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The pros and cons of Cloud Computing: a CIO’s view

Cloud Computing is coming to your neighbourhood, and market competition soon will demand that you give it attention, because its likely rapid growth will bring large benefits for enterprises.

Cloud Computing offers large scale, on-demand computational and storage services provided as a utility by a vendor that may be external or internal to the customer organisation -- a ‘public cloud’ or a ‘private cloud’. Generally, access to Cloud Computing resources would be via the Internet or an intranet with great scalability and timing flexibility. Cloud Computing enables use of one server for weeks on end, or a thousand times that computing power for one hour and the ability change between them at will -- a concept not feasible for in-house computing resources.

The Cloud’s origins can be traced to scientific computation activities some two decades ago and subsequent application service providers and software-as-a-service, but only very recently have technology advances led to decreasing cost of data transmission bandwidth and other overheads to enable cost-effectiveness for corporations.

Flexible, Low Cost, Agile

Very large public cloud data centres will achieve large cost savings for power use, network bandwidth, operations staffing, hardware and software, while greatly increasing flexibility for user organisations.

This will bring economic benefits in terms of greatly reduced entry cost, and cost of infrastructure and system maintenance, but also almost instant scalability to respond very rapidly to corporations’ changing needs and cash flow.

Other potential benefits include increased efficiency and availability, shorter setup time, increased leverage of a pay-as-you-go licensing model, computer architecture independence, service automation, tiering and zoning, reduced carbon footprint and anywhere/anytime access via the Internet, via a standard Web browser interface. Software updates will be automatic and provide opportunity for leverage without additional resource commitment, and there is potential for easier risk management, including contractual and auditable service level agreements (SLAs): no hardware, no software installs, minimal capital investment, and easy to manage service costs.

The notion of “application platform” in service-oriented architecture is building as the foundation of Cloud Computing, exposing the functionality of applications to other applications to achieve faster, cheaper development of applications by reusing existing services and leading to more agile business processes.

Cloud Computing is one of the best options for CIOs who want to remain agile and aligned. It provides on-tap access to scalability and makes pass-through of costs to the business simpler.

Beware the Risks

However, rapid paradigm change is usually accompanied by a variety of risks and organisational culture inertia. Cloud Computing brings risks for security and privacy of business data, since mostly the service will be provided by third-party centres, most likely offshore.

Does your organisation have the agility to improve processes and services, train users, and get real value from automatic upgrades? Can you change your organisational culture, your set of personnel skills and manage the new security regime?

Cloud Computing will not suit every corporate and line-of-business computing need, at least not yet! For some time, and perhaps a long time, heavily regulated industries such as defence and some medical and manufacturing industries might choose Cloud Computing only as an internal service -- a private cloud -- and others are likely to limit their use of public clouds to onshore providers that keep all data onshore and are subject to robust auditing. For some with foreign parents, compliance is part of their governance, but when industries globally -- even regulated industries -- adopt Cloud Computing, the benefit will be enormous.

Factors limiting the uptake of Cloud Computing include Internet-based speed and performance, security limitations and overall customer-vendor environment design, including the integration of existing corporate and line-of-business applications. However, next generation bandwidth advances and the general maturing of Cloud Computing, including likely developments such as a physical-to-cloud migration tool to various cloud architectures, will gradually overcome these limitations over several years. Online connectivity, uptime availability, limited customisation options and how customisation will be affected by upgrades are other significant factors that CIOs need to analyse.

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Do your homework

Following the Gershon Report, both state and federal governments are considering shared services, and Cloud Computing is the next step.

Product-based players are moving into the service-based market and we can expect pressure on smaller players in the vendor market. Your awareness of these trends is important. For example, a current major product provider, Oracle, after buying Hyperion is proposing to buy Sun, expanding beyond its traditional software market into very different territory. Is service provision next?

Corporations will need to understand strategic trends and get the fundamentals right: governance; definition of services provided to stakeholders; identification and categorisation of business tools and processes, including existing and new applications; management controls, including the SLA management model; establishment of institutionalised policies; and identifying the criticality and the required scale and availability of services.

There is plenty of corporate homework to be done, but these are standard building blocks of change management entailing identification of integration points, visualisation of applications and evaluating suppliers, focusing on performance management.

Get on board, but watch your footing

In many ways the Cloud Computing scene is in its infancy, but there are a number of vendors providing these services. Do not rely on the few big suppliers only; there will be a lot of SMEs that might provide better value in Cloud Computing, both system providers and vendors. And, provisioned via system suppliers but managed by the consumer, for a large organisation a private cloud becomes almost like a shared services centre.

Weighing build versus buy, Cloud Computing might be a good decision now and likely to become a better decision soon. Linking with the concept of thin client computing, you might be long way ahead in terms of performance and flexibility. But, before leaping in, get thoroughly ready to exploit the pros, avoid the cons and mitigate the risks.

SIDEBAR: Cloud Computing - The CIO’s Checklist

  • Do I require computational flexibility that would not economically utilise in-house capital resources?


  • What services do I want to integrate? (i.e. CRM and accounting system communication; time tracking; integration of accounting and CRM data into e-mail and intranet sites.)


  • How do I change my staffing structure and skills to meet the architecture, implementation and operational requirements of Cloud Computing?


  • Is the vendor onshore -- and the data onshore -- with adequate security management?


  • Is there good performance and cost measurement -- reviews, reporting and effective vendor underperformance strategies?


  • Does the cloud service integrate with my existing user management service without additional login?


  • Does my budget planning adequately accommodate ongoing payments required to keep a cloud service available?



Bruce Carlos is Chief Information Officer for CenITex, the Centre for IT Excellence, an ICT shared services agency set up by the Victorian Government to centralise ICT support to government departments and agencies. He is also a founding member of the CIO Executive Council of Australia and former CIO of Raytheon Australia.

Bruce has senior executive IT leadership experience in diverse industries in Australia and globally and has focussed on transformation, efficiency and execution. He aims to get the best IT model for business, with simplified IT strategy and services aligned to the business, and is increasing his focus on information assurance, cloud computing and automation.