Cloud Debate 2: It is disruptive

He introduces himself as an Enterprise Strategist and Disruptive Technologies Expert, but his sharp appetite takes much more than that. R “Ray” Wang is a Principal Analyst & CEO of research firm, Constellation Research.  He was previously a founding partner and research analyst for enterprise strategy at Altimeter Group and is popular in the CIO universe for research in disruptive technologies and their impact on business processes, business models, and organizational design.  Ray took out some time here to shed some rays on the now-shining, now-eclipsed confidence orbit that Cloud has turned into.

Have we actually arrived in a Cloud age, where not being Cloud-savvy makes one regressive?

I've talked to 57 startups this year in enterprise software. Not one is an on-premises vendor.  Every funded venture I've encountered is in the cloud

What are your views on 'Cloudwashing' and Cloud's zigzag ride between the terrains of verb vs. as a noun. Is it indeed a disruptive zeitgeist?

Let's take the cloud as it is.  We're really talking about the benefits in the web.  This is disruptive only because we've found a way for enterprises to leverage the scale and elasticity of usage that's required for the benefits of the cloud.

What’s inhibiting adoption then? Or what would you opine as the right recipe for being a Cloud-adopter? Can legacy capital continue in a Cloud age?

Well, as I see it, organizations determining when and how to make the move to SaaS and Cloud face realistic challenges in gaining buy-in and realizing the apparent and hidden benefits of SaaS/Cloud.  In a recent survey of over 300 companies, 73 respondents who were wary of SaaS/Cloud were asked to list the top  three reasons they did not plan to deploy a SaaS/Cloud solution in the next 12 months. Legacy and governance top the list there.

How?

Talking of legacy apps, CIO’s vested in protecting the existing investments may often proceed with caution for SaaS and Cloud solutions.  In some cases, sunk cost mentality takes hold and the goal of being 100 per cent pure with a single vendor clouds the vision to meet needed business requirements. Legacy apps maintenance and upkeep represents a key barrier to SaaS and Cloud adoption.  Becuase the money and resources to support legacy apps consume most of the budget, organizations have little funds for innovation and experimentation.  

What else?

No IT team buy in is another issue.  Many constrained IT teams have not taken the time to understand the requirements to support SaaS and Cloud apps in a hybrid mode.  SaaS requires organizations to revisit SOA strategies, integration requirements, and master data management.  Business leaders and decision makers often overlook these dependencies at the organization’s long term expense.

Is there a way to walk over these barriers?

Next generation apps strategies must account for both a future of hybrid deployments and growing independence of legacy apps.  Start with Point solutions. Organizations often start by augmenting gaps in existing legacy apps functionality.  Common areas include expense management, strategic human capital management (HCM), sales force automation, project based solutions, collaboration, and email.

As with legacy apps over time, organizations will seek to contain investment and surround existing apps with new capabilities.   Expect core ERP apps in finance and HCM to be contained but not quickly replaced.  However, failed CRM, project based solutions, and other “extended ERP” systems in vendor suites will be replaced because many vendors have not innovated quickly enough.

Then, Hosted legacy and surround will be to watch for. It will emerge as a critical trend that will cut infrastructure costs for data centers and hardware.  Once again, the surround strategy will take hold because business can not wait for innovation from many of the legacy apps vendors. After usage of 10 to 15 years, most organizations begin their retirement and replacement strategies.  Given the increasing choices in SaaS and Cloud, expect organizations to make the move to migrate to a more flexible solution. That’s how the long-term script will unfold.

The maintenance variable will be dominant on the equation ahead?

Legacy mid-term replacement and third-party maintenance is interesting. Organizations can fund innovation with maintenance fee reductions by considering third party maintenance (3PM).  Typical deals halve the cost of maintenance while providing regulatory and tax updates.  Upgrades will not be provided but for organization’s who plan to replace apps in the next five years, this option should be considered in all apps strategies.

Talking of Cloud sourcing, Private Clouds, etc, how do you see it panning out?

Cloud is one way to merge BPO and ITO together.  I expect these areas to converge in 2011. Expect commoditized business processes to shift to the BPO model. BPO — SaaS will become the norm as organizations shed lower level processes and focus on custom dev in PaaS and extending SaaS and Cloud suites. Also, many organizations will move to private clouds for security reasons. 

What are Cloud's areas of gaps and gaffes across - Complementary platforms, interdependence (SOA, network bandwidth, last mile connectivity; Vendor lock-in, Standards, App fungibility, Mission-critical apps etc.)?

I would pick: Integration, SOA, process harmonization, Complex event processing, analytics and big data processing.