Cloud cover increasing

Newsroom 22/04/2013 | 12:37

The cloud is “the talk of the town” across Romanian organizations, which are still in the stage of setting out the business case for this technology, while to 70 percent of SMEs the concept is still virtually unknown. But drives towards cost cutting and transformational benefits, coupled with the widespread use of mobile data and applications, are pushing the cloud at higher speed.

By Otilia Haraga

Silver lining for mobile cloud

The option for individual clients to store their information in the cloud has existed for some time, but recently, the hike in the use of mobile data and mobile applications, accompanied by the fact that telecom operators are releasing data offers which include cloud storage space, is pushing forward the development of the mobile cloud.

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“Talking about the final user, many of us will probably keep our data both in the cloud and in a local device. This is also a matter of ensuring the safety of the data: if I lose my phone, I would like my data to be safe, so a cloud solution may prove to be more reliable than keeping my information on the phone’s memory card,” Dan Bogdan, enterprise business manager Romania at Dell EMEA, tells BR.

Mobile operators need a computing component and a storage component, points out Serban Zirnovan, solutions manager at Dell Eastern Europe & CIS EM-EMEA. “This need appears naturally for various reasons: it is easier to manage the information not just from one device but from various devices, because mobility is encouraged. Romania enjoys very good broadband access – the penetration rate is among the highest in Europe at the moment – so the opportunity for this service appears,” he tells BR.

The market of smartphones and mobile gadgets is projected to register a spectacular global evolution, and Romania is no exception. Currently, 2.2 billion people worldwide go online from their mobile phone, according to Breeze Mobile statistics. In Romania, 7 million unique users access the internet from their smartphone, up 60 percent over the past year. The average monthly traffic per user in mobile networks is 40MB.

Last year, 3 million mobile phones were sold in Romania, 1 million being smartphones. There are currently 5 million smartphones on the market in total, which takes smartphone penetration to 25 percent. “Smartphones abstract the idea of cloud very well: the client uses cloud services without realizing that the data is not local. The increasing rate of smartphone adoption will also generate a growth in cloud usage, especially induced by the BYOD (bring-your-own-device) trend, which translates into using a personal device at work and having access to the company’s information and applications from this device,” Valentina Crisan, vice-president, EuroCloud Romania, tells BR.

Mobile applications have also seen explosive growth. While the cumulated downloads of mobile apps by December 2012 amounted to 75 billion, in 2013 alone about 80 billion applications have been downloaded so far worldwide.

“Clients seek to have fast access to as many data as possible and applications that can provide this must rapidly be adjusted to fit their needs. Cloud has many advantages in this respect and very soon, in order to access applications directly from the cloud, it will not matter what OS or device is used, or what memory the device has. Technologies such as HTML5 and CSS3 will allow the display of any type of content in a web browser. The appearance of LTE-compatible devices, recently implemented in Romania as well, will allow exponential growth in the number of applications that use large bandwidth but run in the cloud. If we also factor in BYOD (Bring Your Own Device) strategies, we can expect an extremely interesting landscape in the area of mobile applications developed to run in the cloud in the near future,” Catalin Paunescu, managing director at Star Storage, tells BR.

The sky ahead is blue….

Meanwhile, when companies take up cloud services, they must pay for three things: firstly, the implementation of the solution, paid upfront and at considerably lower prices than implementing a similar solution installed locally; secondly, the services, the fees for which are paid regularly to the provider; and thirdly, support services, Ion Gogoneata, chief technology officer at Pras Consulting, tells BR.

Costs of the equipment, software licenses, electricity, space for setting up the equipment and air conditioning shrink or are cut to zero, he explains.

Another substantial cost reduction is the decrease in personnel expenses. “Here there are two viable options: either costs are reduced by cutting personnel or the existing staff moves to a more productive part of the IT provision, such as the business application part,” Gogoneata points out.

In adopting a cloud solution, a company can cut its IT costs by around 50 percent, Cosmin Ficleanu, software development manager at Infotrend, tells BR. Small companies with up to 25 employees pay monthly fees that start from EUR 5.25 while medium and large companies can acquire more complex solutions for between EUR 9 and EUR 25.50 per user per month. An assessment carried out by Infotrend for a client who now uses Office 365 found that for a solution that offers email, productivity tools and a high security level, the client would have invested more than EUR 100,000 in hardware, licenses and services, Ficleanu adds.

…but dark clouds are gathered

But not everything is pink on cloud number nine. Executives around the globe are waking up to the challenges.

The Cloud Takes Shape survey by KPMG International revealed that business and IT leaders across the globe are finding cloud adoption to be more complicated than many had originally anticipated.

Nearly 33 percent of surveyed executives say cloud implementation costs have been higher than expected. Furthermore, integrating cloud services with their existing IT infrastructure has been particularly difficult.

More than half of respondent organizations are already using cloud, and 70 percent of these state that cloud technologies have already offered significant optimization and cost improvements. “The results of our survey are very important for Romanian organizations that are still in the analysis and business case development phase, as they are able to learn from the implementation experience of organizations from different countries,” says Aurelia Costache, management consulting partner, KPMG Romania.

Business process redesign needs to be done in tandem with cloud adoption if organizations hope to achieve the full potential of their cloud investments.

But despite these emerging complexities, executives still believe that the benefits of cloud adoption far outweigh any growing pains of implementation. In part, this is because organizations are shifting the focus from pure cost reduction to achieving the transformational benefits of cloud, says the KPMG report.

While cost reduction is still the primary reason for cloud adoption in nearly 50 percent of cases, for 28 percent of interviewees the speed of migration to cloud is important, as, for 27 percent of them, is the cloud’s ability to enable faster entry into new markets and for 22 percent business process transformation.

As cloud is evolving into a strategic business tool, the CIO’s role, as the business integration broker on commercial, process and technical levels, is becoming even more critical, finds the report.

While business executives recognize that cloud adoption should improve security, 26 percent still see this area as a key challenge. Still, many businesses are showing growing confidence in the security of cloud, with more than a third of respondents considering migrating the core operations of sourcing and procurement, supply chain and logistics to cloud within the next 18 months. Only 18 percent of respondents see regulation as a challenge. However, the report suggests this may be due to complacency, as organizations may just be beginning to prepare for the complexities that will arise with increased regulatory compliance. Nearly 24 percent of respondents say they are looking at “private” cloud environments as a way to address regulatory challenges.

Striving for critical mass

“While there is much talk about the cloud, the number of actual implementations of cloud-based services confirms the fact that Romania is just at the beginning of the road,” says Paunescu. He adds that IT departments often prefer to make investments in infrastructure and applications without analyzing closely enough the option of outsourcing, in spite of the obvious advantages that it brings.

Estimations from Pierre Audoin Consultants (PAC) are that by 2016, cloud services will have spiked by more than 40 percent, compared to the level of 2012. “As with any new technology, there are early adopters – tech companies for example – but at this point, for Romania the adoption has been equally spread among a variety of verticals, like financial services, professional services, manufacturing and utilities,” Gabriela Matei, cloud director, Microsoft Romania, tells BR.

“I think there is little awareness of what resources businesses allocate to maintain the current IT infrastructure. Gartner estimates this at an average of 70 percent of the total IT budget,” says Matei. “Another way to motivate businesses to transfer to cloud is to make them aware of the fact that there is an optimum scenario which combines the public and the private cloud, migrating to a hybrid solution.”

Cloud providers are still faced with the challenge of convincing market actors that cloud is a viable option for their business. “In our experience, companies with foreign management have no problem in taking the leap. As for Romanian companies, this very much depends on the management’s technical understanding and desire to benefit from the latest technologies at fair prices,” says Gogoneata. He adds that when first confronted with the option of transferring their data to the cloud, decision-makers at a company have one of two types of reaction.

One is the question: “Why should I put my data on Microsoft servers? Why should they have access to them? What if Microsoft goes bankrupt and I lose my data? What if their servers break down and I am left without the information?”

The second is: “What an interesting service. Why didn’t I know until now that such services exist?”

In 2010, Romanian SMEs represented approximately 99.7 percent of the total number of active firms, according to the survey, the Current Situation of Small and Medium Enterprises in Romania carried out by the Post-Privatization Foundation. There were 468,552 SMEs in the country, the overwhelming majority being specialized in services (39.5 percent) and commerce (38.8 percent), followed by those active in industry (11.2 percent) and construction (10.5 percent).  “In Romania, 70 percent of managers of SMEs do not have knowledge of the cloud concept,” says Ficleanu. Approximately one third of the more than 400,000 SMEs have implemented cloud computing solutions, he notes.

Pundits seem to agree that the cloud concept is nothing new.

“A recent survey of TechSoup shows that NGOs in Romania use at least one-two cloud services without being aware that these services are in the cloud. This is why if we are talking about services such as email, storing files, collaboration and communication, most of which are free of charge, then the usage percentage is probably high, around 20-30 percent. When we are talking about paid cloud services, than the usage rate is extremely low, somewhere below 5 percent,” says Crisan.

In corporations, migration is “very slow, almost nonexistent” because they still need to get used to the idea of outsourcing some internal services – which most are considering right now – but it will take at least one year before it becomes reality,” she forecasts.

Other experts paint a rosier picture. “Our estimations show that approximately 25 percent of SMEs have implemented solutions on public cloud and this percentage is growing. For corporations, all those we have information about have adopted the private cloud,” says Alexandru Molodoi, chief technology officer at Gecad Net.

IDC estimates cloud investments in Romania will have a growth rate five times higher than the growth of IT investments more widely, notes Ficleanu.

Over 37 percent of SMEs in Europe believe cloud computing solutions will become normality over the next 12 to 18 months, according to a Vanson Bourne survey carried out for Microsoft, which interviewed 2,100 owners of SMEs in 21 European countries, including Romania. “This indicates that for 70 percent of the Romanian companies represented in the survey, IT plays an important part in developing their business,” comments Ficleanu.

While the public cloud is used mainly in the services sector – consultancy, advertising, legal and logistics – the private cloud is in play mainly in the fields where there are still regulations that do not allow the storage of data outside the company network, such as financial institutions, says Molodoi.

An SME will approach the issue of taking up cloud computing differently from a corporation. SMEs have a faster cloud adoption rate since they have a much simpler IT infrastructure. They also completely lack or have only a small IT department, says Gogoneata.  In an SME, the decision chain is much simpler since they can benefit from premium IT services at costs that are otherwise prohibitive. Lastly, the services offered by local SaaS providers are lower quality, he explains.

Cloud floats up the chain of command

At the level of decision makers, the financial department sees cloud as a very interesting alternative, Gogoneata notes. “Generally, they are not keen to pay the large sums of money needed for an IT investment. For this reason, any means to cut costs and make gradual payments for a service is much more advantageous. What they do not always agree with is that payments must generally be made with a company card registered on the Microsoft website,” he says.

However, things are a bit more complicated for CIOs, because “while they may be glad to be rid of part of the responsibility of managing IT and cost reduction solutions, there are IT employees who need to focus on other things or change their job after the company transfers to cloud,” he says. “To be honest, cloud technology claims to make IT change its focus to business processes but not any IT person and not any company can do this. For instance, not every network administrator can change profile into business analyst,” Gogoneata points out. A wider implementation of cloud services in Romania can be encouraged with the adoption of a coherent set of favorable public policies.

“As long as there are no public programs or legislation to support the use of the cloud model, to help startups pick solutions, as long as there is no public administration cloud, wide adoption will not happen. This will probably take another two-three years as the government should do a study on the benefits of using services in the cloud, and adopt measures that act as incentives for cloud innovation,” says Crisan. They give the example of France, where the OSEO program finances innovative companies and startups, and is widely used by companies in the field of technical innovation.

All in all, cloud adoption does not walk an untrodden path. “The banking system keeps our financial resources safe and confidential and offers services. Even though we were cautious at first with respect to the safety of our money, we saw that it worked. The cloud works by the same principle – it keeps our IT infrastructure and provides services in technology. Moreover, concerns regarding the security and confidentiality of the data can be solved through contractual stipulations,” explains Ficleanu.

Public sector not so comfortable on the cloud

Quoting a global KPMG survey, Ficleanu says that 29 percent of public sector representatives have developed a strategy concerning the cloud, 24 percent have already tested cloud services while 19 percent have implemented one or more services.

But while the private sector spearheads cloud adoption, the public sector approach is cautious in Romania, to say the least. “Unfortunately, implementing cloud solutions in the public sector in Romania is not feasible, due to acquisition procedures that do not directly allow such implementations. Various artifices could be made but they would not be fair in respect to the acquisition and real competition among providers,” says Gogoneata.

About two or three years are necessary for a more widespread implementation of cloud services in the Romanian public sector, forecasts Crisan. “A few strong Romanian cloud companies that support such projects are needed. Setting up a public cloud for administrative services based on the example of G-Cloud in the UK or the Andromede in France can be done,” she says.

Cloud computing is stipulated as an objective in the Digital Agenda strategy currently being drawn up at the Ministry of Communications, which could be completed in 2013. “Since the new cabinet took over, the ministry has restarted several inter-operability projects, which is paramount for the development of cloud services (the inter-operability portal for SMEs) but the stipulations of these projects are not outlined enough publicly,”  says Crisan.

Romania should follow other European countries that have implemented cloud in the public administration. “Romania abides by the same rules as other European states and if Germany, France, UK etc. do it, it means we have to provide the functional framework, the necessary policies, certify the suppliers of services accordingly and make sure that the entire channel from the entrypoints or endpoints to the cloud is secure as well,” says Zirnovan.

The EU is currently working on a framework to standardize public cloud solutions, Molodoi notes. “After this framework of standards is adopted and implemented, we will probably witness the emergence of public cloud solutions in the government sector. Public companies need a lot of persuading to store information in other data centers than their own, and when they do, these data centers must meet a series of very strict criteria,” he says. But for now, things are moving rather slowly in the public sector. “From our experience, the adoption of cloud services in the public sector lags behind the rate of adoption in the private sector,” says Matei.

Security, the crux of the matter

Safety is a top concern among companies. “Security, confidentiality of data and reliability of services are major topics in our discussions with clients. This is good because it is important. After all, the moment a client suggests using business solutions in the cloud, this requires a new approach in their company’s IT strategy. They need no longer think of back-up, contingency and storage, but it is right to ask questions about security, reliability and confidentiality when they select their provider, but also to choose to re-size the internet bandwidth, for instance,” says Matei.

The threats they are exposed to depend on the type of cloud they choose. “While in the private cloud, the threats can come from inside, depending on the user and on the use of the infrastructure, in the public cloud threats are a bit more complex – data may get corrupted or lost if the cloud service crashes, service availability and resilience are issues, there is unclear liability if something goes wrong, and a lack of visibility or confidence in the capabilities of cloud providers,” says Zirnovan.

As far as security in the public cloud is concerned, Zirnovan explains that it depends on what one keeps in the cloud and how one manages the information. “We are talking about data protection (including access and encryption), identity and access management, network protection, endpoint protection and the area of security services,” he says.

Molodoi explains that in the public cloud, applications are accessed and run directly on the servers of the producers. “We usually explain to clients that their data is much safer in the data center than if they are kept on a company server in inappropriate conditions due to lack of budget. In the private cloud, they set their own security policies and we advise them on choosing the best ways to protect their investment and the company information,” he says.

otilia.haraga @business-review.ro

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