IT shifts to the cloud, anecdote by anecdote

Despite risks, IT managers are shifting large shares of their portfolio to cloud services

GRAPEVINE, Texas -- The enterprise road map for cloud computing is being drawn by people like Mark Stone, the CIO at Safety-Kleen Systems Inc., a Plano, Texas-based environmental services company with about 4,200 employees.

Stone has moved as many as 15% of his applications to cloud-based systems, mostly software-as-a-service (SaaS) offerings for things like CRM and travel. Within the next three years, he said, that percentage could rise to about 35% of his application portfolio and include his general ledger.

With a cloud-based approach, he said, "I can go today to a variety of SaaS providers and put in software that's every bit as functionally rich as anything I've developed on-site" -- without having to worry about the upkeep of an IT infrastructure. For customized software that's key to his business, he isn't ruling out migration to a platform-as-a-service (PaaS) provider.

Stone may be among the more aggressive enterprise adopters of cloud computing. But cloud-based services are increasingly becoming a routine alternative for IT managers. Analysts say the overall public cloud services market is growing rapidly (research firm IDC puts it at $23 billion today and predicts that it will grow to about $55 billion in 2014), but the decisions that IT managers are making might offer the best indication of how the enterprise shift to the cloud will play out.

An emerging panoply of cloud services is presenting enterprise IT with viable options to things like in-house ERP deployments and the need to hire consultants to solve data integration problems.

Lien Chen, CIO at RAE Systems Inc., a San Jose-based company whose products include multisensor chemical and radiation detection monitors, needed to integrate an Oracle ERP system with Salesforce CRM. One of the goals was to synchronize the data between the two systems and eliminate the need for double entries by employees.

Chen's options included an integration package for Oracle or on-premises appliances from other vendors. Consulting services would have added to the bill, she said.

Chen decided to use Informatica's cloud-based data integration service, which cost less than those alternatives. But she also saw this decision as best for the long haul. "I think the future lies in the cloud," she said.

But not everything is bound for the cloud. Chen isn't moving her core ERP systems anytime soon because of security concerns.

Robert Scott, managing partner at Scott & Scott LLP, a Dallas-based law firm that advises clients on IT contractual issues, says he routinely sees conflicting forces at work among users considering a move to the cloud. "On the one hand, there is this great pull toward cloud offerings and SaaS offerings," Scott said. But when it comes to putting together an actual contract, he said, "there is a lot of anxiety around these risks."

Scott and some of the others interviewed for this story were attendees or presenters at the Storage Networking World conference here.

Sessions addressing legal and security issues are now part of any conference whose subject matter includes cloud computing, and Scott gave a presentation at SNW that had no shortage of bullet points of things for users to think about when they negotiate with cloud vendors. But his guiding principal for any dealings with a provider of cloud-based services was this: "You own everything you bring and everything you pay for."

That means, for instance, that if a cloud vendor undertakes integrations and customizations or builds templates and layouts, users have to be certain they can take that work with them if they move to another provider, said Scott. "This could have a big impact on your ability to switch," he said.

But managing risks isn't a new discipline for Tom Honan, a senior vice president and CIO at CapitalSource Bank. He sees the cloud as an increasingly viable alternative to in-house systems -- in some cases.

The bank, for instance, had a choice of adding a module to its existing Oracle ERP system for expenses and travel, but it decided on cloud-based services from Concur Technologies. One of the reasons why Honan rejected the Oracle module was because he would have had to expand his software licenses beyond users of the financial system to other employees. "Suddenly, I'm basically looking at having to license our entire workforce," he said.

Honan said about 15% of his application portfolio is in the cloud, and he says he will continue to explore platform and infrastructure cloud services. Honan's move to the cloud also involved migrating a revenue-generating loan servicing application to a SaaS-based system.

But how much of the future lies in the cloud is a continuing question for enterprise IT. Even ardent supporters of cloud-based services see the legal and security issues as serious concerns. Where the critics and advocates differ is in the length of time it will take to resolve them.

Estimates range from a few years to never.

Beyond the legal issues, enterprise IT shops that are considering the cloud also have to think about technical challenges that mostly involve questions about standards. Without standards, for example, it would be difficult to migrate from one vendor to another.

"We are lacking standards that are open enough to allow meaningful portability of infrastructure as well as applications," said Marc Lindsey, an attorney at Levine, Blaszak, Block & Boothby, which offers advice on contractual matters to IT clients.

He urged SNW attendees to question vendors about their data extraction capabilities and ask them if they have the tools to allow it.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at  @DCgov, or subscribe to Patrick's RSS feed . His e-mail address is

Copyright © 2010 IDG Communications, Inc.

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