Cloud computing special: Ready to blow

Definitions of cloud computing services vary from vendor to vendor and customer to customer, which is why it remains a confusing proposition for businesses.

For their part, IT services providers are trying to be more explicit about how cloud services can deliver value, and have started to specify different models and levels of the cloud, based on the function they serve or the service they deliver.

They’ve also expanded their offerings to encompass private clouds, services delivered either via inhouse resources or via a dedicated cloud provided by a third party for a customer or group of customers; public clouds services, delivered via one or multiple multi-tenant external clouds, which promise almost limitless scalability; and hybrid clouds, leveraging both private and public clouds.

We view cloud computing services simply as IT services that customers access over the internet on a pay-as-you-go basis. With this as a backdrop, we view the current cloud computing market in a model that has four primary layers:

* Infrastructure as a Service (IaaS), in which ‘basic’ infrastructure components, such as storage or compute capacity, and associated network and security services are delivered as a service (such as those available from IBM, EMC and some telecoms operators such as AT&T and Verizon Business).
* Platform as a Service (PaaS), which provides, on top of the infrastructure components, an on-demand programming layer for building cloud-ready (web-based) applications. Salesforce’s Force.com and Microsoft’s Azure are some of the better-known examples.
* Software as a Service (SaaS), where cloud-enabled business applications exist. Salesforce.com is the most frequently cited example, but vendors including SAP, Oracle, Microsoft, NetSuite and Workday.
* Business as a Service (BaaS), which provides a combination of data and services for a complete business process on demand for a specific end-to-end business activity, including software, content and workflow (such as WebEx).

Among the major services providers, much of the emphasis and activity in the cloud to date has been on IaaS and SaaS, which are the layers more akin to their traditional offerings, such as managed services and enterprise applications outsourcing. There are varying levels of interest in the PaaS and BaaS layers among services providers, but we’d expect business process outsourcing providers to be looking hard at the potential for BaaS.

Even with this increased vendor activity, the mad dash to adopt cloud solutions has yet to materialise. There are certainly exceptions, including some government organisations with SaaS and SME customers taking advantage of IaaS.

The global recession and the need to cut and control IT costs is spurring customers to at least investigate various options for cloud services. But, by and large, enterprise customers are taking a cautious, phased approach that allows them to “test drive” cloudbased services ­ usually restricted to a specific application, workload or business process ­ before they commit themselves more substantially.

A mixed forecast
Among services providers, systems integrators say they are bullish about the cloud’s potential, but in practice they are as wary as enterprise customers. This is understandable; after all, systems integrators depend on IT complexity, building their businesses around tying together heterogeneous and often geographically dispersed IT systems (infrastructure, applications, etc.) so that they work together ­ hopefully ­ like a well-oiled machine. The larger and more complex a customer’s IT infrastructure, the greater the SI’s revenue potential.

As we’ve detailed in numerous reports, cloud services have captured customers’ attention because of the IT and business benefits they promise, including variable costs, reduced capital expenditure and access to on-demand, dynamic and virtualised resources. In the IT services market, the SI business ­ versus, say, consulting or outsourcing ­ appears most vulnerable if these potential cloud benefits materialise.

We’re not suggesting that the traditional integrator model is going away anytime soon. The cloud computing market is still too young; customers are not taking a cloud-only approach and customers will still need third-party integration services to take full advantage of their IT investments for the foreseeable future. However, some customers that leverage cloud services in theory will no longer need a systems integrator for complex, time-consuming and costly integration of their internal IT systems, especially if they’re accessing services via a public cloud, or even a private cloud, that is maintained by a third party. When, and if, the cloud computing market finds a flashpoint, revenues from integration work are likely to take a hit.

Of course, while global firms including Accenture, IBM and Capgemini may see systems integration revenues decline, they also have massive consulting and outsourcing operations that could make up the difference.

In fact, many of these global firms are already emphasising the value of consulting and outsourcing in their cloud services engagements versus their integration capabilities. Most global outsourcers, in fact, are attempting to position the cloud as merely an extension of services that they’ve delivered for decades, just in a scalable, virtual, on-demand manner.

This article is based on research by analysts at Ovum