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Cloud Computing As A Strategic Economic Tool: Looking Beyond The Recession

CloudNews
by Bryan Doerr
, 16 Nov 2009News

Although times continue to be difficult for many companies, there are early signs that the global economy is starting to improve. This recovery will be neither swift nor easy.

However, after more than a year of dismal news — precipitous declines in revenues, plummeting stock prices and scarce capital — businesses are beginning to ask “what’s next?” in more optimistic tones.

There is a correct, two-part, answer to that question. First, companies cannot relax their vigilance in eradicating excess costs from their IT operations. Even when budgets start to expand again, you must resist the temptation to go back to old spending habits. You must continue to scrutinise your capital investments as well as ongoing operational expenses for ways to contain or even cut costs further.

Of the private sector respondents to our survey of global IT leaders, 39 percent said that if they had anticipated the recession, they would have cut costs. Their next highest priority? To work more closely with suppliers to achieve better IT infrastructure efficiencies (17 percent).

Interestingly, public sector organisations would have cut costs and worked with vendors for efficiency in equal proportions (Figure 1). In general, although the exact numbers varied considerably from industry to industry, the trend was clear: enterprises, in hindsight, wished for greater cost and operational efficiencies.

The findings also revealed that there’s a tremendous amount of resource wastage in today’s IT environments. Forty-four percent of respondents said their maximum server utilisation rate was less than 55 percent and 66 percent said it was less than 70 percent.

However, even these numbers turned out to be deceptively positive. A follow-up question revealed that more than a third of businesses reached this peak capacity at most once a month; another 25 percent only reached it two to four times a month.

Figure 1. IT Leaders Wish They Had Better Prepared for the Recession Figure 2. Most Organisations Aren’t Utilising Hardware Effectively

In addition to cutting costs and improving efficiency, companies must seize the initiative to investigate how to best enhance their agility and flexibility in ways that will enable them to seize the opportunities presented by a stronger economy.

Taking the first action without following it up with the second is risky. For starters, you risk losing muscle due to overly aggressive cost reductions.

Attempting to pursue the second agenda without the first will put IT in the same scenario it was in before the recession: at risk of being viewed as an expense centre that adds little strategic value to the business and its ability to grow revenues.

IT leaders already know the way to meet both these demands. When asked to agree or disagree with the statement “Cloud computing will play an important role in the future of IT in helping companies gain efficiencies and reduce cost,” more than 70 percent agreed (Figure 3).

As a strategic weapon — to both cut costs and enable competitive advantage, cloud computing delivers results and is increasingly recognised as the IT infrastructure platform of the future.

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