In the fall of 2011, Tata Consultancy Services (TCS) conducted an extensive study on how 600+ primarily large companies (most with more than $1 billion in revenue) were using applications in “the cloud” – software residing on remote data centers that organizations access via the Internet. Such data centers can be run by third parties that co-locate applications of multiple companies (so-called public clouds). Or these data centers can be run for the sole use of one organization, operated by that organization itself (private clouds).
Public cloud computing vendors provide shared computing resources (hardware and software) to companies that don’t want to incur the cost of such IT infrastructure. A cloud vendor’s offerings typically provide computing resources on demand, automated system deployment and scaling, and pay-per-usage pricing. There are three primary benefits of cloud services: computing resources on-demand (which saves companies from having to plan ahead for securing such resources); the elimination of upfront commitments to IT (and thus avoid purchasing new hardware, software or whole data centers for computing demand that may be uncertain in the future); and pay-per-usage pricing (e.g., processors by the hour), which reduces the amount of computing resources that are sitting idle.
TCS believed that while numerous studies have been published on cloud computing since 2008, none had deeply explored how business functions such as marketing, sales, R&D, distribution, manufacturing, operations, finance and others were using cloud applications (also known as “software as a service,” or SaaS).
We designed the study to explore five core issues:
- The factors that are driving companies to put their applications software in the cloud – whether those cloud applications were shifted from computers on-premises or were entirely new applications that had no on-premises predecessors
- Which cloud applications have been adopted by what business functions and why
- The benefits they had generated to date from shifting on-premises apps to the cloud and from launching entirely new apps in the cloud
- The success factors to generating buy-in, adoption and benefits
- Their future plans for cloud apps – specifically, what types of cloud apps their business functions planned to have by 2014
We conducted several research streams. The first was quantitative research: an online survey of 600+ companies from four regions of the world. The survey was extensive and polled the experiences of both senior business functional managers and corporate IT executives.
The second stream of research was in-depth interviews with six companies on their attitudes and experiences with cloud applications. Their stories shed further light on what’s driving companies to shift existing applications or put new applications in the cloud, the benefits and competitive advantages those applications are generating, and the challenges to getting the organization to adopt cloud applications (both those in public and private clouds). These companies were:
- CTB/McGraw Hill – an educational assessment testing company that believes cloud applications will help it fund the investments it needs to continue to move its school assessments from a print to an online world.
- Commonwealth Bank of Australia – One of the four largest Australian banks has moved dozens of sales, customer service, HR, operations and IT applications to the cloud over the last three years. The result: the ability to offer bank customers a range of innovative new banking services.
- Dell Inc. – The $61 billion technology company has been using the cloud to provide engaging online marketing programs that win over customers and keep them coming back for more.
- Major telecommunications services company – Why a telco is rapidly shifting on-premises applications to the cloud in order to create common applications and cut millions of dollars in data center costs.
- Large consumer products company – How cloud computing has helped the $5 billion company more effectively field consumer complaints while keeping technology costs low.
- AOL Inc. – The cost savings and other benefits that the iconic consumer online media company has gained from a new private cloud.
Our final stream of research was capturing the experiences of TCS cloud experts – professionals who are working with companies on a daily basis about cloud computing issues. From our analysis of the data from all three research streams, we uncovered 10 findings that explain how large companies around the world are using cloud applications, to what benefit, with what concerns, and with what future plans:
Finding No. 1: Despite the hype, cloud applications do not rule the large corporation, although their usage is expected to increase significantly. Cloud applications are still in the minority of all applications in companies (19% of the average large U.S. company’s applications, 12% in Europe, 28% in Asia-Pacific, and 39% in Latin American companies). But they expect the ratio of cloud to on-premises applications to increase greatly by 2014. The case of Australia’s largest bank, Commonwealth Bank of Australia, illustrates why many companies have gained a voracious appetite for cloud applications. (Read more)
Finding No. 2: The biggest driver of cloud applications is not to cut IT costs. IT cost reduction is an important factor, but not the most important. Rather, standardizing software applications and business processes across a company (in the U.S. and Asia-Pacific) and ramping systems up or down faster (in Europe and Latin America) are the most highly rated drivers for shifting on-premises applications to the cloud. And the factors driving companies to launch entirely new applications in the cloud are quite different – to institute new business processes and launch new technology-dependent products and services. The case of assessment testing company CTB/McGraw-Hill shows why cloud computing will become a key tool for delivering pioneering IT-enabled offerings. (Read more)
Finding No. 3: The early returns on cloud applications are impressive. Companies using cloud applications are increasing the number of standard applications and business processes, reducing cycle times to ramp up IT resources, cutting IT costs, and launching a greater number of new products and processes. The story of a major telco shows the ambitions of the some of the most aggressive cloud adopters. (Read more)
Finding No. 4: Customer-facing business functions are garnering the largest share of the cloud application budget. Marketing, sales and service are capturing at least 40% of that budget in all four regions. The experiences of Dell’s enterprise sector online marketing function shows how one large company is trying to get closer to customers through cloud marketing applications. And a new private cloud at Web media company AOL Inc. explains how a technology-dependent company can make its technology more responsive and cost-effective. (Read more)
Finding No. 5: Many companies are reluctant to put applications with sensitive data in the cloud. In the U.S. and Europe, the applications least frequently shifted from on-premises computers to the cloud were those that compiled data on employees (e.g., payroll), legal issues (legal management systems), product (pricing and product testing), and certain customer information (e.g., customer loyalty and e-commerce transactions). Still, some companies had shifted applications with customer data to the cloud, especially in customer service, and many planned to shift a number of customer-related applications to the cloud by 2014. (Read more)
Finding No. 6: The heaviest users of cloud applications are the companies that manufacture the technology hardware that enables cloud computing (computers/electronics/telecom equipment), while healthcare services providers are the lightest users (in terms of average number cloud apps per business function). (Read more)
Finding No. 7: The most aggressive adopters of cloud applications are companies in Asia-Pacific and Latin America. They report having much higher percentages of cloud apps to total apps – and bigger results from cloud apps than their peers in the U.S. and Europe. We show how a large consumer products company uses the cloud to respond rapidly and effectively to consumer issues around the world. (Read more)
Finding No. 8: Despite a significant shift to cloud applications, most companies (especially in Europe) remain conservative about which applications they put in public clouds. Less than 20% of U.S. and European companies would consider or seriously consider putting their most critical applications in public clouds. But 66% of U.S. and 48% of European companies would consider putting core applications in private clouds. (Read more)
Finding No. 9: The keys to adopting and benefiting from cloud applications are overcoming fear of security risks and skepticism about ROI. (Read more)
Finding No. 10: Companies evaluate cloud vendors most on their security and reliability/uptime capabilities – and far less on their price. This was the case in all four regions. In fact, price typically finished at the bottom of a list of nine factors in making the cloud application purchasing decision. (Read more)