cloud computing in the german middle market
TRANSCRIPT
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Cloud Computing inthe Middle MarketExperiences, Advantagesand Challenges
www.pwc.de/de/cloud-computing
A survey of the experiences
of mid-sized companies with
IT in the cloud
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Cloud Computing in
the Middle MarketExperiences, Advantagesand Challenges
A survey of the experiences
of mid-sized companies with
IT in the cloud
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Cloud Computing in the Middle Market
Experiences, Advantages and Challenges
Published by PricewaterhouseCoopers AG Wirtschaftsprfungsgesellschaft
Written by Markus Vehlow and Cordula Golkowsky
With thanks to Christina Mller, Johannes Beichel, Stefan Knecht and Eiko Alexander Ermold
Overall design, coordination and evaluation of the telephone survey: denkstelle hamburg
Independent market research institute for the telephone survey: teleResearch GmbH
June 2011, 36 pages, 17 figures
All rights reserved. Reproduction, microfilming, storing or processing in electronic media is not allowed without the
permission of the publishers.
The results of this survey and the contributions from our experts are meant to serve as a general reference for our
clients. For advice on individual cases, please refer to the sources cited in this study or consult one of the PwC
contacts listed at the end of the publication.
June 2011 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprfungsgesellschaft. All rights reserved.
In this document, PwC refers to PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprfungsgesellschaft,
which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate
legal entity.
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Cloud Computing in the Middle Market 5
Preface
Once the stuff of IT dreams, cloud computing has become a reality. There is hardly an IT
event that doesnt address IT in the cloud; the media report on cloud computing almost
daily; and more and more, companies, IT vendors, analysts and industry associations
are discussing the opportunities and challenges of this technology.
This high level of attention is well-founded because cloud computing has many
advantages: IT resources can be deployed flexibly, efficiently and virtually without
limits via the internet. The pay-per-use model provides companies with cost reduction
potential and higher cost transparency through usage-based billing. In addition,
investment in hardware and software can be reduced by the purchase of cloud services,as these structures are supplied by the cloud provider. There are also other advantages
that allow for faster, more flexible IT processes and that can serve mid-sized companies,
as well.
Yet so far, only relatively few mid-sized companies use cloud computing. Why are so
many companies hesitating? And what experiences have companies in the middle
market had with cloud computing until now? Will the situation change?
The present survey answers these questions and provides insight into the current mood
toward cloud computing in the middle market. It also offers family and mid-sized
companies approaches and ideas on how to benefit from this trend and on what they
should take into account to ensure successful use of cloud services.
We hope you enjoy reading!
Preface
Dr. Peter Bartels Markus Vehlow Cordula Golkowsky
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Table of contents
Table of contents
Preface ............................................................................................................................5
Table of figures ...............................................................................................................7
What is cloud computing and what can it do? ..................................................................8
A Summary .................................................................................................................. 10
B Survey methodology and participants ......................................................................12
C Awareness and prevalence of cloud computing.........................................................15
1 Conceptual understanding ......................................................................................15
2 Current use .............................................................................................................. 16
3 Comparison of users and non-users ..........................................................................18
D Behaviour patterns among users ..............................................................................21
1 Forms of cloud use .................................................................................................... 21
2 Cloud user experiences .............................................................................................22
E Behaviour of non-users .............................................................................................25
1 Potential ...................................................................................................................252 Reasons in favour of the cloud ..................................................................................26
3 Reasons against the cloud ........................................................................................28
F Outlook ....................................................................................................................30
Tips for the successful use of cloud computing ..............................................................32
Contacts ........................................................................................................................34
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Cloud Computing in the Middle Market 7
Table of figures
Table of figures
Fig. 1 Proportion of respondents by number of employees in Germany ....................12
Fig. 2 Proportion of respondents by annual net revenue last year .............................13
Fig. 3 Proportion of respondents by industry ............................................................ 14
Fig. 4 Respondents definition of cloud computing ..................................................16
Fig. 5 Current cloud computing usage among the surveyed companies .................... 17
Fig. 6 Comparison of users and non-users, broken down by number of employees
in Germany .....................................................................................................18
Fig. 7 Comparison of users and non-users, broken down by previous years net
revenue...........................................................................................................19
Fig. 8 Industry affi liation of users and non-users .....................................................20
Fig. 9 Cloud applications used in the surveyed companies .......................................22
Fig. 10 Satisfaction of cloud users with the services used ..........................................22
Fig. 11 Disadvantages associated with the use of cloud computing ............................23
Fig. 12 Respondents knowledge of the location of the processing centres where
their data is stored ..........................................................................................24
Fig. 13 Location of the data processing centres used by respondents ..........................24
Fig. 14 Future use of cloud computing by respondents who currently do not use cloud
computing ......................................................................................................26
Fig. 15 Reasons for future use of cloud computing among respondents who currently
do not use cloud services ................................................................................27
Fig. 16 Types of future cloud services respondents who currently do not use cloud
services plan on using .....................................................................................28
Fig. 17 Reasons cited by non-users for not employing cloud computing .....................29
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What is cloud computing and what can it do?
What is cloud computing and what can it do?
Cloud computing lets companies draw on IT resources via the internet
exibly, eciently and virtually without limits with usage-based pricing.
Computer capacity, data storage and applications must not, or not entirely,
be maintained and operated by the company.
IT-on-demand? Just as flexible and easy to use as TV-on-demand? That would have been
hard to imagine a few years ago, but now its a reality through cloud computing.
The use of cloud computing can save costs because the underlying pay-per-use model
reduces companies expenditures for the purchase, operation and updating of ITstructures. It also provides greater cost transparency. Costly investments in hardware
and software can be avoided, as memory space, development platforms and applications
are used and paid for as needed. The cloud service provider assumes installation,
operation and maintenance costs and includes these in the monthly fee. Fixed costs
become variable costs. But cost reduction is not the only advantage of cloud services:
Because IT resources must only be available as needed and can be scaled easily, a more
efficient allocation of resources is possible.
Cloud computing also promotes innovation in the IT and other departments, as it allows
new services or business models to be quickly and flexibly deployed in conjunction
with business developments (business agility). IT-based processes can more quickly be
brought to market due to the shorter duration of IT projects (time to market). Whatsmore, product and service offerings can be dynamically expanded (portfolio agility)
and adjusted according to capacity needs and customer demand (business scalability).
Cloud users also benefit from the up-to-date hardware and software provided by the
cloud vendor as part of its cloud solutions. This could be of particular use to mid-sized
companies that have a limited IT budget and often cannot or do not want to invest in
current and high-quality IT infrastructure. Another advantage for dynamically growing
mid-sized companies is the ability to centrally operate and manage IT resources
leaving more time for core business activities.
Cloud computingpromotesinnovation
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Cloud Computing in the Middle Market 9
What is cloud computing and what can it do?
Despite these advantages, mid-sized companies especially continue to have concerns
about moving their IT to the internet. This may be due to questions that remain with
regard to practical implementation, such as: How can the benefits of cloud computing
be identified for my company? What business processes are best suited to be outsourced
to the cloud? What legal, regulatory and internal requirements must be satisfied in
order to use the cloud? What technical requirements are necessary? What tax issues
should be considered? What performance and management indicators can help measure
the expected benefits of cloud computing? All of these questions can and will be
answered. In the last chapter, we provide some starting tips for the successful use of
cloud services.
Because IT resourcesmust only be availableas needed and can be
scaled easily, a more
efficient allocation ofresources is possible.
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Summary
A Summary
Key findings
Awareness and prevalence of cloud computing in the middle market1.
58% of the respondents know what cloud computing is all about and could
explain it correctly. 12% gave a wrong answer. Just under one in ten definitions
(9%) could not be clearly assigned. 21% of respondents do not know what cloud
computing is.
12% of respondents already use cloud computing, primarily as: Software as a
Service or SaaS (66%), Infrastructure as a Service or IaaS (42%) and Platform as
a Service or PaaS (37%). It turns out that cloud services are used more in (oftenlarger) logistics companies and service centres. On the other hand, (smaller)
retailers and manufacturers of capital goods are underrepresented.
54% of respondents who do not use cloud services have not yet looked into the
advantages and disadvantages of cloud computing.
Experiences of cloud users in the middle market2.
Almost all respondents who use cloud services say their expectations have been
completely (46%) or at least partially (47%) met. Only 7% are dissatisfied.
Two out of three respondents (66%) know where their data is stored.
know what cloud computing is all about58%of cloud users say their expectations have
been completely or at least partially met93%
of respondents who currently do not
use cloud services are planning to12%
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Cloud Computing in the Middle Market 11
Summary
Potential of cloud computing in the middle market3.
12% of respondents who currently do not use cloud services are planning to do so
in the foreseeable future.
Respondents cited the following as the main reasons behind their planned
introduction of cloud computing: cost savings (83%), low investment costs (78%),
pay-per-use (78%), location-independent access (78%) and rapid implementation
of innovations (67%). A good half of the companies (56%) view cloud computing
as a way to focus on core business while outsourcing IT. The short time to market
(42%) and the elasticity and scalability of cloud computing capacities (42%) arealso key factors.
Challenges of cloud computing in the middle market4.
Respondents who do not use cloud services say they dont because of a lack of
advantages (73%) and security concerns (70%). A little over half (54%) have not
yet dealt with the subject and 46% are concerned about problems with system
integration. 43% of respondents cite compliance violations as a disadvantage of
the cloud. Another 42% consider the market too complicated at present to be able
to make a decision.
The companies surveyed that use cloud services also perceived some
disadvantages, although in their view within limits: 44% mention reliance
on outside companies, along with the transfer of data sovereignty to the
outside company and a lack of data security (34%). 20% consider increased
administrative costs and costs for staff education and training as downsides.
A good half of the
companies view cloudcomputing as a way to
focus on core businesswhile outsourcing IT.
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Survey methodology and par ticipants
B Survey methodology and participants
This survey will shed light on how extensively mid-sized companies in Germany use
cloud computing, what advantages and disadvantages they expect and what risks they
associate with it. In addition, the survey will show how the middle market can benefit
from cloud computing.
PwC commissioned an independent market research institute to conduct the survey of
351 executives of mid-sized companies active in Germany. It was done from February
14th22nd 2011 using computer-assisted telephone interviews.
The respondents were divided into the following size categories:Mid-sized companies: those with a staff of 50499 (244 interviews)
Larger companies: those with a staff of 5002,000 (107 interviews)
This categorisation was chosen to identify whether there are differences in the
behaviour of mid-sized companies (50499 employees) and larger companies
(5002,000 employees).
Fig. 1 Proportion of respondents by number of employees in Germany
50249
48%
250499
22%
500999
17%
1,0002,000
13%
Total sample
The companies surveyed were also categorised on the basis of annual net revenue:
5% of respondents earned 500 million or more in net revenue in Germany in the
previous year. 14% of respondents generated annual net revenue of between 100
million and 500 million. Consequently, nearly a fifth earns at least 100 million.
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Cloud Computing in the Middle Market 13
Survey methodology and participants
What industries do the participants come from? Half of the companies are active in the
manufacturing sector. Trade and services account for 13% and 11%, respectively, of the
companies; finance and the transport and logistics industry each account for nearly a
tenth of the respondents.
Total sample
Fig. 2 Proportion of respondents by annual net revenue last year
Do not know/
no answer
27%
500 million
5%
100499,999 million
14%
2099,999 million
31%
< 20 million
23%
Mid-sized companies
2099,999 million
35%
< 20 million
32%
Do not know/
no answer
27%
100499,999 million
6%
Larger companies
500 million
14%100499,999 million
32%
2099,999 million
22%
Do not know/
no answer
29%
< 20 million3%
At 54% of the surveyed companies, net revenue in Germany last year totalled less than
100 million.
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Survey methodology and par ticipants
Fig. 3 Proportion of respondents by industry
Total sample
Transport and logistics
9%
Manufacturers of
capital goods
35%
Manufacturers of
consumer goods
15%Services
11%
Banks, financial institutions
and insurance companies
9%
Other, such as
construction and mining
8%
Trade
13%
Mid-sized companies
Transport and logistics7%
Manufacturers of
capital goods
37%
Manufacturers of
consumer goods
13%
Trade
14%
Services
12%
Banks, financial institutions
and insurance companies
9%
Other, such as
construction and mining
8%
Larger companies
Other, such as
construction and mining
6%
Manufacturers of
consumer goods
20%
Services
9%
Trade13%
Banken, Finanzinstitute
und Versicherungen
11%Manufacturers of
capital goods
29%
Transport and logistics
12%
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Cloud Computing in the Middle Market 15
Awareness and prevalence of cloud computing
C Awareness and prevalence of cloud
computing
1 Conceptual understanding
Cloud computing is not new: the possibility of moving IT to the cloud was already being
discussed at the CeBit trade show several years ago. Access to data in the cloud has
long been established in the private sphere. The services range from e-mail to pictures
to social networks and video. And now, cloud computing has found its way to business
customers.
In an open question, executives were asked to explain what they understood the
term cloud computing to mean. 58% of respondents demonstrated a mostly correct
understanding of the term; 12% gave a mostly wrong answer. Just under one in ten
responses (9%) was incomplete (not really wrong, but also not right). Every fifth
respondent gave no answer (21%). Even among companies that already use cloud
computing, only three out of four executives answered correctly.
Notably, IT managers from the mid-sized companies defined the term correctly more
often than their counterparts at the larger companies (61% to 49%). This shows
that mid-sized companies are attuned to this issue. Further results, however, show
that especially when it comes to value proposition, there is still significant need for
clarification.
Cloud services offer middle market users the chance to increase their
competitiveness on a global scale while also reducing costs. Many companies
are just beginning to use cloud services. They will use cloud computing more
widely when their high demands for data protection, information security and
integration capability with ex isting IT systems are met. These are issues that
cloud providers continue to work hard on.
Mathias Weber, Head of IT Services, BITKOM (Federal Association for
Information Technology, Telecommunications and New Media)
As I see it
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Awareness and prevalence of cloud computing
Fig. 4 Respondents definition of cloud computing
Total sample Non-users of
cloud computing
Users of cloud
computing
Larger companiesMid-sized
companies
Mostly correct
Mostly wrong Do not know/no answer
Unclear
58% 56%
9% 9%
12% 12%
21% 23%
5%
23% 17%12%
12%14%
4%20%
10%
73%61%
49%
2 Current use
Cost savings, more flexibility, increased potential for innovation and faster time to
market: all these advantages would suggest that cloud computing is well-received
among mid-sized companies. However, most respondents remain cautious about moving
their IT to the cloud. Among larger companies the user rate is 18%, twice as high as
among mid-sized companies (9%). But cloud services are still far from qualifying as a
mass market. Usage among all companies is currently only at 12%.
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Cloud Computing in the Middle Market 17
Awareness and prevalence of cloud computing
Fig. 5 Current cloud computing usage among the surveyed companies
Larger companies
No
81%
Yes
18%
Do not know
1%
Total sample
Do not know
1%
No
87%
Yes
12%
Mid-sized companies
Do not know1%
No
90%
Yes9%
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Awareness and prevalence of cloud computing
3 Comparison of users and non-users
A comparison of the 41 cloud users with the 310 non-users confirms that it is the larger
firms who tend to use cloud services. This seems to be true with regard to both staffsize and annual net revenue: the larger the company, the more likely it is to use cloud
services.
Fig. 6 Comparison of users and non-users, broken down by number of employees in
Germany
Total non-users
50249
Employees
49%
250499
Employees
23%
500999
Employees
15%
1,0002,000
Employees
13%
Total users
500999
Employees
29%
250499Employees
17%
50249Employees
37%
1,0002,000
Employees
17%
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Cloud Computing in the Middle Market 19
Awareness and prevalence of cloud computing
Fig. 7 Comparison of users and non-users, broken down by previous years net
revenue
Total non-users
Do not know/
no answer
28%
100499,999 million
12%
500 million
4%
< 20 million
24%
2099,999 million
32%
Total users
500 million
7%
100499,999 million
24%
2099,999 million
24%
< 20 million
20%
Do not know/
no answer
25%
What is also clear is that cloud services are more likely to be used in (often larger)
logistics companies and service companies. (Smaller) retailers and capital goods
manufacturers are, on the other hand, underrepresented. This may be mainly because
the processes of logistics companies are closely tied to IT solutions a fact also
confirmed by a 2009/2010 market study by the Fraunhofer Institute which looked at
the acceptance of Software as a Service (SaaS) and cloud computing in the logistics
industry.1 In that study, 60% of the surveyed decision-makers would be open to using
logistics IT services from the cloud. As such, this industry seems to already have a fairly
high level of acceptance for cloud services, while acceptance among smaller retailers
and capital goods manufacturers is rather low. The result is surprising as retailers could
profit from the flexible scalability of cloud services especially in light of the intense
competition and price pressure in the sector, as well as the need for scalable services in
order to counteract possible seasonal variations.
1 Cf. Fraunhofer Institute for Software and System Engineering (ed.): Cloud Computing fr den Mittelstand am
Beispiel der Logistikbranche. 2010.
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Awareness and prevalence of cloud computing
Fig. 8 Industry affiliation of users and non-users
Total non-users
Services
10%
Trade
14%
Banks, financial institutions
and insurance companies
10%
Manufacturers of
consumer goods
15%
Manufacturers of
capital goods
35%
Transport and
logistics
8%
Other, such as
construction and mining
8%
Total users
Banks, financial institutions
and insurance companies
7%
Trade
7%
Manufacturers of
capital goods
27%
Manufacturers of
consumer goods
15%Services
20%
Other, such as
construction and mining
7%
Transport
and logistics
17%
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Cloud Computing in the Middle Market 21
Behaviour patterns among users
D Behaviour patterns among users
1 Forms of cloud use
Moving IT resources to the cloud or to external server farms can be done in different
ways. Depending on the type of service, one could use storage space and computing
power over the internet. This is known as Infrastructure as a Service (IaaS). With
Platform as a Service (PaaS), in addition to the hardware and operating system that
comes with IaaS, application infrastructure is provided over the internet in the form of
databases and development tools. And with Software as a Service (SaaS), companies
buy software applications over the internet. SaaS is the most common and currently
most widespread form of cloud computing and is found, for example, in the use of web-based e-mail services. Business Process as a Service (BPaaS) offers the opportunity
to outsource entire business functions and processes, such as in human resources or
payroll. In this form, the cloud provider combines software and process services.
The surveyed companies primarily use SaaS offerings (two out of three users). IaaS and
PaaS are also relatively common application forms (42% and 37%, respectively). Almost
a third use consulting services related to cloud computing. However, respondents use
BPaaS offerings comparatively rarely.
The cloud services I use have met my ex pectations. And every day I use them, I
discover new ways to optimise work processes in future. Taking that into account,
Ive got to say: my expectations of cloud computing and the benefits that come
with it continue to grow.
Kay Lied, Cooperation Manager Logistics & Mobility, German Association forSmall and Medium-sized Businesses (BVMW)
As I see it
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Behaviour patterns among users
The most commonly used SaaS services are e-mail, web conferencing, collaboration
(such as the joint editing of documents) and security applications like anti-virus or
anti-spam programs. In addition, services relating to content management, supply
chain management, personnel management, enterprise resource planning and financial
accounting, customer relationship management, and credit card payments are used, as
is office software such as word processing.
2 Cloud user experiences
The reluctance towards cloud services seems given the experiences reported by cloud
users unfounded: almost all of the cloud users surveyed said their expectations hadbeen realised. Only 3 of the 41 users said their expectations had not been met.
Fig. 10 Satisfaction of cloud users with the services used
Yes, fully
46%Yes, partially
47%
No
7%
Fig. 9 Cloud applications used in the surveyed companies
No answer
Software as a Service (SaaS)
Infrastructure as a
Service (IaaS)
Platform as a Service (PaaS)
Consulting services related to
cloud computing
Business Process as a
Service (BPaaS)
66%
42%
37%
29%
24%
2%
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Cloud Computing in the Middle Market 23
Behaviour patterns among users
Fig. 11 Disadvantages associated with the use of cloud computing
Loss of control over the data (to
an outside party), dependence on
outside companies
Loss of data (security)
Increased administrative costs;
staff training/education,
expenses
44%
34%
20%
Whats interesting in terms of data privacy and security: Two out of three users know thecountry of the data processing centre where the exported data is stored. No users have
knowingly made use of cloud offerings where customer data is stored in data centres or
servers in countries outside Germany, the EU or the US.
In response to the (open) question What advantages does cloud computing give
companies that use cloud services?, the 41 managers responded most often with cost
savings through the pay-per-use model. About a third of users cite simple, centralised
management as an advantage, and one in five say its the flexibility of use. Otheradvantages mentioned include the rapid availability of resources/services, the reduced
need for hardware and processors, and energy/resource savings. Of lesser importance
are better protection against external attacks; the use of the latest technology;
temporary, short-term use; high-availability; or location-independent access.
Among the major disadvantages cited by the companies were lack of control over data,
along with dependence on outside companies (44%) and lack of data security (34%).
Other challenges include increased administrative costs and staff training/education,
and data privacy issues. The loss of core competences and know-how, costs for additional
necessary security technologies, or potential system failures are also considered
disadvantageous by some users.
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Fig. 12 Respondents knowledge of the location of the processing centres where their
data is stored
Yes
66%
No
34%
Fig. 13 Location of the data processing centres used by respondents
In the USA
Within the EU
In Germany
15%
11%
89%
Behaviour patterns among users
How many current users plan to eventually fully transfer their IT to the cloud and no
longer retain their own IT resources within the company? 2% of surveyed users have
already fully migrated their IT to the cloud. At least, nearly every second company that
currently uses cloud services can imagine fully migrating to cloud computing in the
future. The majority, however, have no current plans to do so (51%).
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Cloud Computing in the Middle Market 25
Behaviour of non-users
E Behaviour of non-users
How is the growth of cloud computing fairing in the middle market? How many
companies are planning to move their IT to the cloud? What services are attractive, and
what are the concerns?
Companies that currently do not use cloud services remain hesitant about using them
in future. Larger companies tend to be more open, even though there are very few
differences in their reasoning. The more critical attitude of mid-sized companies may
be largely due to the fact that they have not really engaged with cloud computing, andthat there is thus probably no transparency about available offerings and their possible
benefits. The survey results suggest as much: more than half of the companies surveyed
have not yet delved into the issue. Although this is more true for mid-sized companies
(55%), 52% of the larger companies also state that they have not yet dealt intensively
with the possibilities of cloud computing.
Overall, 12% of the companies surveyed that have not yet used IT cloud services plan
to do so. A slight difference can be seen between mid-sized companies (11%) and larger
enterprises (14%). In addition, more international companies (13%) than companies
active exclusively in Germany (9%) are planning to use cloud services.
1 Potential
Our core business is soccer. We need to make optimum use of resources in
managing the club. Therefore, it is important to simplify structures and work
processes. We dont want to close ourselves off to new approaches, but instead be
open to innovative solutions. We are implementing an ERP cloud service to deal
with sponsors and members and would opt for the cloud again.
Roy Stapfelfeld, Managing Director FC Carl Zeiss Jena
As I see it
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Behaviour of non-users
Total Larger companiesMid-sized
companies
International Active only in
Germany
12%
1%
11%
1%
14%
2%
13%
2%
9%
1%
87% 88% 84% 85% 90%
Fig. 14 Future use of cloud computing by respondents who currently do not use cloud
computing
Yes Do not know/no answerNo
2 Reasons in favour of the cloud
Non-users who are planning to introduce cloud services expect cost savings above all
else (83%). Three out of four companies appreciate the low investments costs associated
with introducing cloud computing. The pay-per-use model and the possibilities for
mobile access are also viewed as positive (78% each). For more than two of three
companies, the rapid implementation of IT innovations through cloud computing is adecisive advantage (67%). Every second company (56%) sees cloud computing as an
opportunity to focus on core business while outsourcing IT. The shorter time to market
(42%) and the elasticity and scalability of cloud computing capacities (42%) also play a
role.
Mid-sized companies in particular cite the focus on core business as an advantage of
cloud computing. This is not surprising, given that smaller companies typically have
only limited resources to deal with IT. The expected low upfront investment and the
prospect of implementing innovation processes in IT more quickly using cloud services
also (still) weigh more heavily for mid-sized companies than for larger enterprises. The
cost arguments (pay-per-use model and general cost-savings expectations) seem to be
equally important to both classes of companies.
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Cloud Computing in the Middle Market 27
Behaviour of non-users
Fig. 15 Reasons for future use of cloud computing among respondents who currently
do not use cloud services
We expect cost savings from cloud computing.
Cloud computing does not require high upfront
investment in expensive infrastructure.
Cloud computing enables worldwide access to
data, even from mobile devices.
We pay only for what we use (pay-per-use model).
Cloud computing lets us implement innovations
faster and better. For example, we can quickly
draw on new cloud services in response to
changes in business models and processes.
IT is not a core competency of our company and
cloud computing is an efficient and cost-effective
alternative for outsourcing IT.
Peak loads or seasonal and cyclical business
developments can be mitigated through cloud
services.
Better time to market: the shorter duration of ITprojects.
83%
78%
78%
78%
67%
56%
42%
42%
Executives of larger companies also gave the following reasons for introducing cloud
services: optimal level of service; special software can be used; additional resources
can be used; and you gain the flexibility to quickly respond to new needs.
Answers to the question of what cloud services companies may want to employ in
the future mirror the current usage patterns of those companies already using cloud
services. In particular, mid-sized companies have identified SaaS as the primary field of
application, while larger companies see possibilities for the outsourcing of development
platforms (PaaS) or a need for processing and storage capacity (IaaS) in addition
to SaaS. Two out of three companies plan to use PaaS (64%). Similarly, 64% of non-users planning to introduce cloud computing will turn to SaaS offerings. Only 19% of
current non-users but 33% of larger companies would like to use BPaaS (complete
outsourcing of business processes) in future. A good third plan to procure consulting
services related to cloud computing (42% of larger companies, 33% of mid-sized
companies).
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Behaviour of non-users
Fig. 16 Types of future cloud services respondents who currently do not use cloud
services plan on using
Not specified
Software as a Service (SaaS)
Infrastructure as a
Service (IaaS)
Platform as a Service (PaaS)
Consulting services related
to cloud computing
Business Process as aService (BPaaS)
75%42%
64%
58%
67%
64%
42%
47%
58%
42%
33%
36%
33%
13%
19%
8%
4%
6%
Larger companies
Mid-sized companies
Total
3 Reasons against the cloud
While the benefits of cloud computing are constantly highlighted and discussed in
the media, mid-sized companies, in particular, still seem to be holding back. What
are reasons against the use of cloud computing from the perspective of the companies
surveyed? Three out of four respondents dont think cloud computing will offer any
advantages to them. This may be largely because inspired by recent incidents the
opportunities and potential of cloud computing are being far less discussed, at present,
than issues like data security, privacy and compliance. In fact, about 70% of companies
surveyed (68% of larger companies and 71% of mid-sized companies) fear that the
security of their business data cannot be adequately guaranteed in the cloud. This
perception is consistent with that of the cloud users.
Surprisingly, more than half of the companies (54%) have not really engaged with theissue. This is more so the case among mid-sized companies with 55%. But 52% of larger
companies have also not yet concerned themselves with cloud computing.
Almost 50% of larger companies fear that they will have problems with system
integration through the use of cloud services. At 40%, compliance considerations play a
not surprisingly lesser role for mid-sized companies than for larger companies (51%).
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Cloud Computing in the Middle Market 29
Behaviour of non-users
Other reasons to not use cloud services include cost uncertainty, technical
considerations (are technically well equipped; internal or external technical
reasons; inflexible cloud offerings, only standardised solutions that are not suitable)
and internal management issues (decision from management; corporate decision;dependence on corporate structure; want to avoid dependence on external
providers).
These results alone reveal little difference between the views of mid-sized and larger
companies on the subject of cloud computing. But in the course of the survey, it became
clear that more of the larger companies have engaged with the issue of cloud computing
some even extensively. Their answers to certain concrete questions were more pointed
than those of the mid-sized companies. In total, the mid-sized companies responded to
the six different prompts with Do not know/no answer 45% of the time; among the
larger companies it was just 34%. That may be because we reached more specialised
(IT) executives in the larger companies than in the mid-sized companies.
Larger companies
Mid-sized companies
Total
Fig. 17 Reasons cited by non-users for not employing cloud computing
Why doesnt cloud computing currently play a role in your company?
The market is currently toocomplicated to be able to make a
decision.
We see no advantages to our
company through the use of cloud
computing.
The security of our business data
cannot be adequately guaranteed in
the cloud.
We are concerned with violating rules
and regulations (ie, compliance
infractions) through the use of cloud
services.
40%47%
42%
40%51%
43%
We have not yet looked at the issue of
cloud computing for our company.55%
52%
54%
Integrating cloud services in our IT
landscape is too costly.
48%
46%
45%
71%
68%
70%
72%
75%
73%
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Outlook
F Outlook
The survey results show that the hesitation of mid-sized companies in particular stems
from uncertainty over information security, data protection and compliance, and that
many companies despite the attention the topic has received in the (trade) press and
the IT industry in general do not clearly see the benefits of outsourcing their IT to the
internet. But despite all the hesitation: the survey results also show that users have had
good experiences with cloud services and that they have reaped measurable benefits.
What remains is to overcome any lingering scepticism among non-users especiallysince more than half the companies surveyed had not yet engaged with the subject.
The survey results showthat users have had goodexperiences with cloudservices and that they havereaped measurablebenefits.
The results of PwCs survey of the middle market highlight what still has to be
done: if some 80% are still sceptical about u sing cloud computing, then we have
to shed more light on and raise awareness about cloud computing among smaller
companies. We also have to address the biggest concerns mid-sized companies
have about cloud computing, namely privacy and data security.
Hans-Joachim Otto, Member of German Parliament, Parliamentary State
Secretary at the Federal Ministry of Economics and Technology
As I see it
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Outlook
But how?
First off, providers have to present transparent concepts that clearly articulate the
benefits of cloud computing and alleviate uncertainties and, in particular, concerns.Solutions are necessary in terms of information security, data privacy and compliance,
all of which were cited by the mid-sized companies surveyed as the biggest obstacles to
cloud computing.
Providers have received support from policymakers who have themselves recognised
the potential of cloud computing and who are working on pragmatic solutions for its
successful application. As such, the Federal Ministry of Economics and Technology has
announced a technical competition around cloud computing: Trusted Cloud aims to
promote research and development activities that will generate efficient and innovative
cloud structures and innovative cloud-based services. The project focuses in particular
on aspects like data security, trust and reliability. Pilot projects chosen as part of the
competition will receive financial support totalling about 50 million.
But satisfied users, too, can help to alleviate the current concerns: through progress
reports and the sharing of best practices. No argument carries more weight and is better
suited than the opinion of a satisfied user when it comes to raising awareness among
companies about the benefits, challenges and solutions surrounding cloud services.
with which selected pilot projects will be supported
50million
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Tips for the successful use of cloud computing
Tips for the successful use of cloud computing
We would like to end by providing mid-sized companies with some tips for succeeding in
the cloud. Here we address the main concerns of the middle market.
Concerns about cloud computing and its disadvantages stem in part from the fact that
there are no binding standards or best practices that could provide guidance on how to
use cloud technology in everyday business. Users report, however, that cloud services
can already be used profitably. Good preparation is the most important foundation for
a successful experience. Ahead of outsourcing their IT, companies should consider the
following:
Define your goal in using cloud computing and develop an appropriate strategy.
Decide what business processes and services are suitable for being outsourced to thecloud.
Set clear and quantifiable goals for example in terms of cost savings, increased
innovation potential and optimised use of resources. Confirm these goals in-house.
Involve all relevant people and competencies in your cloud project, because: important
competencies dont only reside in IT, they also lie in the different departments as well
as in the areas of information security, data privacy, compliance, purchasing, finance
and contracts. Establish important frameworks (including with regard to information
security, data privacy, compliance, technology, contracts) and formulate guidelines.
On this basis, develop a filter for evaluating and selecting cloud providers.
Take stock of your situation and identify the areas where some adjustments are
necessary and what costs are associated with them.
Determine the costs and benefits of your cloud project in the form of a feasibility
study.
When drawing up a contract, it is imperative to detail services and obligations between
cloud providers and cloud users in order to protect against later surprises. It should
also be determined whether software licences are adequate (for example in terms of
transferability). Data privacy should also be addressed. The contract parties also need to
decide whether subcontractors can handle the data. This is especially important when
From the perspective of the EU, cloud computing means that we have huge
potential, and that as part of the digital agenda we must set standards for its use.
Because we do not yet have such standards in the EU. This will be addressed by the
Commission in the weeks and months ahead.
Matthias Groote, Member of European Parliament
As I see it
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Cloud Computing in the Middle Market 33
Tips for the successful use of cloud computing
data is transferred across borders between different servers and processing centres.
Other important components of a robust contract include guaranteed service availability
and the return of data post-cloud. Thats because at the end of the contract, upon sale
of the provider to a third party or in the event of insolvency the data must be returnedsafely and its entirety. A transfer of data to a third country should only be considered if
there is a level of data protection equivalent to that in the EU.
These preparatory steps quickly pay off and ensure companies will reap maximum
benefit from cloud services.
To alleviate companies concerns about information security, data protection and
compliance requirements, many cloud providers are currently working on viable
solutions. PwCs 2010 study Cloud Computing Navigation in the Cloud also
showed this. However, there is still work to do, as evidenced by the results of our
survey. Providers should therefore take advantage of all available certifications from
independent third parties to do what is obviously missing: build trust.
Users report that cloudservices can already beused profitably. Good
preparation is the mostimportant foundation fora successful experience.
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34 PwC
Contacts
Contacts
Markus Vehlow
Olof-Palme-Strae 35
60439 Frankfurt am Main
Tel.: +49 69 9585-2293
E-Mail: [email protected]
Dr. Peter Bartels
New-York-Ring 13
22297 Hamburg
Tel.: +49 40 6378-2170E-Mail: [email protected]
Cordula Golkowsky
Friedrich-Ebert-Anlage 3537
60327 Frankfurt am Main
Tel.: +49 69 9585-5022
E-Mail: [email protected]
Dr. Christina Mller
Olof-Palme-Strae 35
60439 Frankfurt am Main
Tel.: +49 69 9585-1714E-Mail: [email protected]
About us
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every day. They turn to us for comprehensive support and practical solutions that
deliver maximum value. Whether they are a global player, a family business or a public
institution, we leverage our full range of skills: experience, industry-specific knowledge,
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needs, the more strategically we can support them.
PwC. 8,700 dedicated people at 28 locations. 1.33 billion in turnover. The leading
auditing and consulting firm in Germany.
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