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March 27, 2012

Cloud Adoption on the Rise at Large Companies

Tiffany Trader

Tata Consultancy Services (TCS) conducted a survey involving senior managers and corporate IT executives from over 600 large companies (most with greater than $1 billion in revenue) to find out how various business functions are using cloud strategies. Contributors to the study include such industry giants as AOL, CTB/McGraw Hill, Commonwealth Bank of Australia, Dell Inc., as well as a major telecommunications services company and a large consumer products outfit.

The TCS report, The State of Cloud Application Adoption in Large Enterprises, found that cloud applications have a solid market share across all four geographical regions studied, US, Europe, Asia-Pacific, and Latin America. Out of US companies surveyed, currently 19% of applications are cloud-based, 12% in Europe, 28% in Asia-Pacific, and 39% in Latin America. While this does not yet represent a majority share, the ratio of cloud to on-premises applications is set to increase greatly by 2014, up to 54% (Latin America), 52% (Asia Pacific), 33% (US) and 24% (Europe).

TCS sought to distinguish this survey by focusing on the use of cloud for specific business functions, such as marketing, sales, R&D, distribution, manufacturing, operations, and finance. Survey participants were asked about motivating drivers, benefits and competitive advantages, and future plans with 2014 cited as a target date.

Top 10 Key findings:

Finding No. 1: Despite the hype, cloud applications do not rule the large corporation, although their usage is expected to increase significantly.

Finding No. 2: The biggest driver of cloud applications is not to cut IT costs.

Finding No. 3: The early returns on cloud applications are impressive.

Finding No. 4: Customer-facing business functions are garnering the largest share of the cloud application budget.

Finding No. 5: Many companies are reluctant to put applications with sensitive data in the cloud.

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).

Finding No. 7: The most aggressive adopters of cloud applications are companies in Asia-Pacific and Latin America.

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.

Finding No. 9: The keys to adopting and benefiting from cloud applications are overcoming fear of security risks and skepticism about ROI.

Finding No. 10: Companies evaluate cloud vendors most on their security and reliability/uptime capabilities – and far less on their price.

In an era where cloud is often asked to justify itself based on price metrics, items 2 and 10 are especially telling. In this survey, price was considered secondary to security and reliability. And in a similar vein, IT cost savings took a back seat to improved operational efficiency. According to the survey, companies in the US and Asia-Pacific are adopting cloud to support software applications and business processes across a company, while in Europe and Latin America, the main driver is increasing applications or systems flexibility, i.e., the ability to quickly ramp up and ramp down applications. Cloud is also being used to launch entirely new systems and to enter new lines of business. Given the barriers associated with moving legacy systems into the cloud, it makes sense for companies to wait until a natural transition period.

Big data was another major driver with 65% of the US survey respondents citing the need “to improve data and trend analysis” as either “important” or “very important.” Asia-Pacific companies had a similar response at 66%, while only 47% of European companies were committed to this strategy. Latin America, however, was the biggest proponent of the cloud-for-big-data angle, with 80% of responders citing this driver. Interestingly, the report authors found that the companies who benefited the most from cloud adoption were those that had the most interest in using cloud-based resources to manage big data needs.

More than anything else, successful companies understand the need to position themselves to compete in the future while managing current business realities. This is cloud’s promise: that it will foster innovation and competition on the global playing field.

N Chandrasekaran, CEO and managing director of Tata Consultancy Services, said, “We have reached the inflection point in cloud computing and there is no turning back. Cloud-based applications are already a substantial piece of large corporate IT infrastructure and the early benefits achieved are too substantial to ignore. There is huge scope for growth in both developed and emerging economies and we firmly believe that cloud computing will continue to open up opportunities for companies across many different functions.”