Monday, March 16, 2009

S'pore firms turn to cloud computing

Business Times - 16 Mar 2009

S'pore firms turn to cloud computing

Two studies show that there is a high level of interest in this cutting edge technology which can reduce capital expenditure and costs, reports AMIT ROY CHOUDHURY

CLOUD computing, which promises to reduce capital expenditure and operational costs, is being examined closely by Singaporean companies, two independent surveys have revealed.

Cloud computing refers to the delivery of services over the Internet by a service provider or vendor, with the 'cloud' referring to the Internet.

It is closely related to some of the technologies that chief information officers (CIOs)are most interested in, such as Software-as-a-Service (SaaS), utility computing and resource virtualisation.

According to IDC, in Singapore there is a high level of awareness of cloud computing, with nearly 80 per cent of companies surveyed saying that they knew about cloud computing.

However, another survey by Avanade shows that Singapore still lags behind the US in the adoption of cloud computing. Avanade is a leading technology integrator working on the Microsoft Enterprise platform.

The Avanade report noted that more than 60 per cent of the companies are not familiar with cloud computing and how it can benefits their organisation. Only about 10 per cent of the companies are beginning to test and use it.

IDC's findings broadly corroborates this last point. According to the research firm, 40 per cent Singaporean respondents said that the 'cloud' was either just vendor hype, renaming of an old concept or still too immature to judge its value.

Also, 30 per cent said that it was going to be a useful new service delivery model, with 20 per cent saying that they were either piloting or using cloud computing already.

IDC's Chris Morris told BizIT that there is much interest in cloud computing amongst both end-user and vendor communities in Singapore.

'Both see it as a way of reducing their costs of delivery, and funding expansion of services or new projects within now very constrained Capex (capital expenditure) budgets . . . That cloud works on an Opex (operational expenditure) basis with limited or no up-front charges is very attractive to them,' Mr Morris, who is IDC's Asia-Pacific research director for Services Research, said.

Avanade's Tia Too Seng added that about 60 per cent of Singaporean companies surveyed in their study believe that cloud computing is a real technology option and can help to reduce overall business cost.

'However, most companies are not embarking on the use of cloud computing yet because of their uncertainty over security of data, control and service level. Service providers and vendors will need to do more to educate and create the awareness and provide more assurance before the adoption rate will increase,' Mr Tia, Avanade's South-east Asia chief technology officer, told BizIT.

Mr Tia observed that with the current economic downturn and companies looking to lower their IT expenditure in Singapore, Avanade feels that more companies will seriously consider using cloud computing 'if they are more assured by service providers or vendors over security of data and service level'.

IDC's Mr Morris noted that in Singapore, 'there is a serious intention to counter recession through innovation with new technologies like cloud computing'.

Avanade's Mr Tia added that although his company hasn't yet seen a rush of companies implementing cloud computing in Singapore yet, there is certainly an increase in interest.

'There's no doubt that cloud computing has a compelling value proposition in helping companies to reduce their IT investments and build a flexible IT infrastructure,' Mr Tia said.

He added that given the present economic downturn, companies are looking to do more with less (investment) and some of these companies are starting to look at how to include cloud computing as part of their IT plans.

'Cloud computing does require a complete rethink of technology infrastructure and changes how companies make IT investments, hence our advice is for companies to plan and test out on a smaller scale before they leap into wider implementation.'

Singapore's public sector has shown a very high level of interest in cloud computing, according to IDC. Mr Morris noted that the public sector sees it as a way of reducing costs and delivering more and better services to their constituencies.

'The education sector is also particularly attracted to the cloud concept because of cost saving potential,' he added.

Market watchers with whom BizIT have spoken to in the past have said that the Singapore Ministry of Education's proposed outsourcing project for around 100,000 front-end computers is expected to include technologies such as cloud computing, especially for services such as e-mail.

Mr Tia noted that the Avanade survey did not see any significant differences among the different verticals among Singapore companies in their interests in cloud computing.

'We do, however, see a difference in the type of applications that they will consider using cloud computing for,' he added.

Regardless of verticals, companies do consider using cloud computing for applications that are 'commodity' in nature, for example e-mail, office applications, or even customer relationship management (CRM) applications, Mr Tia said.

However, the Singapore companies are generally not yet considering the more sophisticated applications that require higher level of security or control, the Avanade official noted.

According to IDC, worldwide IT spending on cloud services will grow almost threefold, reaching US$42 billion, by 2012.

The same survey shows that in Asia-Pacific excluding Japan (APEJ), 11 per cent of the respondents are already using cloud-based solutions.

A further 41 per cent indicated that they are either evaluating cloud solutions for use in their businesses, or already piloting cloud solutions.

When asked about their opinion of the current state of cloud computing, 17 per cent of the respondents stated that although cloud computing is very promising, there are currently not enough services available to make it compelling.

IDC's Mr Morris noted that future uptake of cloud computing looks strong in APEJ.

'Over the next three years, as the use of cloud services expand . . . it becomes critical for IT vendors to develop strong cloud offerings and play a leadership role in aligning their new cloud products and services with their traditional offerings, partner ecosystem, and customer and market requirements,' he said.

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