OK, first things first: cloud is definitely here to stay! Almost every CIO (98 per cent) questioned by Xantus for our latest research report had already investigated cloud services for their organisations; almost a quarter are now using them, with a further third planning to join them within the next six months, rising to 73 per cent within the next two years.

That equates to a pretty hefty budget spend on cloud computing, with anything up to 40 per cent or more of IT budgets already paying for cloud-based activities. There is an expectation of Return on Investment; two thirds felt that an ROI of 10 -20 per cent was realistic.

So, it’s clear that everyone has big expectations of cloud and most can see a compelling proposition in the long term. However, there remains a significant challenge in seeking clarity from vendors as to what they are actually selling. Almost all CIOs (86 per cent) felt that vendors are using the term ‘Cloud’ generically to sell products and services without being specific about what it means, and almost half appealed for greater differentiation in products.

Equally, while many public cloud vendors are offering a consumerised model – the key questions are - how big will the take up be? Have they got supply and demand right? Who’s going to grab market share? One view holds that too much tin is going into data centres and the whole global cloud IT estate is going to look a lot like 3G did immediately after the bandwidth auction. If that’s the case, then pricing will be very aggressive as vendors seek users for their newly-built mega datacentres.

A flexible friend?

Although agility, flexibility, business continuity and data recovery were all cited as key benefits of migrating to cloud services, the apparent ease of accessibility to generic, non-business-critical applications in The Cloud may be a double-edged sword. In Xantus’ experience, a number of firms see cloud as a very disruptive technology that IT has to react to.

Business users, familiar with Facebook and LinkedIn at home, struggle to understand the inability to have the same functionality in the office. If IT doesn’t react fast enough, other business areas are already voting with their credit cards and using cloud services for projects and specific business requirements.

Dark clouds

While the cloud computing revolution is underway, a number of practical hurdles need to be overcome before CIOs, their organisations and Boards, commit wholesale to cloud solutions. The single largest internal block to implementation appears to be integration with existing IT estates. Closely linked to this is the complexity of the task, while almost one third of CIOs remain concerned about losing control of business applications or preference over their own assets.

Surprisingly, security – often cited in the past as a serious stumbling block to cloud IT – only ranked equal fifth amongst respondents in terms of implementation. However, once ‘in the cloud’, compliance and audit (which includes security) becomes the most significant obstacle to cloud management for more than half of all CIOs.

Despite the budget CIOs already claim to be spending, it is still taking longer to convince the private sector that cloud gain is worth implementation and management pain. Several CIOs of major corporates stated they knew the benefits were out there, and it was probably only a matter of time before they entered The Cloud, but they still needed to be shown a clear value proposition or specific service to seal the deal.

Silver linings

On balance, there is plenty of work still to be done to capitalise on the cloud’s business potential. There is a school of thought, to which I subscribe, that the term ‘cloud’ may fairly quickly disappear, becoming just another mainstream IT solution approach in the same way that ‘e-business’ has just become ‘business’

However, a lot of clients are struggling with the technical and financial costs of integrating cloud into their existing IT estate, evidenced by the low level of potential partners. Vendors that solve this issue will win accounts quickly and establish some serious market share in cloud.