By guest author Shaloo Shalini
Cloud computing adoption at large enterprises such as Novell can have a significant impact on ROI depending upon the solution and vendor. Besides a close look at service level agreements (SLAs) and the capability to integrate with on-premise applications, what do large enterprises need to verify before they adopt cloud-based offerings? This part of the discussion takes a closer look at the cloud offering maturity issues large enterprises face.
SM: With respect to cloud adoption at Novell, how do you think it has changed the way you calculate return on investment (ROI) on your IT projects?
JA: I don’t think the basics of how you calculate ROI are going to change. What you need to be very careful about in terms of corporate expenses is what are the hidden costs of a solution that we don’t know yet but that are part of this transition to the cloud.
For example, you engage with a cloud provider, you make a commitment, and then you try to make it work. If it doesn’t work, you look for an alternative and need to move from one cloud vendor to anther. In that case, what are going to be the costs of switching?
You need to know who is going to pay for the integration if you need to use a cloud-based solution and also have some business critical on-premise applications to deal with. For us, at this point, what I still have to understand are what are the hidden costs that we don’t know yet. That will be a part of this process of cloud adoption. I can mention a few more based on my experiences. The first is integration cost.
When we adopted some of these solutions – I don’t want to mention any particular names or make anyone look bad – but there wasn’t a system integrator involved in our case. That was because there was no on else in the market with this solution and with the right experience, so we had to use the technical professional services from this vendor, and they were not that effective in helping us create the integration. Eventually, they ended up using more hours to get to the level of integration we were expecting. This is something you have to be very careful about upfront; you need to limit how much you are going to invest in the integration.
By the way, there is an expectation from cloud computing vendors that for deployment for such solutions is going to be faster. Another issue you may have to address is downtime. I mentioned earlier that if you hire or if you engage with a SaaS provider and it has its own data center or hires it, then you may want to make sure that its service levels match what your organization requires. If they don’t, who is going to be reponsible for the consequences?
In the case of Novell, for example, when we use one of the cloud-based solutions to support business with our partners, if the solution is down we lose revenue. You need to ensure how you can include that in your ROI investment.
SM: So what you are saying is that SLAs for SaaS and the data center and infrastructure providers who are supporting their back end is something you need to look into, to make sure that it is compatible with the SLAs you need in your organization?
JA: If you are talking to new cloud-based solution vendors, they re not going to agree because these vendors usually don’t have the operational practice or system to manage their business in a smooth way or deliver the SLAs that you want.
You usually don’t expect one SLA. It is a set of SLAs that they need to meet. Since they are usually small and new companies, they don’t have these processes in place. So you need to make that assessment when you deal with vendors regarding what are the SLAs that are critical to your business. You need to make sure whether this service provider or its cloud-based solution addresses all the SLAs that you need them to. Where are the risks involved in adopting a cloud-based solution? How do I include that in the contract, and how do I manage the cost that is going to be associated with this vendor if they deliver a lower SLA in the meantime?
SM: In case of the newer cloud-based solution vendors who are trying to work with you, don’t you think it is in their best interests to take your feedback, process it, and provide you with the right SLAs? They are trying to work closely with enterprise customers because most likely their other prospects are going to have similar requirements. They have no choice, and if they are serious about playing in the enterprise business, they need to provide that kind of SLAs.
JA: I agree, but there is a difference between what these cloud solution vendors understand in terms of what they have to deliver and what they are actually able to deliver in the form of cloud offerings. When you are in the sales cycle or process, they come and talk to you, and there they would agree to everything you request because it all makes sense.
But if and when you dig deeper into the core and check what these vendors are able to deliver, they are simply not ready. It doesn’t mean you are not going to work with them. It just means you as an enterprise need to make an assessment and understand what are the possible additional costs that you need to include in your ROI model. That way, you can be sure that the cloud-based solution you are targeting for your organization is going to be the right one for you.
SM: Very interesting! I think what I learned from this is that integration infrastructure at some of the new vendors and their service level agreements are not up to enterprise level yet. These really are two issues that you consider as you evaluate cloud-based solutions for adoption at Novell.
JA: When we hired one of the vendors, we went through the entire integration project with them. When we were just ready to go, we realized that this company was actually reducing head count; it had financial issues. It was not able to provide the support it were supposed to provide to Novell for our integration. At that moment we had not yet deployed the solution, so we looked at the SLAs and asked ourselves, do we really need to go with this new solution, or what we are going to do?
This was a significant wake-up call for us, and we finally were able to solve the problem because this company was acquired. The new owner was able to put the funding and resources required to deliver the SLAs that they committed to. But I see this as something that can happen in this situation where everyone gets locked in with all benefits of cloud computing, but not everyone is able to deliver those to customers yet.
SM: You are right. The environment is volatile right now owing to the economic situation. People have financing problems. All sorts of monkey wrenches are being thrown into the process so there is some risk in working with early-stage companies. To summarize, do you think that with the integration costs involved in using cloud-based solutions and the risks that you mentioned just now, would these negatives surpass the cost savings and advantages of cloud computing at this stage of the game, the summer of 2010? Where do you stand on that topic?
JA: I don’t think so. My statement is not a general one. My statement is not that integration costs may or may not surpass the benefit. My statement is more that you have to do the right assessment in each situation. I still believe that the benefits are there, and if you make the right assessment and protect your company with the right terms in the contract and aligning with your strategy with these vendors, you should be able to do just fine. It is a matter of being careful. I don’t want to give you the impression that this is something that is not positive about the opportunity that cloud computing provides.
I am personally very excited about some of these things in the SaaS space coming from a small company perspective. Cloud computing enables them to be a solution provider and increase the distribution to rich customers. You just need to go through the process of vendor and solution selection thoroughly. I can see a lot of value coming to enterprises like us from the cloud computing movement.
You don’t know how many problems, real business problems come to me where people require a solution to address such and such to help business at Novell. You go to the marketplace in search of a software solution that will help you support the right process within the organization, and there are so many cases where you don’t find the right solution. I think cloud computing will give small software ISVs the opportunity to be the new solution vendors and solve real business problems. So I am very positive about what is going to come out; it may take a little while to mature to the level where it fully addresses enterprise requirements, and you just need to be careful in the meanwhile.
SM: Right, we need to be patient to let the infrastructure develop because this is relatively new field with a lot of vendors. There are close to 1,000 SaaS cloud-based offerings from small companies in business today. There is a lot of competition, and there is a lot of innovation there as well with niche products and ideas developed into software solutions. Overall, there is this great momentum and positive energy, but we have to give them a bit of time to mature.