Head in the clouds

Constrained credit and a new frugal approach to IT spending are the forces currently shaping enterprise expenditure. Ben Furfie met with managed services provider Smartworld to ask if cloud services can take off in such a hostile climate

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Head in the clouds Iyad Hindiyeh (centre) predicts enterprises will rapidly turn to cloud services in the next two years.
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By  Ben Furfie Published  September 15, 2010

Constrained credit and a new frugal approach to IT spending are the forces currently shaping enterprise expenditure. Ben Furfie met with managed services provider Smartworld to ask if cloud services can take off in such a hostile climate.

Iyad Hindiyeh doesn’t shy away from making bold claims. As the chief operating officer of Smartworld — the joint venture between telecoms giant Etisalat and investment house Dubai World — he is eager to tell people about his, and his backers’, vision of the future.

“In a couple of years time, as much as 20% of large companies will not have an IT infrastructure — at least as we recognise it today,” he told a room full of journalists at a press conference to launch the company’s latest cloud computing services for SMBs.

In the space of one minute, he’d made a claim that others had only alluded to in the past: that cloud computing will replace IT departments wholesale.  What’s more, he didn’t just put a time frame on it — he also gave an estimate of the number of companies that would do so.

Sitting down with Hindiyeh after the conference, it was clear that the bolshiness wasn’t just for show: his belief in the product is unquestionable. “I feel that cloud computing is the remedy for the economic situation we have today,” he told me, when questioned about whether or not companies can really afford to invest in cloud while they are still wrestling with ROIs on existing deployments and the credit markets are still strained.

“Even with the economic crisis, companies are still forced to spend a lot of money keeping up with the technological advancements of hardware and software. By moving into the cloud, [companies can] remove many of the headaches that they currently experience.”

Coming back to his claim that one-in-five enterprises will have essentially done away with their IT infrastructures within the next couple of years, Hindiyeh added: “This is where things are moving. If you look today, it’s already happening at some large corporations in the US and Europe. This trend is being motivated by the idea that companies have to focus on what they do best, and that’s delivering their product or service to the customer. It’s not expending energy and resources on an IT department, especially when a managed service provider can often do it more efficiently and cheaper.”

When pushed for a reason why he felt IT departments weren’t up to the job, he explained: “It’s not that CIOs and their IT staff aren’t able to do the job well. It’s simply that cloud services mean that instead of having a sprawling IT infrastructure for just one company — one that probably isn’t being used efficiently — and having to expend the capital to purchase it and also fund its upkeep, several companies can use the same hardware more efficiently — and it has the benefit of being cheaper and greener too.”

With benefits like that, it begs the question as to why more firms haven’t already embraced the cloud. “Before [they] will move towards a cloud computing service, they need to see the same offering that they experience from internally-based services — it has to be reliable, it has to be scalable and it has to be for the right price,” offered Hindiyeh, as a reason why it hasn’t happened yet.

“[Now that Smartworld has launched its offering], we’ll start to see companies moving over straight away,” he proclaimed.

When asked about the impact that a delay in IT refreshment by companies might have on that prediction, he said: “For some, it will already be time to refresh. For others, there will be a cost benefit in moving away from expensive to maintain IT infrastructures, towards the lower costs of cloud computing. If you look at the costs of the cloud computing services that Smartworld is offering, the price is lower — sometimes substantially lower — than maintaining the existing IT infrastructure. In those cases, it simply doesn’t make sense to wait until the next hardware refresh before considering moving to cloud computing,” he commented.

One of the big fears that will inevitably arise from his prediction that as many as 20% of enterprises could do away with their internal IT infrastructure within a couple of years, is that it will spell out widespread job losses. However, Hindiyeh downright dismisses the idea that cloud adoption automatically equals job losses.

“If you look at the trends that are happening in markets where the move towards infrastructure-free enterprises has already begun, such as the UK, the US and Western Europe, IT jobs haven’t gone down — instead they’ve gone up. This is because once you start to introduce cloud services, the companies offering those services will begin to absorb those staff whose jobs no longer exist. There is also increased demand for IT staff at private companies that will still have a need for those services — such as those that need private clouds.”

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