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