Mid-sized companies call cloud overrated; more than half have no cloud plans at all

Focused on a specific company profile, survey highlights surprising variance in cloud micro-markets

Mid-sized companies in the Midwest that are heavy users of Microsoft enterprise business products are also far less likely to use cloud computing for anything more than to outsource management of troublesome Microsoft business apps, more likely to have no cloud projects underway at all, but just as likely to put both virtualization and cloud computing at the top of their priority list for the next 12 months.

The survey from SWC Technology Partners in Chicago, surveyed 210 IT and business managers at companies among the base of its customers or prospects – that is, companies in Illinois, Wisconsin and Indiana, half of which have between 100 and 2000 employees.

The value of a survey like this is its specificity; it doesn't reflect the perceptions or intentions of companies in companies all over the world whose political and economic situations are so different from one another it's surprising if they have anything in common at all.

It also doesn't focus on U.S.-based multinationals, or the largest U.S.-domestic corporations, or geographic regions dominated by industries such as medicine or finance, in which the minimum level of IT automation required by federal regulation is higher than companies in manufacturing, transportation or other verticals.

Chicagoland is hardly the bucolic small-town America idealized by people who have never lived there. It's busy, industrial and as globally connected as companies based on the coasts.

Companies based there tend not to be the kind that have giant networks of self-owned datacenters and IT development operations crewed by graduates of nearby computer-engineer manufactories like MIT or Stanford.

They do have a lot of the giant data centers that house many of the outsourced, co-located and cloud-based data-center services used by those data-center-centric companies on the coasts, however, which makes it that much more interesting that they don't really use the cloud for much of anything important.

Only 3.7 percent of respondents to the SWC survey said they'd adopted a cloud-computing strategy for the whole company.

That's lower than most other surveys, which estimate rates of cloud services adoption between 37 percent and 50 percent, consistently find half or more of mid-sized and large companies surveyed consider cloud a strategic technology option, and estimate the percentage of companies intending to adopt cloud services within the next 12 months as high as 75 percent.

Even Microsoft's own survey of SMBs (PDF) (wth fewer than 250 employees) shows 66 percent are using some type of cloud service and 29 percent are using services for which they pay.

At SWC, 54 percent of companies said they have no cloud projects underway at all.

Of those that do use cloud services of any kind, 65 percent use Microsoft's Exchange Online, 48 percent use Microsoft SharePoint Online and 24 percent use Google Apps.

That's where the mid-market bias comes in.

According to SWC, Gartner and Forrester surveys, cloud services pay off more quickly for small companies than for mid-sized companies, because they give companies with only a handful of IT people access to top-level IT infrastructures and applications.

Large companies tend to need too much customization to use a lot of generic services, so they sign up for SalesForce and Exchange and SharePoint to save support, but the bulk of their cloud projects tend to be internal cloud infrastructure development, or longer-term pilot tests and slow-growing projects built using infrastructure-as-a-service (IAAS) offerings from Amazon or Rackspace or other data-center outsourcing and hosting companies.

Mid-sized companies don't have the quick payoff that lets small companies forget about the risks to privacy and security in trusting the cloud, or the complexities that would justify heavy development of spillover data-center capacity on IAAS services such as Amazon's EC2 or platform-as-a-service (PAAS) products such as Microsoft's Azure. Both are designed to provide extra data-center capacity companies can use to cover spikes in demand or projects they don't want to run internally.

Mid-sized companies can benefit quickly by offloading labor-intensive support and hosting of Microsoft apps like SharePoint and Exchange, however, so that's where they focus their cloud projects, the report found.

Of the respondents surveyed by SWC, only 7.4 percent were using Amazon's EC2.

The leading reason SWC respondents didn't adopt cloud were privacy and security (cited by 21 percent) and cost (cited by 9.8 percent.

The speed with which cloud and SAAS products are being adopted is under almost constant debate. The most likely reason is that "cloud computing services" covers such a broad area of both applications and scope of individual projects that it's hard to estimate how quickly the whole pie is growing. Cloud computing isn't just one big pie; it's a lot of little pies in a lot of different flavors, different combinations of which appeal to different segments of the corporate IT market.

This particular survey, at least, marks out boundaries for the size, location, industry and technology focus of the companies it surveyed in great enough detail to shed some light on that particular segment.

It also helps highlight the fractured nature of a "cloud market" that isn't a highly segmented but still cohesive economic unit, as most vendors and analysts insist on treating it.

It's a whole series of different markets differentiated by the size, industry, requirements and biases of the customers within it.

Summarizing the "cloud market" in those terms is bad enough, but the complexity is multiplied by the range, variety, cost, labor intensity, infrastructure requirement and availability of the applications and services all defined as "cloud" because they're not installed in the customer's office and are savvy enough in their marketing to attribute both their strengths and weaknesses to "the cloud" because everyone wants it but few know when they're looking at the real thing and when they're just being fogged.

Read more of Kevin Fogarty's CoreIT blog and follow the latest IT news at ITworld. Follow Kevin on Twitter at @KevinFogarty. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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