CIOs See Big Cloud Computing Shifts In 2010

CIOs are looking at making major strategic shifts toward the cloud this year as they grapple with continued pressure on IT budgets.

Several IT executives attending the annual North American Conference Wednesday in Boston of the Innovation Value Institute (IVI), an organization aimed at establishing IT investment benchmarks, said they are embracing private and public clouds.

Peter Forte, CIO of Analog Devices, said the electronics manufacturer is moving to the cloud in the wake of a 25 percent IT budget cut last year. Over the last 45 years, he said, Analog simply built up too many resources around maintaining IT infrastructure.

Now, Forte said, Analog is looking at moving applications to the public cloud embracing applications like Salesforce.com and at the same time building an internal private cloud as part of a move toward virtualizing 300 Windows Servers and scores of Unix servers.

"This is a matter of survival," Forte said. "In the last 20 years, I haven't seen this kind of dramatic cost cutting. Luckily, the good news here is technology has evolved to the point where it is helping us make this transition. We would never have been able to make a 25-30 percent budget reduction 10 years ago without an incredible fall off in service."

Forte cautioned that he does not see applications like e-mail or even Microsoft's Office product line as ready to move to the public cloud. Almost to underscore that point, Microsoft revealed last week that customers of its Business Productivity Online Standard Suite may have experienced on January 28 "intermittent access to services."

"We understand that any disruption in service may result in a disruption to your business," said Michael Ziock, senior director, Business Productivity Online Service Operations for The Microsoft Online Services Team in a posting on the Microsoft Online Services Team Blog.

That Microsoft outage underscores the critical service level agreement issue (SLA) that businesses face as they move to the cloud. IT executives at the conference said that is one of the reasons it is critical that companies embrace IVI's IT-CMF (Capability Maturity Framework) as a standard for making IT investment and operating decisions.

The IT-CMF consists of a five-stage maturity model used to organize and structure a framework for mapping IT improvement efforts.

Gregg Wyant, Intel's IT CTO, who spoke at the conference, said the entire industry needs to look at frameworks like IT CMF in order to assure cloud computing is successful. "If you don't have standard business processes or standard ways to outsource some of your IT responsibilities you will never be able to utilize cloud effectively," he said.

Wyant said one of the biggest dangers in moving to the cloud is the lack of industry standards to connect various cloud platforms whether they are public or private. "The catch 22 is there are no inter-structure standards that exist," he said. That means significant integration challenges for companies that want to adopt various cloud offerings. "Those shortcomings need to be addressed by the industry for cloud to be more viable," he said.

Wyant said Intel currently has only about five percent of its IT operations in the cloud in the form of Software-as-a-Service (SaaS) offerings. He said because of its scale Intel is unlikely to take more than 10 to 15 percent of its IT operations to external cloud offerings. He said the cloud model is likely to appeal more to small medium busineses (SMBs).

Next: What Impact Will IT Budget Pressure Have On Cloud Decisions?

Wyant said he sees IT budgets remaining flat with companies scrutinizing those budgets more aggressively to shift costs from maintaining infrastructure to strategic IT investments aimed at growing sales. He said Intel looks at constantly moving five to eight percent of its annual IT budget from maintaining systems to designing and creating IT solutions that give Intel a competitive advantage.

Vincenzo Marchese, Group Enterprise Architect for United Kingdom petroleum giant BP, said as BP establishes its cloud strategy it will distinguish between business critical apps that are hosted internally and commodity technology which would more likely be hosted in the public cloud.

"In one form or another cloud computing will be part of BP going forward," he said. "I think the cloud under different forms and different names has been around for many years. There is a lot of hype at the moment related to cloud computing. Being a large organization, we are always looking at ways to reduce the IT budget. We think in some form cloud computing, especially for non-critical business applications, might give us a way to be more effective."

Jim Boots, senior business process management advisor for Chevron, said he sees security of data as a major issue to address as companies move to the cloud. "Big companies are going to be very careful about allowing someone to host their (critical) data," he said. "For oil companies it is seismic (exploration) data which is huge. Companies are going to want a lot of proof that the security and reliability is going to be there."

Martin Curley, Global Director of Innovation at Intel and a National University of Ireland professor of technology who spoke at the conference, said he has been surprised at how quickly cloud has entered the CEO vocabulary rather than just CIO speak.

"IT is moving from the backroom to the boardroom," he said. "We have moved from a scenario where technology or IT was kind of an accessory to the business and now it is moving to the core." He said IVI addresses that with a core mission of improving the "predictability, probability and the profitability of IT investments"

IVI, which was established in 2006 as a joint venture between Intel, The Boston Consulting Group, and the National University of Ireland, currently has about 50 blue chip members including Microsoft, SAP, Ernst & Young, Chevron and BP.