A KPMG survey finds providers see cloud revenues comprising significantly larger share of their total revenue due to migration of more sophisticated applications.
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
Nearly half of providers say that loss of control is still a business user’s biggest difficulty with cloud adoption followed by data loss and privacy risks, according to 39 percent. Fifty-seven percent of providers say they are addressing the data security issue with tighter restrictions on user access and applying more sophisticated data encryption.
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 KPMG 2012 Cloud Providers Survey is part of a series of two global KPMG surveys on the business of cloud. The providers report is based on the findings of a web-based survey of 179 executives from cloud providers across more than 10 countries in North America (51 percent), Asia Pacific (29 percent) and Europe, the Middle East and Africa (20 percent). Forty-five percent of those surveyed were C-level executives. In January, KPMG will release the second half of the Cloud Survey series focusing on the cloud business users.
Read the full press release.