Among the predictions about the future of the cloud offered at a recent technology event in San Francisco: The role of IT will become more business-focused as routine operations are off-loaded. Some very large companies will migrate all of their technology infrastructure to the cloud, sooner rather than later. And computing power will follow the same trend as electric power did a century ago, becoming a utility delivered from industrial-grade plants (an idea popularized by Nicholas Carr’s 2008 book, The Big Switch ).

Significant progress toward some version of this future already is in evidence, as shown by our study, Unlocking the Cloud. And companies are moving quickly to further their cloud presence–92% of our survey respondents expect to achieve moderate to significant improvements in speed and efficiency of processes via the cloud.

As the chart shows, key business functions such as HR and finance will see rapid cloud adoption in the next three years, and companies expect to see significant gains in productivity, innovation, and efficiency as a result.

Our boldest prediction, made in the paper “Connecting the Cloud,” concerns the power of networked clouds. We say that cloud-derived advances to date are “only incremental gains compared with those promised by the merger of disparate clouds, whether operated by different groups within the same company or by external business partners.” Integration of cloud-based operations into business networks promises a variety of payoffs, including better performance across functional areas (e.g., supply chain, purchasing, payments); increased ability to partner with other firms and take advantage of new technology; and access to new markets and customers.

Nobody who works in technology thinks this will be a picnic. Chuck Hollis, chief strategist for VMware, has posted at his blog a litany of cloud-related woes suffered by vendors and customers in the early days of the transition. But he also sees a way forward, to a market where services tailored to business needs become essential to enterprise users. Here, high-level capabilities, not price, will emerge as the key differentiator. Writes Hollis, “As an IT vendor, you’re known by the quality of your people; I can’t [see] it being all that different in an enterprise public cloud world.”

The reward from open and integrated cloud networks is return on investment that is greater than the sum of its parts.

Cloud integration will dictate the benefits or setbacks cloud users see from their investments, but capitalizing on cloud-integration strategies requires a significant amount of groundwork. Cloud leaders typically share several good habits when it comes to cloud networking, including:

  • Building vendor networks. Leading organizations look to build vendor networks rather than taking a one-off approach. One of the benefits of building cloud platforms is the simplicity of adding services. Without adequate planning, however, a random collection of solutions can emerge as a problem. In many cases, organizations benefit by selecting a vendor as a core cloud provider and filling in additional needs with boutique solutions. The integration of services is crucial.
  • Engaging in ongoing reviews. Maintaining an inventory of cloud services and understanding what is in place at any given moment is essential. It is also important to identify any unauthorized services that a department or employee might procure. In the end, IT executives must ensure that all services are in sync and security does not fall between the cracks.
  • Centralizing controls and end-to-end visibility. It is critical to put monitoring and controls in place in order to gauge performance and understand how systems and data are being used. It also is important to validate service levels and confirm vendors’ claims that their systems are realizing the terms of service-level agreements.
  • Relying on KPIs. Key performance indicators are an essential component in cloud environments. Although every organization is different and each must determine which KPIs are most critical, common yardsticks include availability; capital vs. operating-expense costs; workload compared to utilization; SLA response error rates; and revenue efficiencies.
  • Recognizing that governance and security are critical. Strong single-sign-on authentication is essential, as are security tools, including firewalls, intrusion detection, data encryption, and endpoint security. An enterprise must also embrace a lifecycle approach to data—assigning tiers and classifications—so that it can be used effectively while managing costs.
  • Building a pool of IT talent. It is critical to hire and develop talent that matches requirements. Clouds represent different challenges than traditional client-server environments. Finding talent that fundamentally understands clouds and how they integrate with existing IT assets is indispensable.

Today Oxford Economics joined SAP for a discussion of how the cloud is changing business.

Participants included:

Martin Heisig , Senior Vice President of Infrastructure Services and SAP HANA Enterprise Cloud Operations

Christian Horak, Global VP of Product Marketing for SAP Business ByDesign, SAP Cloud for Financials & SAP Cloud for Travel and Expense

Edward Cone, Managing Editor/Senior Analyst, Thought Leadership @ Oxford Economics

and Adrianna Gregory , Editorial assistant for Thought Leadership @ Oxford Economics.

You can watch our hangout on youtube here .

Cloud security is a challenge, but businesses can take steps to reduce risks.

Originally posted on on September 18, 2013

Security remains the primary concern for businesses turning to cloud computing. According to a recent article from CIO Magazine , many CIOs are reluctant to adopt cloud services because of security threats. Several CIOs who spoke at the Security Insights forum (held in April in Sydney, Australia) explained the reasons behind their conservative approach to cloud platforms. Ramsay Health Care CIO Mick Campbell cited data leaks and the resulting reputational damage as a barrier to cloud adoption, and others expressed similar concerns, along with nervousness about inefficient government regulation and confusion over how and where data is stored.

These concerns are in line with the fears expressed by executives in a study conducted by Oxford Economics for SAP, Protecting the Cloud. Survey results show that security is the top concern among business leaders adopting cloud platforms.

Protecting data is an ongoing challenge, but there are ways to mitigate security risks:

  • Map out business processes to understand potential vulnerabilities.
  • Classify data and know how it is being stored and shared.
  • Recognize the potential cost of a data breach.
  • Identify gaps in existing compliance and security policies.
  • Increase the use of education and training to keep up with rapidly morphing security threats.
  • Avoid a locked-in approach—do not let vendors dictate a rigid set of proprietary tools and technology.

CIOs who express concern over cloud security have already taken a step in protecting their businesses: They are aware of the potential costs—financial and reputational—of a security breach. Armed with this awareness of their vulnerabilities and of the value of their data, CIOs should be able to outline a strategy for protecting cloud security that works for their organization’s unique needs. With a tailored and flexible approach to cloud protection, they will be able to experience the benefits of cloud computing.

“While there is a tremendous opportunity for CIOs and other top executives to be champions and brokers of cloud computing, there are also tremendous compliance and security risks that line-of-business executives don’t want to handle—and many aren’t equipped to deal with.”

–John Considine, Chief Technology Officer at Verizon Terremark.

Security is the top concern among executives moving business functions into the cloud. The use of mobile environments is an increasing concern for companies. Internal and external sources both pose a threat—companies must be fully aware of how vendors are migrating and storing their data, and they also must prevent internal breaches, whether accidental or planned—this risk is heightened by the advent of BYOD policies.

The most successful cloud vendors take a holistic approach to security, building defenses into the fabric of their cloud platforms from the beginning and constantly reevaluating their needs as technologies and business requirements change.  Here are a few approaches cloud leaders typically take to their security strategies:

  • Tearing down silos. In many instances, gaps and breakdowns occur when different departments or divisions procure cloud services—sometimes in a haphazard or ad hoc way. An organization must integrate services and platforms to ensure that tools, systems, and strategies function comprehensively.
  • Adopting strong integration tools and practices. Well over half (58%) of respondents have purchased integration tools. Almost as many (55%) have a dedicated team focused on cloud integration, while 52% use integration-service providers. All three of these approaches are crucial.
  • Developing solid communications with cloud providers. It is important to understand roles and responsibilities, and to know what is included in service-level agreements (SLAs) and what third-party certifications a vendor has achieved. Companies should be well informed regarding what security protections are offered, particularly when tiered service options exist, and how and when maintenance, patches, and upgrades will take place.
  • Implementing data-centric controls. Once an organization has identified and classified its data, it is essential to have a strategy to ensure that the data is managed and stored in a secure way. This may include the use of encryption, firewalls, and numerous other tools. Virtualization and cloud make this task more difficult—but even more essential. Visibility into systems—including hosted services—is key.
  • Applying role-based authentication. A cookie-cutter approach to authentication is an invitation for problems. Secure access—knowing that only those with the right credentials can access data—serves as the foundation of an effective cloud strategy.
  • Using VM (virtual machine)-specific tools. When it comes to clouds and cloud platforms, data boundaries and separation are everything. The use of physical and virtual firewalls—as well as other security tools that ensure that data isn’t inadvertently shared—is a vital component.
  • Insisting on complete oversight. A secure enterprise requires full knowledge of operations at any given moment. This translates into a need for robust audit capabilities, user tracking, ongoing risk assessment, regular compliance inspection, and consistent reporting. In some cases, compliance must function across multiple organizations.
  • Maintaining physical security. A vendor or hosting service must have strong physical protections in place, including access controls and 24×7 video surveillance and monitoring systems that can detect unauthorized access to server rooms and other sensitive areas.

By the end of this year, more than half of all internet activity will involve smartphones, tablets, laptops, and other mobile devices, according to consulting firm IDATE. Companies cannot afford to ignore this, so they are investing in mobile strategy and tying it in to their cloud platform plan with the hopes of increasing productivity, brand loyalty, and revenue. Above all, businesses are prioritizing customer-facing strategy in mobile clouds—customer reliance on smartphones and tablets demands it.

Here is a look at the benefits companies expect to see from focusing on customer-facing mobile strategy, with responses broken out by geographic regions:

Source: Oxford Economics

“Mobile is going to take over in the next couple of years, and companies will have to pay attention to that fact.”

–Shawndra Hill, operations and information management professor at the University of Pennsylvania’s Wharton School

Companies are investing in mobile technology and expect to see rewards in the next few years. Several key factors drive optimal results from cloud-platform investments.

  • In order to take advantage of the benefits of mobile tools and technologies, organizations must leverage a hybrid platform approach. One of the most effective ways to put clouds to work in a mobile environment is through a platform-as-a-service (PaaS) model. It provides a pre-built infrastructure that can simplify provisioning, development tasks, and more. It also reduces or eliminates patching, upgrades, and an array of administrative and technical tasks.
  • Customers must be served in real time, and mobile systems must connect with on-premises systems. Mobility demands a different mindset and approach. Customer, employee, and partner expectations demand solutions that stream data on demand. It is critical to connect databases and enterprise applications with newer web and mobile tools—including marketing, human resources, and finance—and allow data to flow in every direction. Cloud platforms remove infrastructure tiers and obstacles that complicate this task.
  • Online and offline support is critical. Because users aren’t always connected and groups may use the same applications and databases, it is critical to design systems so that they are able to sync data effectively. Clouds remove many of the obstacles and constraints associated with conventional databases stored on servers. They create a distributed computing model that fits the collaborative environment.
  • Silos and departmental boundaries must be breached. Any cloud initiative requires cooperation and collective planning. Clouds increasingly drive niche business tasks within different departments. However, the value of data is magnified when enterprises can connect systems and clouds to create a more holistic and integrated approach.
  • There is a need for end-to-end visibility and lifecycle management. An enterprise must have visibility across clouds and micro-clouds in order to understand data movement and workflows. It is critical to understand the value of data throughout its lifecycle in order to build the right systems and security.
  • Analytics and reporting are at the core of an effective mobile cloud. It is necessary to track usage by mobile device, application, versions, content, and consistency in meeting performance needs. In addition, there is a need to track requests, and understand performance and response times in order to tune performance and eliminate bottlenecks. Finally, there is a need for end-to-end traceability to troubleshoot problems.
  • Organizations require robust security. Authentication, firewalls, VPNs, data encryption, mobile device management (MDM), data leak prevention (DLP), and other systems are vital. What’s more, an enterprise must connect to multivendor on-premise systems and external cloud services without any gaps or breakdowns. Clouds require a data-centric view of security.
  • Talent is a key factor for success. Organizations must find new talent or retrain existing talent to put a cloud platform to work. The task of building new systems requires fundamentally different thinking and approaches than traditional IT models. It also demands different skills and an outlook that is focused on rapid deployment and managing highly flexible and modular technology components.

In addition to our global survey of IT and business executives, we interviewed several leaders across different industries for the Unlocking the Cloud project.

Among those who spoke with us about what cloud does in the real world were the following executives:

John Rote , Vice President of Product and Experience at Bonobos

  • Key quote: “What’s attractive about cloud services is that they can be switched on, scaled up, scaled down, and reconfigured quickly, and with few IT resources. It’s possible to go from State A to State B without having to navigate an intermediate state.”

Lincoln Wallen , Chief Technology Officer at DreamWorks Animation SKG

  • Key quote: “A shared-service, distributed-cloud model gives us the flexibility to know who is doing what at any given moment and fully understand what infrastructure is and can be applied to any given problem at any given time.”

John Considine , Chief Technology Officer for Verizon Terremark

  • Key quote: “As more and more people use mobile devices and access data from remote offices and the field, there is a strong argument that data shouldn’t reside in the data center. It should be stored in the cloud, which, by definition, is distributed. This makes data much more accessible and simplifies IT requirements.”

Feargal O’Sullivan , SVP and Head of Sales, Americas, at NYSE Technologies

  • Key quote: “Unlike a generic cloud-based environment, where every node or VM in the cloud needs to be able to talk to any computer, anywhere in the world over the Internet, this cloud requires a much higher level of security and therefore cannot be accessed directly over the Internet.”

Roger MacFarlaine , Vice President, Technology & Systems at Mövenpick Hotels and Resorts

  • Key quote: “The question isn’t whether to be in the cloud—this is inevitable. It’s how to build the best security possible into a cloud environment. It’s important to start with the mentality that you will find a way to build in protections.”

More from these executives in our on cloud adoption, mobility, security, and integration.

Originally posted on on September 13, 2013.

The recent study SMEs: Equipped to Compete , conducted by Oxford Economics for SAP, explores the ways small and mid-size businesses around the world are leveraging technology to boost innovation, strengthen customer relationships, improve agility, and expand their businesses. Based on an expansive global survey and a collection of in-depth interviews with SME executives, the report highlights key trends within these enterprises. Among the key findings: SMEs are defying the stereotype that they are technophobic and only think locally. In fact, they are transforming themselves in fundamental ways and thinking globally, allowing them to compete with both domestic and multinational rivals. Key to their transformation is their aggressive investment in new technology, including cloud platforms.

Cloud platforms allow these smaller businesses to automate systems, processes, and interactions in ways that were previously impossible, leveling the playing field against larger competitors.  They help companies roll out new services that connect all their data—and their partners’ data—seamlessly and efficiently. Cloud computing is a key component of SMEs adoption of new technologies, with 18% of executives citing it as a tool for better customer service and 25% attributing to it improved product and service development.

Yet cloud adoption among SMEs is less robust than one might expect. Among the key factors holding it back are security risk, data consistency across applications and job roles, and recruiting people with the necessary skills to support this expansion. Additionally, existing employees often need prodding to use new technology and lack understanding of cloud benefits. Regardless of the potential security risks and the difficulty of finding employees with the right skill sets, wider adoption of cloud will be a key to the global agenda and technology transformation expected to power SME growth over the next several years. The companies that quickly adopt a comprehensive approach to protecting and integrating cloud platforms will benefit most from them.

You can read more about these trends in the Oxford Economics study SMEs: Equipped to Compete . How are cloud platforms transforming your business?