Understanding the Cloud | BTalk Australia

(14min 53) A recent survey of 500 senior executives has shown that Aussies are more likely to understand the concept of cloud computing but less likely to have adopted it.

Does your company utilise only cloud computing, only internally owned IT systems or a combination of both?
Only Internal: Global 61% Australia 80%
Only cloud: Global 5% Australia 4%
Combination: Global 33% Australia 16%

In today’s BTalk Australia Phil Dobbie talks to Avanade’s Australian MD Craig Dower about the reasons for the slow adoption and the impact of the global economic downturn. Do we really understand what it’s all about?

Have you embraced cloud computing? Add your thoughts and experiences in the Talkback section at the end of this post.

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• Today’s Transcript

Phil Dobbie: Hello I’m Phil Dobbie and welcome to BTalk Australia. Today, cloud computing. Do we really get it?

Dower: I think we do, I think we get it and so certainly there’s the research that people understand or have heard of the term cloud computing. When it comes down to the next step though, which is are we doing anything about it yet and do we have it as part of our plans then you know the research starts to sort of drop off dramatically. It’s like 20 percent of organisations in Australia have a plan today of how to use cloud computing and are doing anything with it today. So we would classify it as being very early stages but we’re also seeing large enterprises start to embrace it as part of their strategy if not part of their near term plan.

Dobbie: So is that it? Is it the big end of town that’s embracing it and small organisations are a little bit more reticent or just perhaps don’t understand how they can operate?

Dower: I think it’s mixed. I think if you look at three broad sectors, consumer, small medium business and the enterprises it’s probably the enterprises that are the slowest to adopt in many respects. The consumers and small to medium businesses have been using cloud computing for want of a better term for quite some time now. Applications, service provider models, etc where they don’t have complex integration needs and they’re really looking for an ability to store stuff and maybe access some software on a subscription basis. You know all of those things are now sort of morphing into what we’re referring to as cloud computing. What we’re starting to see and what the research shows in the enterprise base at least is that it’s now becoming seen as a more viable platform for the larger end of town. And as, particularly as infrastructure and software applications are able to be commoditised over the next several years then using the cloud as a means of both hosting and storing data around those applications starts to become more viable.

Dobbie: But is it, I mean you touched on it, is integration really the issue? I mean most large companies have a nasty habit of taking a piece of software and then adapting it for their own needs rather than having something off the shelf. When you’re looking at a lot of applications that are sitting in the cloud in effect they’re off the shelf packages. Is that part of the problem?

Dower: Well I think that’s part of the opportunity as well. And so the question there becomes for IT organisations: where do we differentiate? Where do we add value? Where does it make sense for us to continue to have mass customisation around what we do because we build software, we invent business processes and we use that to create competitive advantage. At the same time you could argue that there are areas like mail and data storage and others that come to mind as well where you don’t need a great degree of integration and maybe you could look to further commoditise or simplify, you know have them in vanilla flavoured form and use cloud as platform for doing that. So that’s the first point. The other point is that technology coming available now using middleware and various integration services to in effect integrate applications between and across firewalls are becoming more viable as well. So we’re seeing a growth in the number of technologies and the bringing together of those technologies that make all of this viable. I worked in Telco industry in the late 1990’s and we talked about the application service provider model, ASP, and it was a great idea but it was stillborn in many respects and in part that was because the technology wasn’t sufficiently available. You know bandwidth, infrastructure, the capacity to integrate or the ability to integrate across platforms in between firewalls weren’t really available then. So those are the things that as you bring all of those together have really morphed into what is now being referred to as cloud computing.

Dobbie: Yeah which is basically the old ASP model, isn’t it? Which incidentally back in the 1990’s, I hope you weren’t one of those people, but a lot of people lost a lot of money pushing the ASP model in the late 90’s, didn’t they?

Dower: I think I might have invested in some companies that no longer exist so. It was a great idea and it didn’t resonate at the time for the reasons that we just talked about. And so in a sense this is ASP version 2. It’s also being referred to in days gone by by organisations like IBM and Accenture as utility computing. You’d want to be able to use IT like you can use an energy company — you turn on a light switch and you pay on a usage basis. And so I think we’re going to see innovation from lots of different organisations at the small end of the market and I think we’re going to see some things happen at scale here over the next year or two as well that really start to make this quite interesting for large enterprises.

Dobbie: Now it seems that a lot of the applications being used, I mean there are things like webmail, collaborative tools, wikis, all the things that as you said you know appeal particularly to the smaller end of the market because they can just pick them off the shelf and use them. I’m a great example. Everything I do is online. I don’t think I really use too many applications listed on my  computer these days, my calendar, my webmail, but for larger businesses perhaps a lot of those applications aren’t as relevant, or in Australia perhaps the larger businesses are not as up on Web 2 type technologies like wikis, for example. Is that part of the problem?

Dower: I think there’s an element to that but I think also the reality is this is technology that’s in it’s very early stages and so the availability of commercial strength enterprise ready application it’s very early days. We’re starting to see interest from our costumers asking questions around what should our point of view be about this? Is there a viable platform that we could be looking to incorporate into our sort of medium to longer terms plans around this? Other applications they’re either vanilla flavoured today or perhaps could be more commoditised in the future that would make sense for us to put into the cloud and so I think we’re going to see a lot more of style of Microsoft online applications becoming available that do step up to that need. And then it’s really around where does it make sense for us to continue to differentiate and innovate ourselves versus sort of put all this stuff off to an outsource model of some sort? So I think yes it’s early days. Yes in Australia there are some concerns that probably, at least the research says to us that we’re a little bit behind where organisations are elsewhere on the planet, in adopting this. And then if you think also about the realities about how these models ultimately cascade and find their way down into Australia often these massive datacentres are in the Northern hemisphere, in the US or in Europe, and then they become available in Australia down through Singapore and then they finally find their way here. So it’s just a function of a scale and availability which is a market reality for Australia that can sometimes be a factor in these things. At the same time you might like to think that that’s an opportunity for some of the larger infrastructure players in Australia to step up and take advantage of those in a year or two.

Dobbie: I also wondered because obviously it particularly lends itself to CRM type applications and there’s a number of online CRM tools that are available. I wonder also whether it’s a reflection of the success or otherwise of the local sales team. For companies like Salesforce.com or anyone else who’s providing these tools. There might be widespread adoption and it’s just completely driven by where these companies are focusing their efforts.

Dower: And Salesforce.com is a great example of an organisation that’s being hugely successful in pushing this model. It’s a model that’s worked really well for people like yourself as you say, small businesses but many organisations have adopted that as well. And then you’ve got, I guess another factor being that often these technologies have been released in a cyclical manner as well in the US first of all. So Microsoft released their CRM online set of services in the US I think in January last year and it’s now getting ready to roll out here as well. So there’s often some latency in the availability of these services and applications down in this part of the world also which is no doubt a factor.

Dobbie: Now totally unbiased answer from you here I’m sure but I mean Microsoft has been a bit slow to really embrace the cloud but it’s starting to offer a lot more as you say. So do you think Microsoft’s presence in the cloud space is going to change the situation markedly?

Dower: I think so. I think whenever they get serious about a particular space and harness their very significant resources and intellect on it then they tend to influence that sector. They’ve been a player in some of the areas that we touched on before, things like Hotmail and its related applications and so on, for quite some time now. So they would argue at least in the consumer space and maybe the small business space that they’ve been in the cloud for a long time. I think the enterprise side of it is more complicated and probably therefore warrants a more considered view of things. But we’re starting to see now from Microsoft some announcements around what they’re going to be doing or are doing now in the enterprise space which will definitely have an impact. Mail and messaging and collaboration platforms being the first area around Microsoft, the BPOS suite, so I would suspect without having any real insight and awareness of Microsoft’s development plans in the space that they’re going to be a player there.

Dobbie: Right, I guess a couple of things that have come out of the survey, concerns about the reliability of products and also security. I guess both of those, the reliability one particularly is a factor that as you say this is still a relatively new space and so I would imagine that’s holding a lot of companies back and particularly given the current economy where there’s a reluctance to change or to experiment.

Dower: Right and so those are the usual barriers. If you go back to, I remember working in the mid-range market when PC’s first became available. You had all these issues around data privacy and security and loss of control and so on and then we sort of managed to wrestle those to the ground and then the internet came along and in some respects we’re still helping organisations wrestle that to the ground. Similar issues that arise here as well which no doubt they’re valid issues and in many cases they’re policy issues as opposed to technology issues but we’ll be spending the next few years helping organisations get those things under control as well. So I think with any new wave of technology you see the same kind of barriers present themselves. And then the question really becomes, onto the second part of your question, what are the opportunities that flow out of them? We’re seeing some mixed data. I think is what the survey is saying and certainly the conversations we’re having with costumers in Australia around adoption, definitely people are pausing and taking breath in a broader sense right now which is understandable but at the same time if you think about the benefits that can come from using an outsource model like cloud computing, particularly when it comes to the use of capital and allocation of resources there’s an argument that says that this could actually grow faster during an economic downturn than being slowed down or impacted by it. So I think it’s early days. Again, we’ll see how that plays out but the level of interest in at least discussing this is definitely on the rise.

Dobbie: And it does sound like the biggest obstacle is just the lack of available products in the space.

Dower: Well I think there’s no shortage of products available. You’ve just got to do a Google search of who are the cloud computing providers today and there’s lots of organisations that we’ve never heard of that are starting to provide all kinds of service, the software as a service or infrastructure as a service. I think that reflects that this is new and there’s an opportunity for innovation and niche players to emerge out of this. I think where it really resonates for the enterprise is where the large players get serious about it and you can see that that’s starting to happen. If you’re a large enterprise and you want to outsource a big chunk of your applications albeit that it’s maybe not the core to start with then you’re going to want to work with somebody who you feel will provide safe hands. And so the IBM, the HP’s, the Accenture’s, the Microsoft, all are developing points of view and providing some tools and platforms around this today and making major announcements over the last six to 12 months and I would expect that to continue next year about how they see it planning out as well.

Dobbie: Well listen Craig I’m not going to call it cloud computing anymore I’m going to call it ASP 2.0 and I’m going to say that’s the term that Craig Dower coined and we’ll see if we can get that into general circulation. Thanks very much for your time today.

Dower: Great, thank you Phil.

Dobbie: And I have to say I did schedule that appointment with Craig Dower on my Google diary which is normally fine although it has on occasion lost the odd appointment so I concur with that real liability concern. That’s it for cloud computing and that’s it for BTalk Australia for today.