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What CIOs Need to Know About the Cloud

By Sean Michael Kerner

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The market for managed cloud services is predicted to grow at a rapid rate: Researcher Forrester predicts the cloud market hitting $217 billion by 2014, while IDC is also seeing strong interest in the cloud, reaching into the billions of dollars in spending by the same year.

Of course, as enterprises move toward cloud services, how CIOs acquire technology assets as well as the role that CIOs themselves play within enterprises are also going to be shifting.

In a live webcast with representatives from Verizon and Cisco, Ellen Daley, a vice president and practice leader at Forrester, noted that it's important to remember that while there is a lot of excitement around the cloud, it's still early days for the market -- which means much is in flux.

"This is about a change in something that for CIOs affects accounting, performance, security and reliability, and they're concerned about that bundle of elements," Daley said. "My counsel for people trying to sell to CIOs and network managers is to make the value equation clear."

Daley noted that CIOs need to act on more than just the ethereal promise that they can save tons of money by using a consumption-based model, as that's not always the case. In Daley's view, CIOs must be provided with models that clearly show what the return on investment is for the cloud. She added that solutions they consider also must have built-in security and performance with SLAs that commit to network reliability.

It is the delivery of security, reliability and performance assets that make the difference in the cloud delivery model, she added.

"It is Forrester’s opinion that network assets are going to be very important in this game, and this is not a traditional over-the-top game where everyone can just ride on the network and suddenly data center services will be offered by just anyone," Daley said.

When it comes to which CIOs are currently considering leveraging the cloud for their infrastructure, there are some market verticals already adopting the approach. Daley explained that with infrastructure as a service, cloud adoption is coming from industry verticals that have burstable workloads where they want to increase capacity but at a flexible level. Those verticals currently include retail, health care and manufacturing.

Joseph Crawford, executive director of IT solutions at Verizon Business, said that from his perspective, he's seeing cloud adoption behavior from CIOs differ depending on what's happening with their businesses.

"If there is a triggering event -- a divestiture, an investment, merger or acquisition -- we're seeing those types of customers almost by necessity having to go to some kind of pay-as-you-go model," Crawford said.

On-premises equipment

One of the promises of cloud computing is the ability for a CIO to leverage a cloud provider's equipment instead of making capital expenditures on new, on-premises equipment. While the cloud may help to reduce the need from some on-site, data center equipment, it doesn't remove the need for enterprises to continue to invest in their own gear.

"Our view is that [on-premises] equipment will be around for quite a long time," Crawford said. "We don't see anyone talking to us about closing down a data center and moving all of their servers and applications to the cloud. What we see is some triggering event, or a new application coming up, and there is something happening for which they need the cloud to move, too."

While the cloud won't eliminate the need for on-premises equipment entirely, Forrester's Daley said the cloud is something new and not just another marketing term for technology approaches that existed before, like application service providers (ASPs). In particular, she noted that the ASP model was primarily about hosting, and in her view, ASPs were not able to definitively prove that they could deliver applications for less than the enterprise.

"The difference this time is the technology innovations that we're seeing," Daley said. "Infrastructure combining storage, server and virtualization is allowing cost efficiencies that can be translated to the buyer. In the end, it's an economic game."

Changing role of CIOs

As the economics of cloud computing offer an alertenative method of infrastructure and application delivery to CIOs, the role of enterprises' chief information officers is changing as well. Verizon's Crawford noted that CIOs are increasingly focused on establishing their priorities around becoming aggregators of IT services for their end-users, instead of just delivering the services themselves.

Fundamentally, though, it all comes down to the bottom line for the business, which is now the same line for CIOs as well.

"The CIO's role is increasingly about helping the business with its goals, which are to grow revenues and profits," Daley said. "It changes the mindset of the CIO from just providing service to being an instrumental part of the business."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.