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Cloud Adoption Accelerates, But Challenges Remain

As CIOs lead their organizations down the path towards digital transformation, cloud adoption continues to soar.

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As CIOs lead their organizations down the path towards digital transformation, cloud adoption continues to soar: According to Gartner, the worldwide public cloud services market is projected to grow 16.5 percent in 2016 to a total of $204 billion, up from $175 billion in 2015, reflecting a shift away from legacy IT services and over to cloud-based services.

The 2016 Harvey Nash/KPMG CIO Survey, The Creative CIO, found that four in ten IT leaders (40 percent) use cloud technology to improve responsiveness as well as resiliency. One-third (33 percent) use cloud in an effort to save money, while a similar proportion invest in cloud to accelerate product innovation.

“We see the demand for cloud adoption growing rapidly,” says Pierre Champigneulle, a principal in KPMG's Advisory Services practice. “The CIO sees pressure from the CFO to optimize the legacy IT, while IT also needs to support the rapid pace of the business and implement new capabilities at the right cost.”

When it comes to investing in cloud services, the survey reports that Software as a Service (SaaS) is leading the pack in 2016 — three in ten IT leaders are planning significant investment in this area, compared with 25 percent planning similar investment in Infrastructure as a Service (IaaS) and only 20 percent in Platform as a Service (PaaS) solutions. With so many easier-to-deploy SaaS options available, this confirms the value of shifting one-off applications that typically don’t affect the larger technology stack to the cloud.

The survey also found that all three types of cloud services will demonstrate robust growth over the next three years. It will come as no surprise, experts say, however, that the biggest acceleration will come from PaaS — the survey predicts that significant investment will almost double, from 20 percent to 37 percent.

“From a consumption standpoint, SaaS is easier to implement, while PaaS is a much more complex transformation, with quite a bit more architecture work,” says Champigneulle. “But the survey shows that while PaaS is currently lower in terms of consumption, it’s actually accelerating faster than the others because the technological maturity level and the breadth of offerings is rapidly increasing, making PaaS a viable alternative.”    

The Biggest Cloud Challenge: Data Loss and Privacy Risks

Despite accelerating cloud adoption, almost half of CIOs (49 percent) report data loss and privacy risk as the biggest security challenge with adopting cloud technology. A similar proportion (47 percent) have concerns about integration with existing architecture. 

The survey response regarding security in the cloud “reflects an inexperience with cloud implementation in a lot of organizations,” says David Conroy, a managing director in KPMG's CIO Advisory practice.  “Security teams are inherently (and rightly) cautious, yet they may not have a full appreciation for the sophistication and resilience of leading Public cloud providers – typically well in excess of those found within internal environments”

The bottom line is that most organizations remain in transition when it comes to the cloud, he says, noting that they need to get comfortable with how they bridge those types of policies and controls in a cloud environment. “Even though it might be more secure in the cloud than internally, it’s critical to have end-to-end policies and controls” he says.

Surprisingly, only 17% of respondents to the Harvey Nash/KPMG CIO survey said the impact on the IT organization is a challenge in adopting cloud. “That was a surprise to us,” says Champigneulle. “It seems really low, showing that many IT organizations still have not completed a major cloud enabled business transformation.” One hypotheses put forward by Conroy was that “this finding really reflects the current trend towards IaaS, which is merely a more flexible provisioning of a similar IT service consumed today. As organizations embrace PaaS I would expect the impact on IT organizations to rise along with the potential economic benefits” 

Multiple Reasons to Move to the Cloud                                               

The cloud is no longer “should we or shouldn’t we” choice for IT organizations, according to the Harvey Nash/KPMG CIO survey. For one thing, adopting the cloud means IT is no longer the sole purchaser of technology solutions — business units are purchasing SaaS applications on their own. And fully half of organizations are planning to make a “significant” investment in SaaS in the next 1-3 years, compared to less than one-third in the previous year. But developing an overall strategy for cloud migration can still be a struggle, so creative CIOs develop a set of use cases that highlight the opportunities of cloud and clarify the risks.

The most compelling use case, says Champigneulle, is building new capabilities that the business needs and demands. In this case, the business units are often driving cloud adoption, while IT follows. “This might be driven by IoT, or data and analytics, or business automation, where cloud is an enabler and the business turns to IT to facilitate standing up and operating that environment,” he says. 

The other category of cloud use cases is when IT is the driving force, incented by the need to optimize the legacy IT, adapt capacity, improve resiliency and reduce costs. “This typically starts with IaaS adoption for applications with variable workloads and limited regulatory and information protection requirements,” says Champigneulle, who adds that KPMG sees a good balance between the two types of use cases among larger companies.

A Foundation for More Substantial Business Transformation 

Nearly half of Harvey Nash/KPMG respondents cited integration with existing architecture as one of the biggest challenges to cloud adoption. But the growth of all the types of cloud services demonstrates the viability and maturity of all the offerings, providing a foundation for more substantial business transformation, says Conroy. This allows companies to leverage cloud offerings and integrate them with their legacy environment. “It’s good to see that growth,” he says, “even though PaaS is a still a challenge for CIOs to address.”

Cloud adoption also offers an opportunity to bring in new talent as companies wrestle with bigger issues, he notes. “It’s about how cloud can improve the mobile workforce and enable improved relationships with customers and partners,” he says. “It’s one of the issues to watch over the next couple of years as larger organizations get their roadmap together.”

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