When Neil Armstrong and Buzz Aldrin set foot on the moon 45 years ago it represented a technological leap forward for mankind. More astounding, perhaps, to those of us who wear our phones like a sort of security blanket, the computer on the Apollo 11 space shuttle ran on technology less powerful than the average modern smartphone. We have come a long way, often in leaps and bounds.

One of the most influential and transformative of these leaps, at least in the world of IT, was the arrival of virtualisation and shared tenancy on computers – the enabling seeds of modern cloud computing. With a bit of smart software, data centres the world over could immediately utilise the huge surplus of excess server capacity. Cloud computing was initially pooh-poohed by box-hugging IT department heads who preferred to play in their own DIY sandpit. It still is in many quarters, but it is becoming increasingly clear that they are swimming against the tide. Frost & Sullivan’s State of Cloud Computing 2013 reports for Australia and New Zealand indicate that local organisations are now steadily embracing cloud computing for most if not all of their IT infrastructure and software.

Forecast: Cloudy
Frost & Sullivan reports that over 60 percent of Australian organisations currently using cloudbased solutions are planning to increase their cloud budget over the next 12 months. The converted are liking what they see and wanting to buy more. What is more, 24 percent of organisations that currently do not access storage via the cloud are likely to do so in the next 12 months. Similar data was reported for New Zealand.

In 2010, 74 percent of enterprise IT budgets was spent by CIOs. Last year that had plunged to 58 percent.”
Forrester Research – Asia Pacific 2013

The report indicates that many organisations had initially used public cloud offerings for test and development activities, but are now migrating a wider range of production workloads and core business systems to the cloud, including ERP, CRM and online services.

A key driver has been a maturing in wider business understanding of cloud computing. Phil Harpur, senior research manager for A/NZ at Frost & Sullivan mentions that the increasing awareness of cloud has seen an increasing number of companies ask the question, ‘What can I do with cloud services?’, rather than ‘What do cloud services prevent me from doing?’. This is opening up a broad range of opportunities for companies to develop their business models to cope with the rapidly changing IT environment. Cloud is progressively seen as more than just a way of reducing IT costs and IT decision makers are gradually becoming more aware of the other benefits that the cloud offers such as agility and flexibility.

Cloud computing expert Craig Deveson, CEO of Cloud Inc and the first in the world to develop an exclusive partnership with Google with his company Devnet, explains that cloud by itself doesn’t save you money. “In fact if you are trying to do things exactly the same it may cost more, but if you re-architect around the cloud it could cost you significantly less or give you significantly greater return on investment for the company. Increasingly you’ll see companies re-architecting their solutions and moving to the cloud for strategic reasons. That’s where the real payback is.”

Frost & Sullivan showed that overall IT cost reduction was just one of the reasons that organisations are now considering the cloud. Reduced risk of IT disruption from external factors such as natural disasters, greater overall business agility and flexibility, enhanced IT infrastructure efficiency and faster deployment time are all driving adoption of cloud computing. SaaS adoption is also being driven by the Ultra-Fast Broadband (UFB) rollout in New Zealand (and presumably the NBN rollout in Australia although this wasn’t highlighted in the Australian report, perhaps deliberately given it’s somewhat languid progress), falling broadband prices, rising data cap limits on broadband plans and increasing demands for enterprise mobility.

A significant factor that has emerged over 2013 that is reportedly hastening decisions on cloud hosting has been the establishment of local facilities by big global players Amazon Web Services and Rackspace. Both have ramped up local cloud operations as has long time provider of cloud services, Fujitsu. IBM is reportedly establishing a cloud services infrastructure (as opposed to its large traditional hosting service) and Microsoft (Azure) has stated it will have local facilities…errr…soon.

Technology too important
Not every CIO has welcomed the arrival of cloud computing, or indeed the consumerisation of IT in the enterprise. Many remain resistant and, as a result says CIO of Yarra Valley Water Leigh Burrell, “A lot of the control and the decision making is shifting away from the IT department.

“Historically the people in IT were the only ones who actually understood what was going on in information technology and data processing space. For everyone else it was just some form of black art.”

Today those outside the IT department also have a good grasp of what is possible with technology and the myriad options available. What is more, it is easy to procure SaaS services with a few clicks of the button and the company credit card. As a result the recently-published Asia Pacific CIO Budgets and Priorities in 2013 report from Forrester Research showed that chief information officers are losing their grip on enterprise IT budgets with line-of-business managers taking up the slack.

In 2010, 74 percent of enterprise IT budgets was spent by CIOs. Last year that had plunged to 58 percent. According to John Brand, a co-author of the report and Forrester vice principal, the commoditisation of enterprise technology along with the advent of cloud-based infrastructure which is “easily consumed and built for purpose” is driving the shift in terms of who controls the purse strings. Today chief marketing officers, HR directors and line-of-business managers often spend part of their budget on technology specific to their business needs. Two in five survey respondents said that the business was spending more on technology directly because; “technology is too important for the business not to be involved”.

Executive representation
So where does this leave the CIO? If line of business managers are procuring IT without consulting the CIO and one of the benefits of cloud computing is that CIOs no longer have to worry about keeping servers fed and watered, is the CIO becoming disenfranchised? Owen McCall, founder and consultant at successfulcio.com and ex-CIO of The Warehouse doesn’t think so.

“Our challenge is still the same. The role of the CIO is still the same. It’s about understanding how technology can deliver value to the organisation. Be that through business model change, process improvement, or better use of information. The challenge has always been that, it’s just that we have not been very good at it.

“If your customers are going around you then that should be a pretty strong signal that you are doing something wrong and you should seek to fix whatever it is that you are doing wrong rather than blame the customer.”

Burrell admits “there are some CIOs I’ve met in my life who are just glorified IT managers and they really don’t want to get away from the technology”. He believes however, that a good CIO and their team should be like a Sherpa. “If you think of all the thousands of people now who are climbing Everest, they couldn’t do it without the support and logistical expertise of the Sherpas. But it’s the climbers getting the glory. I see the role of enterprise IT and therefore the role of the CIO as a heavy lifting support role for the business.”

In the context of Burrell’s Sherpa analogy, it is relevant to note that Devnet was sold to US-based Cloud Sherpas back in 2011, helping them on their way to a projected US$200 million revenue this year, and a tag from IDC as a “Major Global Player” among Salesforce.com’s partners.

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