South Africa

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  • Industry: Information, Communication & Entertainment
  • Type: Press release, Survey report
  • Date: 2013/02/21

 

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The cloud takes shape - Industry report 

Business and IT leaders across the globe are finding cloud adoption to be more complicated than many had originally anticipated, according to a report from KPMG International.

According to The Cloud Takes Shape, nearly 33 percent of all executives surveyed say that cloud implementation costs have been higher than they expected, and a similar percentage say that integrating cloud services with their existing IT infrastructure has been particularly difficult.

 

The South African experience appears to be a bit different, according to Frank Rizzo, Technology Sector Leader KPMG in South Africa. “Locally, our clients are still experiencing lower costs in cloud implementation, though our market is still relatively immature compared with the more developed participants in this survey,” he says.

 

Business process design key to the implementation challenge
As the market for cloud matures, enterprises are now starting to come to terms with the hard practicalities of cloud enablement, according to the report’s authors. There is evidence that organisations are placing greater focus on getting the business process redesign right, facilitating appropriate change processes and making business model improvements. 

 

“One of the most important lessons uncovered by this research is that business process redesign needs to be done in tandem with cloud adoption if organisations hope to achieve the full potential of their cloud investments,” said Rick Wright, Global Cloud Enablement Programme Leader and a Principal with KPMG in the US. “Executives have found that simultaneous process redesign is central to addressing the complexities that often arise in the implementation and operational phases of cloud adoption.”

 

Here, too, South Africa appears to be in an earlier phase of cloud adoption according to Rizzo. “The question for our clients is: What problem are we trying to solve? This makes business process redesign less of a critical issue for local cloud adopters, who are still evaluating cloud technology to address specific concerns rather than to change their entire business’ IT structures.”

 

Reaping the transformational value from cloud
In more developed markets such as those surveyed, executives still believe that the benefits of cloud adoption far outweigh any growing pains they experience through implementation, despite these emerging complexities, the survey shows. In part, this is because organisations are shifting their focus away from pure cost reduction objectives to instead focus on achieving the transformational benefits of cloud.

 

“As cloud begins to become more mainstream within the business environment, we are seeing organisations move from the ‘when and why’ of the cloud adoption process to instead focus on the ‘how’,” said KPMG’s Wright.

 

Locally, bandwidth costs remain a challenge. “We should see cloud adoption picking up as our local bandwidth costs decrease, but for now it is still a barrier to business-wide cloud adoption,” Rizzo says.

 

While cost reduction is still the primary reason for cloud adoption according to nearly half of respondents, 28 percent said that the speed at which they are able to migrate to cloud is important, as is cloud’s ability to enable faster entry into new markets (27 percent) and business process transformation (22 percent).

 

“Gaining real cost savings from the cloud is about more than simply moving from fixed costs to operating costs; the greatest cost savings – and, more importantly, the transformational business benefits – will come from the longer-term outcomes such as more efficient processes, more flexible operating models,” commented Steven Salmon, Principal Advisor with KPMG in the UK. 

 

Mr. Salmon also added that as cloud moves further up the ranking as a strategic tool of the business, “we will begin to see the CIOs role becoming ever more critical as the business integration broker on commercial, process and technical levels.”

 

Cloud’s new and emerging challenges
Businesses are starting to more clearly understand some of the other aspects of cloud that can either significantly enhance or impair their organisation’s ability to reap the rewards of cloud adoption. 

 

Security: Business executives are recognizing that cloud adoption should improve security, not lessen it, nevertheless 26 percent of respondents still see security as a key challenge.  The report indicates that business executives recognize that the only way to address the concern is to work more closely with IT to develop a joint approach on cloud security to ensure that cloud providers’ solutions and services are reliable and protected.

 

Many businesses are proving their growing confidence in the security of cloud with more than a third of respondents saying they will migrate core operations of sourcing and procurement, supply chain and logistics to cloud within the next 18 months.

 

“Security – data loss and privacy – are still significant concerns for business and IT leaders but many are quickly gaining more confidence in their service providers,” said Greg Bell, Principal, KPMG in the US. “Functions that, until just recently, were considered too sensitive or complex are now being put on the table.”

 

Regulation: Only 18 percent of respondents see regulation as a challenge but that may be due to complacency, the report’s authors suggest, because organisations may be just beginning to prepare for the complexities that will arise with increased regulatory compliance. Respondents from the Americas are 10 percent more likely than their Asia Pacific peers to view regulation as a key challenge.

 

“It will not be long before regulators start to enforce new rules that will have an impact on the way global organisations use the cloud,” said Shahed Latif, Principal, KPMG in the US.

 

Nearly 24 percent of respondents say they are looking at ‘private’ cloud environments as a way to address regulatory challenges.  

 

Tax: According to the survey, when asked how significant the role of tax was to making decisions to migrate to cloud, nearly 75 percent of respondents globally view the role of tax as either very significant or significant, indicating recognition that tax structures may change as a result of migrating to cloud.

 

Rizzo agrees that security and regulation are key concerns for local organisations looking to enter the cloud. “The Protection of Personal Information Bill, which is on the verge of becoming law, adds complexity to cloud adoption. People need to know where their information is being stored, and what safeguards have been implemented to protect their information. Cross border data flows further add to this challenge.

 

“Yet despite challenges to corporate cloud adoption, consumer adoption of the cloud seems to be taking off in Africa. ICT vendors have made the cloud accessible to their customers, and continuous development in improving Africa’s bandwidth speeds makes the future of cloud in Africa bright.”

 

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Contact

Contact
Frank Rizzo
Director
Advisory
Tel: +27 (0)11 647 7388
frank.rizzo@kpmg.co.za