Firms slow to embrace cloud computing

The technology industry and the venture capitalists that invest in it have had their heads in the "cloud" for quite some time, but individual companies in other industries will likely be slow to join.

One analyst at last week's Microsoft Worldwide Partner Conference predicted companies will embrace a hybrid model between cloud computing and their current system for at least 10 years. Another estimated closer to 15.

"There's an awful lot of talk about it and there is consumption of cloud," said Al Gillen, an analyst at IDC. But "organizations don't simply make change because they can. There has to be good justification."

Harry Weller, a general partner at New Enterprise Associates, said start-ups and new businesses will likely be among the first to move to the cloud. A need to hold down costs is often an overriding factor in their decision, he said.

"You don't have to go and buy a bunch of servers," said Weller, who is based in Reston. "You go to Amazon and rent them when you need them. From a start-up perspective, it's a massive change."

But smaller companies often have fewer applications and have less money already invested in massive servers and networks, Weller said. For larger companies, "it's going to take a little longer," he said.

"That decoupling from its physical assets is a big change and requires a lot of efforts," he said.

That's one of the reasons Tiffani Bova, a tech industry analyst at Gartner, estimates only 20 percent of companies will have moved to the cloud by 2012. The rest will gradually migrate over at least the next 10 years, adopting hybrid models in the meantime.

During an interview at the Microsoft conference, Tim O'Brien, the director of the software giant's platform strategy group, said most big businesses are willing to take the first step of embracing cloud-based e-mail.

Because of security concerns and an unwillingness to relinquish infrastructure control, fewer companies have been willing to push sensitive or proprietary information out into the cloud, he said.

"You start looking at other categories of computing that involve sensitive business data, either they involve regulatory impact in terms of where data is stored or where computing is run, and it's not so clear-cut or the path to cloud might be a little bit slower," O'Brien said.

But the formation of private clouds, which offer the cost and capacity benefits of storing data and applications on the public Internet with the security of an on-site system, could speed up that process. Microsoft last week unveiled its offering that enables the formation of private clouds, called the Windows Azure Appliance.

Dux Raymond Sy, the managing director of Reston-based Innovative-e, said the new product from Microsoft, of which he is a partner, should get attention. But the companies he consults with still want to assess whether the time is right to move to the cloud and if the economic benefit outweighs the discomfort of adopting it early.

"From my clients, I don't have a client that says, 'Let's go all in,' as Microsoft would say," Sy said. "It's still at the education and understanding stage. They're read about the cloud, but it's still not clicking about what it means for their organization unless they sit down and do the research and number crunching."