Cloud growth will continue to grow for 2017, but cloud service vendors are going to be taking some tall orders from executives that are expecting a big return on their investment after years of being guided towards the cloud model by many industry vendors.

The old adages of “turn capital costs into operational costs” and “don’t focus on IT, focus on your core business” are just the minimum point of entry for cloud services looking to win over new customers in 2017. Executives that haven’t made the cloud leap until now are expecting to see additional managed services and improved customer engagement directly linked to their cloud investments.

ITWC’s own CanadianCIO Census for 2016 found that worldwide respondents expect cloud models of IT Service delivery will rise 96 per cent within the next two years. Compare that to the declines of 21 per cent for on-premises models and 23 per cent for traditional or dedicated hosting.

IT executives are mostly looking to reduce the time spent on infrastructure maintenance (63 per cent) and for reduced costs as a result of the outsourcing (45 per cent). Yet many also expect that they’ll be able to improve customer satisfaction with the new approach (34 per cent) and enjoy better access to their own data (34 per cent).

Canadian CIO Census - Benefits from Outsourcing

In other words, business performance using the cloud model has to be better than could be achieved otherwise. In an October interview, Aldo CIO Lance Martel said that the role of a CIO needs to evolve in this way. The Canadian shoes and apparel retailer has been using several different software as a service (SaaS) apps to knit together its in-store and online customer experience.

“A CIO shouldn’t be thinking about infrastructure, or applications. These are solved problems,” he said at Salesforce.com’s Dreamforce conference in San Francisco in October. “A CIO should be thinking about building a platform for business to build amazing customer experiences.”

The amount of spending on hosting and cloud services is expected to rise from 28 per cent in 2016 to 34 per cent in 2017, according to 451 Research. The New York analyst firm’s Voice of the Enterprise: Hosting and Cloud Managed Services Study says that the majority of that spending isn’t going to pure infrastructure spending, but to cloud services at a more abstract level. It breaks down the average budget spending like this:

  • 42 per cent on application services
  • 14 per cent on managed services
  • 9 per cent on security services
  • 5 per cent on professional services for cloud enablement

The interpretation by 451 research manager Liam Eagle is that enterprises are looking for cloud computing services that come bundled with managed services, meeting not only their IT infrastructure needs but also their line of business requirements with one monthly bill payment. Public cloud infrastructure providers are the most likely to be delivering this at the moment, but managed hosting providers are also used by more than one-quarter of firms too.

In some scenarios, more established businesses are looking for cloud service providers to help them adapt to industry disruption. German-based Deutsche Bank is doing this by meeting with hundreds of startups in the FinTech space, and then working with some of them to provide their services at scale through its already-established customer base. At the same time, the bank is benefitting from the improved customer experience developed by these startups.

“What we are trying to do is change that whole interaction experience with our customers,” Kim Hammonds, COO of Deutsche Bank, said during a panel at Dreamforce. “All of our customers expect a digital experience.”

Kim Hammonds, Deutsche Bank - Dreamforce CEO panel
Kim Hammonds (left), COO of Deutsche Bank, says a data lab known as ‘The Hive’ has a mandate to improve user experience bases on analytics.

To that end, the bank has set up a data lab in Dublin dubbed The Hive, where 50 data scientists work to improve the customer experience aided by analytics data. It’s also looking to understand how the 150 million processes that are run at the bank can be simplified with the help of machine learning – another service now available from several public cloud infrastructure providers.

The growing expectations of the cloud from businesses show that years of hearing about what the IT delivery model can achieve at industry conferences has sunk in. But now that businesses are embracing it, the services will need to live up to the hype.

 



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