Cloud adoption most popular with SMB market, not large WANs

Cloud adoption is taking off in the SMB market but not among large enterprises. This article from the TM Forum explains why large companies with wide area networks (WANs) are not adopting cloud computing services quite yet.

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Editor's note: Cloud adoption is taking off in the SMB market but not among large enterprises with wide area networks (WANs). This article from the TM Forum explains why large companies are not adopting cloud computing services quite yet.

Cloud benefits: Why should enterprises adopt cloud?

When we think of adopting cloud computing or cloud services, often it’s with an eye to the companies that are actually delivering these services. We hear a lot about Google, Amazon, IBM, AT&T and others that are offering processing power, storage, applications and other services to customers looking for cost-effective solutions.

The beauty of cloud adoption is that it enables companies across just about any vertical to shift their expenditures from business as usual to innovation and growth, which will lead to a real value-add for their customers.

This in itself is a fundamental turning point with regard to how businesses will operate in the future. Instead of getting bogged down in functions and operations that are not part of its core competencies, an organization can hand off some of these tasks to a provider that has expertise in that particular area and the economies of scale to carry off this kind of business model.

This frees up enterprises to shift their expenditures from a rigid model to a more flexible one, based on use. Looking at it historically, companies have had to overcompensate when it came to their WAN networks and systems and purchase far more than they needed in order to allow for expansion, peak loads and the like. But most of the time, these extra resources sat idly by, costing the company money.

The bottom line with cloud computing is that it allows organizations to be a lot more cost effective and efficient in their delivery of goods and services. And these cost savings can be passed along to customers, ensuring that everyone wins.

The cloud adoption cycle: Which markets are adopting cloud service?

With something like cloud services, and the huge potential of reduced cost and increased operational efficiency, you’d naturally think that the biggest companies in the world would be first on board to reap the benefits. Interestingly, this is not the case. If you really look closely at cloud adoption among enterprises, there are three very distinct areas or target audiences, with varying degrees of interest and implementation.

SMB cloud adoption
First up are the small and medium-sized businesses (SMBs), which are enthusiastically and rapidly adopting cloud computing. They are using Google Apps and other similar services that take away all the pain of doing their own WAN and storage backups, allowing them to focus on their core business without having to pay enormous amounts of money for an IT infrastructure.

Cloud adoption is really a no-brainer for SMBs. To really get a feel for the service uptake from this market, just look at the fact that last quarter Google hired 1,000 people just to work on its apps. That’s a huge investment on Google’s part, and a testament to the fact that thousands upon thousands of companies are using their services.

SOHO cloud adoption
Although not nearly at the same level, the small office home office (SOHO) user is another likely market for cloud services, because users have the ability to watch a movie on any device, depending on whether it’s been purchased or rented for a certain time period and for a particular number of instances. Also, as more TVs become Internet-enabled, we’ll start seeing real adoption of cloud-based services for the home user, which plays directly into Google’s whole business model.

Large business cloud adoption
While the SMB market and home users are either eagerly embracing cloud services or are on the verge of catalyzing this market, the largest companies in the world are still sitting on the fence. This should actually come as no surprise, because when we look at verticals such as banking, pharmaceuticals, manufacturing and energy, they have very real problems and concerns with regard to security and privacy. If they suddenly start moving data and resources to an external provider -- which may be in a different country entirely -- they could be in violation of various laws and regulations for their home base of operations.

Besides security and privacy, large multinational enterprises have to consider other potential obstacles, among them regulatory issues with data, portability and interoperability. Large enterprises will need assurances that these critical questions have been addressed and resolved before they really get on board with cloud services.

To learn how the TM Forum's Cloud Services Initiative is encouraging large enterprise cloud adoption, continue reading this article. 

Mattew EdwardsAbout the author
Matt Edwards is head of the Cloud Services Initiative at the TM Forum. His primary objective is to stimulate growth of a vibrant and open marketplace for cloud services by bringing together the entire ecosystem of enterprise customers, cloud service providers and technology suppliers in order to remove barriers to adoption based on industry standards. Matt has more than 20 years of experience successfully driving profitable business solutions into enterprise and telecommunication companies around the world.

This was first published in August 2010

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