CIOs Lack Adequate Cloud Computing Knowledge

Cloud computing adoption is increasing rapidly, but CIOs' ability to structure and manage these deals is not keeping pace, according to a second quarter 2011 survey by KPMG Sourcing Advisory.

Traditional IT outsourcing customers are struggling with cloud computing, according to IT service providers and outsourcing advisors surveyed by KPMG Sourcing Advisory. IT service providers and advisors rated their IT executive customers' facility with various aspects of cloud computing on a scale of one to five, where one represented "very unskilled" and five represented "very skilled." IT executives earned embarrassing scores from their providers and advisors: None garnered even a middling score of three.

When it comes to managing and governing cloud initiatives, IT leaders earned their lowest scores from respondents: 1.69 from advisors and 2.19 from providers.

Their skills in cloud sourcing and structuring cloud engagements didn't fare much better. Advisors gave their IT customers a ranking of 1.81. Providers were marginally more generous with a ranking of 2.35.

IT executives also received low marks for their ability to assess the near-term maturity of cloud computing and its viability to support enterprise computing needs: 2.19 by advisors and 2.68 by providers.

Outsourcing providers gave their highest score of 2.81 to customers for understanding how cloud computing options can complement or supplant traditional enterprise systems and outsourcing investments. Advisors gave customers a score of 2.03.

Stan Lepeak, director of KPMG Sourcing Advisory Global Research, was not surprised by the low scores. "Most of the cloud computing focus has been around long-term futures, not scrutinizing real short-term opportunities and deciphering the reality from vendor and service provider claims," says Lepeak.

Notably absent are clear business cases that verify cloud computing vendors' claims of lower costs, he adds. "It's not so much that buyers are not skilled at cloud computing capabilities," says Lepeak, "but that they have not had much real-world practice at utilizing them, or that there is not enough relevant, real-world data available from providers to do meaningful business case assessments."

Despite the low ratings IT executives received, IT service providers are bullish on buyer uptake of cloud-based solutions. Forty-two percent of service providers polled said that their clients have one or more live cloud services deployments and that cloud engagements would increase to 66 percent in the next year, according to the KPMG survey.

It's that fast-moving nature of the market that has made it difficult for customers to keep up, says Lepeak, who compares cloud computing to the early days of the Internet, when buyers struggled to define and execute strategies to exploit its full business potential.

The cloud computing learning curve for traditional IT outsourcing buyers is "elevated, but not steep," Lepeak says. "It's as much a function of practicing the skills as acquiring them."

The same general framework and processes that customers use for traditional outsourcing contracts can be employed for cloud computing deals: define the scope of the deal, create a business case, vet the vendor, determine measurable metrics for success, plan for transition and ongoing management, and outline a change management plan.

Customers need to get up to speed with cloud computing skills quickly to keep up with an increasingly diverse set of cloud computing options, but it's unlikely that they will, says Lepeak. Consequently, cloud deployments might get worse before they get better. "Look for lots of press in one to two years over cloud failures, [unmet] expectations, and overpromised benefits," adds Lepeak.

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