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Cloud Services Providers Confident Despite Questions Around Cost Savings, Control, And Security
KPMG survey finds providers see cloud revenues comprising significantly larger share of their total revenue due to migration of more sophisticated applications
By: PR Newswire
Dec. 6, 2012 08:01 AM
SANTA CLARA, Calif., Dec. 6, 2012 /PRNewswire/ -- Cloud-based services revenue in two years is expected to comprise nearly twice its current share of provider revenue, even as providers believe that showing evidence of cost savings is the biggest barrier to cloud adoption, according to the 2012 Cloud Providers Global Survey from KPMG International.
Revenue from business users' migration to cloud in the coming two years will be increasingly for data-intensive applications, such as business and data analytics, content management, customer care, and operations and manufacturing, say providers in the survey. They expect the shift to occur despite users' ongoing concerns over loss of control and data security, which are in addition to the providers' challenges of proving savings and the business case.
Nearly six out of 10 providers say cost reduction is still the chief reason most business users migrate to cloud, yet almost four out of 10 providers say proving cost savings is their biggest challenge. The challenge is further complicated by the fact that only 39 percent of providers believe that users have realistic expectations for cost savings in the migration to cloud, while 19 percent believe users don't.
Addressing the expectations gap on cost savings is just one of the interrelated customer challenges emerging as users embrace cloud for more strategic reasons. Providers see the top three challenges as: showing stronger evidence of cost savings (38 percent), devising usage-driven pricing (31 percent), and helping clients develop realistic business cases for switching to cloud (27 percent).
"While providers are seeing the challenges of a maturing, yet still relatively young, market, we're at a pivotal point in the evolution of the cloud ecosystem as users become more comfortable with a variety of cloud applications," said Gary Matuszak, partner, global chair and U.S. leader for KPMG's Technology, Media and Telecommunications practice. "Leading cloud providers know they must evolve to provide a new level of scale, capacity and capability."
Prevailing User Concerns
Ongoing challenges with cloud adoption may point strongly to the increasing need for more tightly defined parameters on service level agreements (SLAs).
Presently, 59 percent of providers surveyed have service level commitments in their cloud SLAs. Over the next three years, 68 percent say they will have commitment parameters in SLAs, and 82 percent expect data security to be the single-most important SLA parameter.
The Evolving Cloud Ecosystem
"The anticipated migration of core systems and critical infrastructure to cloud in the next two years will be complex undertakings; users will be requiring if not demanding strategic direction and guidance from providers across a broad range of areas," said Tom Lamoureux, Global Advisory Leader, KPMG Technology sector. "The lines are blurring across the various types of cloud services; users need and want to understand cloud's value and immense power much better than they do."
Understanding of Cloud Needs a Boost
The knowledge gap may explain the interest in outside assistance, as 60 percent of providers say users turn to a third party for help with acquiring or implementing technology. Nearly 40 percent of providers say business users employ third parties for help on the user business strategy. Users also do so, according to providers, for technology implementation (56 percent), business process transformation (45 percent) and information security assistance (41 percent).
Providers Shore up Expertise
Interestingly, more than one-third of providers say they need to train or retrain their sales forces on cloud. Almost half of providers say they will form a partnership (48 percent) or expand capabilities to provide more strategic services and consulting to business users (47 percent).
Provider differentiation is no doubt higher on the agenda because they believe that increasingly, board-level executives - Chief Information Officers (79 percent) and Chief Technology Officers (77 percent) - are influencing the purchasing decisions on cloud.
About the Survey
About KPMG LLP
About KPMG International
Contact: Mike Alva
SOURCE KPMG LLP
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