Rackspace Cloud Chief Predicts Enterprise Caution

IDG News Service — Most large enterprises won't move their established applications on to cloud services for years but are embracing the technology for new projects, the head of Rackspace's cloud business said on Thursday at the Structure 2010 conference in San Francisco.

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"The idea of an IT department prioritizing taking their SAP and putting it in the cloud, it's just not the way IT (departments) think," said Lew Moorman, Rackspace's chief strategy officer and president, cloud. "The SAP [in their enterprise] works. I think mostly they just don't touch it," he said. The number of new projects in the cloud will far outweigh the large-scale migrations, he said.

Though mainstream productivity applications are likely to be run on a cloud eventually, it won't be done in one fell swoop, Moorman said. A company might start with the human resources component of the SAP package and see how that goes. "Piece by piece, those legacy applications will get disaggregated, and they'll end up in the cloud. ... But that's going to be a 10-year process," he said.

Enterprises are already taking advantage of cloud services for small, new projects that they can now easily buy the resources for, according to Moorman.

"There's a whole backlog of projects and ideas and innovation that exists in companies and in employees' minds that suddenly they're going to execute on, because they can do it," he said. "They can put their credit cards up, they don't have to coordinate with IT."

Rackspace is still mostly in the managed hosting business, with only about 10 percent of its revenue coming from cloud services, Moorman said. But its revenue is growing much faster in the cloud business and within a few years will probably make up about half of what the company brings in, he said.

"There is tremendous momentum behind these technologies," Moorman said.

Other observers at the conference have also noted an upswell of cloud use in individual departments as they tackle small or temporary projects.

"If you want to see what's really happening in the cloud, don't go to IT," Forrester Research analyst James Staten said during a Wednesday panel discussion. A CIO may say 5 percent of the company's computing work is being done using cloud services, not knowing about what a research and development department is doing because they haven't told top management, he said. Other panelists agreed.

Though most cloud projects are tactical today, enterprises are soon likely to target established applications that are relatively easy to migrate, said Frost and Sullivan analyst Vanessa Alvarez.

"I do think there are legacy applications that make sense to put in the cloud," Alvarez said. One possible example is e-mail, which doesn't operate in real time, she said. By contrast, CRM (customer relationship management) is more complex and holds sensitive data about customers. Both the time and the cost involved in putting a legacy CRM application in the cloud is likely to be higher.

However, though C-level executives are beginning to plan long-term cloud strategies, most enterprises won't move their first mainstream applications to a cloud service until 2011, she believes.