Case Study

Cloud Computing: The Journey Yet To Begin

Cloud computing is arguably the most important innovation the IT industry has seen for many years—comparable to the move from mainframes to personal computers. The benefits to enterprise users of cloud-based services are potentially significant, including savings from the reduction of fixed infrastructure costs and greater flexibility to scale IT resources up or down as circumstances dictate. Yet the path to a cloud-computing future is littered with obstacles, according to Dimension Data, a South Africa-based provider of IT software and services.

In developed markets, and particularly the enterprise sector, IT customers still have many reservations about the cloud. "Some of our clients have major security concerns and are not prepared to give up their core applications at this stage," says Brett Dawson, Dimension Data's chief executive. Many large corporations are also burdened with ageing, bespoke IT systems and have made little progress on standardization and virtualization of their applications. "These companies need to adopt a lot of the cloud architecture principles internally before they can move to the public cloud," he says.

Mr. Dawson reckons most big enterprises, as well as public-sector organizations and governments, will need to spend at least another year on consolidating their IT activities before the journey to the cloud can truly begin.

High-profile security breaches at Sony and downtime at Amazon earlier this year will no doubt cause even more "head-scratching" at already apprehensive organizations, says Mr. Dawson. In response to that, he believes, a new class of cloud provider will appear over the next couple of years, offering guaranteed levels of service with the enterprise sector specifically in mind. Until then, enterprises may continue to favour the use of so-called private clouds, which are operated for a single organisation. These promise some of the economic benefits of the more open public cloud but entail less of the risk.

By contrast, in emerging markets, and among small and medium-sized organizations, there is greater enthusiasm for the cloud. "It allows these companies to deploy IT systems without the same degree of cost and complexity as more traditional solutions," says Mr. Dawson. Of course, cost savings are a big incentive for the enterprise sector as well, but many start-ups and younger organizations do not have to make such a difficult transition from those older systems in the first place.

The major constraint in emerging markets is likely to be the basic communications infrastructure—or rather the lack of it. Mr. Dawson applauds the installation of new submarine capacity off the coast of Africa, saying this will help to lower the cost of Internet access and spur take-up of cloud services. But he thinks a lot of emerging markets still need more telecoms deregulation and investment in fixed-line and mobile networks.

Mr. Dawson said he would like to see more countries adopting bold approaches like Europe and the US which would facilitate the move to cloud computing. There are some notable examples: in Brazil, for instance, the government is promoting the cloud as part of its modernization initiative. Yet there has been limited international progress on creating a legislative environment in which cloud computing can flourish. Laws prohibiting the storage of financial data in another jurisdiction, for example, could be seen as a further brake on the rollout of cloud computing.

In the meantime, cloud innovators will continue to find answers. "Because of these laws, providers serving the enterprise sector will need infrastructure in multiple geographies, which is a challenge in terms of complexity and management," says Mr. Dawson. "It's another reason why I think an enterprise-grade service provider will emerge in the near future."