Is ‘The Cloud’ a Boon or Bust for UK Business?

The free discussion:’Is The Cloud a Boon or Bust for UK Business’ is one of the key events during Global Entrepreneurship Week (14th-20th November 2011). Headline speaker is James Caan, former BBC Dragons’ Den star and private equity investor. 

Caan is joined by Anne Boden, one of the world’s most respected leaders in global banking. As a banker and a technologist, Ms Boden is at the forefront of the debate on the future of the financial services industry, in the light of regulatory and technological change.

Richard Alvin is Group Managing Director of Capital Business Media, publishers of Business Matters Magazine and an expert on The Cloud and Eric Van Der Kleij, CEO, of the UK Government’s Tech City Investment Organisation.

There will be one minute’s silence for Steve Jobs at the event.

“Cloud computing is completely changing the UK business landscape,” says James Caan, who utilises The Cloud for his private equity firm Hamilton Bradshaw and has just released his own Business Secrets App for iPhone and Android.

Anne Boden says: “We are at the beginning of a phase of rapid change triggered by the growth of social media, the mobile revolution and Cloud computing. The big question is who will own this space, will it be the existing players, banks or technology companies, or will it be new entrants? The opportunity is clear but fostering this innovation is our challenge.”

Cloud services’ primary appeal is in sparing start-up businesses the expense of building and hosting their own information technology hardware and software.

The Cloud also allows small businesses and start-ups to operate on an equal playing field with multinationals. “Successful business models can scale to meet demand,” says Anne Boden. “Cloud computing can deliver the scale on a global basis, it is now up to our business leaders to deliver the creative and real customer value”.

“A business that would traditionally need one to three million pounds to launch, now with The Cloud you might only need £5,000-£10,000 to really fly,” says James Caan, “because cloud computing uses economies of scale. Cloud computing’s pay-as-you-grow scalable business model turns the traditional approach to enterprise IT upside down.”

UK businesses are stampeding into The Cloud as a result. According to a Virgin Media Business survey of 5,000 UK businesses, 66% label technology as vital to the success of their business – with 32% of business leaders saying Cloud computing is the most valued aspect.

According to Caan, “what’s very useful to me as an entrepreneur is that Cloud computing enables information and data access anywhere in the world, as long as there is an internet connection. I was recently abroad and I wanted to show my colleague some fairly large documents. I was able to access the files and information within minutes. Importantly, companies no longer need to have large bulky archives with all their databases written on papers. Cloud computing enables all this information to be stored online in a digital format, with no real limitations on size”.

According to Boden: “When we use multiple computing devices – phones, iPads and PC’s – Cloud computing allows real business transactions, not just browsing or data storage, on the move. Whether this is a consumer paying a bill or a manufacturer importing raw materials, this new independence of process, data and device prompts a new wave of innovation”.

As well as start-up businesses using private and public cloud services provided by the likes of Google Docs, Amazon Web Services, Apple iCloud and Microsoft, multinationals are equally adopting a ‘Cloud First’ strategy.

Key proponents include Netflix, News International, NASA, Mothercare, Morgan Stanley, Barclays Bank, HSBC. In fact, over 50% of blue chip multi-nationals have cloud usage already for either IaaS (Infrastructure as a Service) or SaaS (Software as a Service). In some companies, they are almost 70-80% virtualised.

The UK Government is in on the cost savings provided by The Cloud, following in the footsteps of the USA. George Osborne has just announced the G-Cloud (or Government Cloud) will see over 50% of Government IT spending move to cloud computing by 2015.

As well as cost savings, job creation is a huge driver for the Government and the private sector. If the UK, Germany, France, Italy and Spain continue to adopt cloud technology as expected, they will generate 2.4million jobs in Europe over the next four years and £151.3bn in annual revenue, according to an EMC survey.

With so much seemingly going for The Cloud, what is the downside?

Security is the key concern. Sensitive data access, data segregation, privacy, recovery, accountability, malicious insiders are all concerns.

Whilst security has increased ten-fold since Cloud Computing took off in 2008, today the biggest threat is cyber security.

“Business owners are simply not doing enough with their business security. It’s at the bottom of their priority list,” says Caan.

“But it should be at the top. A company’s information is one of their most valuable assets. Moving data outside the company’s physical premises poses security concerns. Cloud proponents become targets for hackers. The challenge for the Government will be sharing huge amounts of citizen data consistently, accurately and securely across a range of cloud services”.

Caan agrees that security is a potential impediment to Cloud growth. He says: “The focus on security is something more SMEs should be aware of, even if their time is limited. I think all companies, not just start-ups, are not doing enough for their business information security.

In the case of small businesses this may be down to the perception that they aren’t in a high risk position. As a business owner you wouldn’t leave the front door of your office open at night, so why would you put your information assets at risk?”

A key solution is the use of multiple cloud providers. “Spreading the risk is important and this can be achieved by spreading data amongst a number of Cloud suppliers,” says Caan.

Geographical ‘Availability Zones’ are an important issue for consideration by UK businesses so that “companies store their data in the territory in which they operate for compliance, taxation and IP challenges.

Another headache for larger companies is the conversion from a Capital Expenditure Budget to an Opex (operational expenditure) budget which means a subscriber rental model on the balance sheet. UK businesses also argue that Cloud providers need to be more transparent on costs.

“The onus is now on Cloud providers to provide a greater transparency of cost, it’s all about trust” says Caan. According to a survey by Vanson Bourne, 71% of British CIO’s are seeking a greater transparency from cloud companies when it comes to data protection, whilst 66% want clear proof of data security and 45% want more visibility on pricing.

As UK businesses stampede into The Cloud, Caan advocates a careful balance. By creating a
hybrid of combining your own network for the most important and sensitive information whilst using The Cloud for storage and back-up

“It doesn’t need to be all or nothing. There’s nothing wrong with utilising your own data storage and combining that with Cloud services. It’s not head first into The Cloud or nothing at all” says Caan.

Overall it is clear that The Cloud is a huge opportunity for UK businesses, particularly those looking for a way to market themselves globally at a low cost. “But it needs to be balanced and used wisely”.