CIOs Warming (and Moving) to Cloud Technology

Cloud technology surveys—many of which either foretell widespread corporate cloud adoption or caution the over-exuberant—are relatively common in IT, frequently separated only by minor distinctions. What differentiates the various studies, however, is what motivated the research in the first place and what are the authors trying to confirm (or dispel).

Such is the case with a new body of research—underwritten by Host Analytics, a Redwood City, Calif.-based provider of cloud-based corporate performance management (CPM) software—and mined this past May from web-based interviews with 348 CIOs and IT professionals by Dimensional Research, a boutique researcher based in nearby Sunnyvale.

The findings suggest a heightened optimism by CIOs concerning the value and benefits of cloud technology. Indeed, chief among Dimensional’s results is the assertion by 92 percent of CIOs and IT professionals participating in the survey that cloud technology is good for business, with 67 percent contending that it helps deliver better systems for less money. Such is CIOs’ rising enthusiasm for the cloud that it outstrips even that of their IT staff, as 81 percent of IT managers believe the cloud presents a business benefit.

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The research sprang from Host Analytics’ interactions with key customers over the past year, says Alex Ortiz, the company’s product marketing director.

“We’ve seen a shift in attitudes toward the cloud from our buyers. Even among some of our larger customers, we noticed more CIOs leading the vendor search for cloud applications,” Ortiz says. “We were used to selling around the CIO. We wondered what had caused them to become more advocates of cloud technology, and we wanted to see if our experience perhaps extended to a broader audience.”

CIOs and IT executives accounted for 202 of the 348 respondents. More than 60 percent came from the manufacturing, financial, education, healthcare and government sectors in North America, spread equally among small and mid-sized businesses and large enterprises, says Diane Hagglund, Dimensional Research principal and the study’s author.

“This is the first cloud research where we focused on CIOs and looked at a broad view of the cloud,” she says. “We asked specifically if the cloud delivers better systems for less money to see if CIOs believe this is true. We were surprised at how positive they were about the cloud.”

Other researchers have seen the same boost in cloud-related CIO confidence, albeit not at such lofty levels. Laurie McCabe, a partner at SMB Group, a Northborough, Mass.-based industry watcher, says her data likewise shows that businesses are expanding plans to deploy cloud solutions.

“While we don’t see CIOs quite as bullish on the cloud, we are seeing a significant uptick in plans for cloud vs. on-premises apps,” says McCabe. “Businesses have big investments in on-premises applications and aren’t going to rip them out unless they no longer do the job. However, the cloud will increasingly be the first choice when companies need to add new solutions, because it eliminates so many barriers to getting solutions up, running and productive.”

A recent IDG Enterprise survey of some 550 IT professionals uncovered findings similar to those in the Dimensional work.

In the IDG study, which included more than 350 IT executives, 64 percent said that, in the long run, cloud technology will lead to lower costs and savings. Of the participants, 60 percent had a least one cloud application, about 70 percent expected to spend more on cloud services in the coming year, and more than 80 percent identified business continuity as the impetus behind their cloud investments.

That’s a noticeable uptick in CIOs perception of the cloud’s value, particularly when only 31 percent of CIOs in the Dimensional survey describe their infrastructure as primarily cloud-based. That contrasts with 35 percent of CIOs whose systems are mainly or exclusively on-premises, Ortiz says.

In fact, based on study data, CIOs appear to be jumping on the cloud bandwagon. As stated, two in three CIOs say the cloud lets them deliver better business systems with the same or lower costs, Moreover, 62 percent say that cloud technology gives business stakeholders more ownership of key applications.

Among business departments using cloud-based applications, IT makes the most use of the technology by far, at 67 percent, followed by sales (36 percent), customer support (35 percent), marketing (29 percent) and finance (25 percent).

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“We know that IT comes under the scrutiny of CIOs for the cloud, so it is particularly intriguing to see that IT itself is the highest user of cloud technology,” Ortiz says. “On the other hand, if you think about the systems that finance runs, the level of functionality is deep. Part of the slowness on cloud adoption for finance owes to the more stringent requirements.”

Cloud Technology Challenges Do Temper Optimism

According to the study, CIOs are not without reservations and awareness of the challenges surrounding cloud technology. The most pressing concerns among respondents relate to integrating data among applications (67 percent), knowing where data resides (39 percent) and developing workflows across cloud applications (34 percent).

Cloud security issues were not listed among the challenges because Dimensional elected to focus the study elsewhere, Hagglund says. “We made a conscious decision not to explore that. It’s been done, she says. “Any time you talk about the cloud, security comes up.”

Nevertheless, security is an issue that affects adoption of the technology, as pointed out in a November 2011 Ponemon Institute study, in which organizations acknowledged that they lack a firm grasp on cloud security even as they continue to move to the cloud.

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Meanwhile, some 74 percent of survey respondents say value would be gained from integrating various cloud applications into a business intelligence solution that’s common across their systems, with 54 percent saying that would make it easier to access data stuck in application silos. (Host Analytics’ interest in CIOs’ take on BI stems, at least in part, from its recent launch of a BI toolkit aimed at finance departments in midmarket businesses. “If you put non-siloed, cloud-based BI into use, there’s more value than with on-premises solutions,” Ortiz says.)

Cloud adoption at the IT professional level has also been hampered by other, somewhat less tangible, factors. Indeed, an August 2011 study by TheInfoPro, a unit of New York-based enterprise IT researcher The 451 Group, pointed to the fear of change as a strong impediment to businesses moving to the cloud.

The Dimensional study, however, with its emphasis on the cloud’s business value, suggests the fear factor may be ebbing. Of note, only 17 percent of the CIOs and IT professionals in the study believe that cloud technology is contrary to their overall IT strategy. Accordingly, Ortiz says future iterations of the research will further probe CIOs’ perceptions of the cloud’s business benefits.

“Our own CIO shifted the company to Software-as-a-Service only, and we’ve seen a 62 percent cost reduction in email alone,” Ortiz says. “As CIO, he’s thinking about the business differently.”

D.H. Kass is freelance journalist who covers the channel and reseller market. Follow everything from CIO.com on Twitter @CIOonline, on Facebook and on Google +.