide deep insight on disruptive companies, people and trends.

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