Australian CIOs say cloud services adoption is currently marginal but momentum is building

AUSTRALIA: Despite media hype to the contrary, ICT remains predominantly an in-house affair for Australian CIOs, according to global analyst firm Ovum.

In a recent report* Dr Steve Hodgkinson, Research Director for Ovum’s Asia-Pacific IT research, describes the results of a survey of 63 CIOs who attended the third SE-Corp CIO Strategy Summit in Melbourne in February. He says: “We asked CIOs about how they sourced a range of ICT activities and were surprised to find that three-quarters of the activities were currently provided by an in-house ICT department”.

Hodgkinson states: “It is always difficult to assess the true rate of cloud services adoption – and to sift fact from fantasy. This survey was conducted as pre-event research for CIOs attending the summit, so it provides a good qualitative assessment of their views on current and target sourcing approaches across a spectrum of 50 ICT activities. These spanned the categories of data center, network, application development, information management, applications and end-user services. The results reveal a rather prosaic focus on traditional in-house IT operations.”

Ovum's report reveals that 74 percent of ICT activities are currently provided primarily by an in-house ICT department, although this figure is projected to decline to 61 percent during the next 1–2 years. Shared services arrangements account for around 9 percent of ICT activities, and this is not projected to change much during the next few years.

Outsourced arrangements currently account for 13 percent of ICT activities, and this figure is projected to rise to 20 percent during the next one to two years across a range of services – primarily focused on data center, network, and application development services.

Around 4 percent of ICT activities are currently sourced as cloud services – primarily software-as-a-service (SaaS) applications – but overall this proportion is projected to rise significantly during the next few years. Cloud sourcing of data center and application services, in particular, is expected to comprise more than 15 percent of the ICT mix.

Hodgkinson states: “The reality for this group of CIOs is that ICT management is still about managing the people, processes, and technologies of the in-house ICT department. It is therefore not surprising that a shortage of people and skills was regarded by CIOs as one of their major challenges. However, outsourcing and cloud services are projected to account for one-third of ICT activities overall in the next one to two years. Change is definitely coming, while perhaps more slowly than expected, and momentum for cloud services in particular is expected to build during the next few years.”

Hodgkinson recommends: “CIOs with ICT sourced substantially in-house are advised to start gaining skills in the procurement and management of cloud-sourced services sooner rather than later. New mindsets and skills are required, particularly for counterparty risk management and systems integration, and these skills can only be learned with hands-on experience”.

He states: “It’s really all about organizational learning and more agile thinking. Also, the experiences of early adopters are that cloud services can be better, faster, less expensive and, overall, less risky. Given this, there are productivity and innovation opportunity costs associated with delaying cloud services adoption.”