October 3, 2012 - Management consulting firm Navint Partners LLC has released a report and white paper documenting the success of cloud computing adoption when it comes to cost savings. The key finding: 90 percent of participants in a survey reported they had received 100 percent of forecasted savings when their companies adopted cloud technology.
The sampling of CIOs across North America included client and non-client executives, mostly from global organizations with more than 5,000 employees, offering a view into the ways large organizations view cloud adoption, according to Navint. Navint further engaged Robert Summers, the CIO of tax preparer Jackson Hewitt, to dig into the findings.
From a list of forces driving cloud adoption, survey respondents indicated that hardware costs yielded the most pronounced benefits. This includes the “true” costs of hardware ownership including upgrades, onsite staff and data center costs.
Summers and John Robosson, senior partner at Navint, agreed that skepticism toward near-term savings benefits was misplaced. Though many executives and business managers initially expected five or more years to fully realize the tangible benefits of cloud implementation, respondents indicated cost savings came in short time frames.
Part of this is simply because displacing costs by locking in contracts for 12 or 24 months can recognize savings faster than purchasing and depreciating hardware over a period of time, Robosson tells Information Management. “There’s so much activity in the infrastructure and operations space right now and companies are perpetually in contract mode, so when you look at entertaining a cloud-based contract you are just quantifying costs. You can easily ask yourself, ‘should I go on premise and procure additional hardware and facilities or go the outsource route?’ and the savings are a function of contractual substitution.
Likewise, savings can be carried across related cost centers including infrastructure, security and disaster recovery. This is more possible as service providers mature and service levels ensure companies can contract a provider “who’s better at it than you ever will be,” Robosson says.
Process efficiencies improve internally when services are contracted, said 64 percent of those CIOs surveyed, especially in areas where mature services like payroll providers or CRM and even ERP financial service providers have established records of experience and competency. “You bake in the process standardization opportunity when working with these companies that are in some cases doing business with tens of thousands of clients,” Robosson says.
The process efficiency template that comes from working with a SaaS provider is powerful when applied to areas where roles can be repurposed. Though IT is not widely viewed as a competitive differentiator, 80 percent of respondents said cloud technologies gave their organizations a competitive advantage, which Robosson may reflect their ability to allocate their resources to other areas, thereby supporting competitive advantage.
On the downside, security concerns remain, though this is another area where organizations rationalize their own competency versus that of a provider, says Robosson. “You can look at any survey out there and talk to any CIO and they’ll tell you security is the number one concern. That’s going to be number one period, whether you’re operating on premise solutions or hosting something.” He says many SaaS providers can argue that their own compliance requirements make them more secure than home-office departments.
There is a lot of news in the press about securing personally-identifiable information in the cloud and that can't be played down, Robosson says. "Obviously that is a critical concern for any organization, but again, consider that payroll providers have been providing their own services for 40 years and draw your own conclusion.”