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Clouds in the Forecast

Finance departments will invest heavily in cloud computing and mobile technologies in the coming year.

Cloud computing — still in its relative infancy but hurtling toward maturity at an ever-faster pace — and the exploding usage of mobile devices for business purposes will dominate finance-department plans for technology investments next year, according to CFO’s September survey of 148 senior finance executives.

The potential ROI in those areas is large. So are the potential risks. In the near future, companies may begin to see more evidence of the negative aspects of cloud adoption as the hype begins to taper.

“Organizations that have been early and successful adopters of cloud have obviously promoted that success, and so have their vendors,” says Rob Livingstone, who heads an IT advisory practice in Sydney, Australia. “But the cloud projects that have failed or fallen short of expectations have not generally been visible. That has led to an asymmetry in perceptions of benefits from the cloud.”

More cloud failures, such as unintended disclosures of lists of customer credit-card data or Social Security numbers, will be disclosed as the cloud market matures, Livingstone says. And a recent “hype cycle” report by David Mitchell Smith of Gartner points to signs of fatigue and disillusionment starting to show in the cloud-solutions marketplace. There is also “rampant cloud washing”—marketing by companies that are trying to get on the cloud bandwagon, even when they’re offering something that really doesn’t fit into the definition of cloud.

Smith says companies likely won’t completely abandon on-premises models or soon buy complex, mission-critical processes as services through the cloud. On the other hand, they will consume more cost-effective cloud services with “capabilities that are not easily done elsewhere.”

13Dec_Outlook_p34Gartner tracks 42 components of the cloud market through a timeline where the “innovation trigger” phase is followed by a “peak of inflated expectations,” then a “trough of disappointment” and a slow rise to a “plateau of productivity.” Only four components of the cloud market are within two years of the plateau, including the one CFOs are most interested in: software as a service (SaaS). Among the other 38 components that are wallowing in hype, the climb to hype or disappointment until at least 2015, finance chiefs should be interested in at least two: infrastructure as a service (IaaS), which is two to five years from the plateau, and Big Data (five to 10 years).

The most rapidly maturing use of IaaS, or on-demand computing capacity rented from a service provider, is the hosting of websites and web-based applications. Before IaaS is adopted by the mainstream, costs must come down and security, risk and compliance issues must be addressed, Gartner says.

Companies that haven’t tried IaaS should consider pilot projects, expanding successful trials into broader use, and reevaluate the suitability every six months, Gartner recommends. Cost benefits will be significant for small and midsize businesses, and large companies will benefit from greater flexibility.

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