Cloud Computing in the german middle market

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Cloud Computing inthe Middle MarketExperiences, Advantagesand Challenges

www.pwc.de/de/cloud-computing

A survey of the experiences

of mid-sized companies with

IT in the cloud


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Cloud Computing in

the Middle MarketExperiences, Advantagesand Challenges

A survey of the experiences

of mid-sized companies with

IT in the cloud


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Cloud Computing in the Middle Market

Experiences, Advantages and Challenges

Published by PricewaterhouseCoopers AG Wirtschaftsprfungsgesellschaft

Written by Markus Vehlow and Cordula Golkowsky

With thanks to Christina Mller, Johannes Beichel, Stefan Knecht and Eiko Alexander Ermold

Overall design, coordination and evaluation of the telephone survey: denkstelle hamburg

Independent market research institute for the telephone survey: teleResearch GmbH

June 2011, 36 pages, 17 figures

All rights reserved. Reproduction, microfilming, storing or processing in electronic media is not allowed without the

permission of the publishers.

The results of this survey and the contributions from our experts are meant to serve as a general reference for our

clients. For advice on individual cases, please refer to the sources cited in this study or consult one of the PwC

contacts listed at the end of the publication.

June 2011 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprfungsgesellschaft. All rights reserved.

In this document, PwC refers to PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprfungsgesellschaft,

which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate

legal entity.


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Cloud Computing in the Middle Market 5

Preface

Once the stuff of IT dreams, cloud computing has become a reality. There is hardly an IT

event that doesnt address IT in the cloud; the media report on cloud computing almost

daily; and more and more, companies, IT vendors, analysts and industry associations

are discussing the opportunities and challenges of this technology.

This high level of attention is well-founded because cloud computing has many

advantages: IT resources can be deployed flexibly, efficiently and virtually without

limits via the internet. The pay-per-use model provides companies with cost reduction

potential and higher cost transparency through usage-based billing. In addition,

investment in hardware and software can be reduced by the purchase of cloud services,as these structures are supplied by the cloud provider. There are also other advantages

that allow for faster, more flexible IT processes and that can serve mid-sized companies,

as well.

Yet so far, only relatively few mid-sized companies use cloud computing. Why are so

many companies hesitating? And what experiences have companies in the middle

market had with cloud computing until now? Will the situation change?

The present survey answers these questions and provides insight into the current mood

toward cloud computing in the middle market. It also offers family and mid-sized

companies approaches and ideas on how to benefit from this trend and on what they

should take into account to ensure successful use of cloud services.

We hope you enjoy reading!

Preface

Dr. Peter Bartels Markus Vehlow Cordula Golkowsky


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Table of contents

Table of contents

Preface ............................................................................................................................5

Table of figures ...............................................................................................................7

What is cloud computing and what can it do? ..................................................................8

A Summary .................................................................................................................. 10

B Survey methodology and participants ......................................................................12

C Awareness and prevalence of cloud computing.........................................................15

1 Conceptual understanding ......................................................................................15

2 Current use .............................................................................................................. 16

3 Comparison of users and non-users ..........................................................................18

D Behaviour patterns among users ..............................................................................21

1 Forms of cloud use .................................................................................................... 21

2 Cloud user experiences .............................................................................................22

E Behaviour of non-users .............................................................................................25

1 Potential ...................................................................................................................252 Reasons in favour of the cloud ..................................................................................26

3 Reasons against the cloud ........................................................................................28

F Outlook ....................................................................................................................30

Tips for the successful use of cloud computing ..............................................................32

Contacts ........................................................................................................................34


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Table of figures

Table of figures

Fig. 1 Proportion of respondents by number of employees in Germany ....................12

Fig. 2 Proportion of respondents by annual net revenue last year .............................13

Fig. 3 Proportion of respondents by industry ............................................................ 14

Fig. 4 Respondents definition of cloud computing ..................................................16

Fig. 5 Current cloud computing usage among the surveyed companies .................... 17

Fig. 6 Comparison of users and non-users, broken down by number of employees

in Germany .....................................................................................................18

Fig. 7 Comparison of users and non-users, broken down by previous years net

revenue...........................................................................................................19

Fig. 8 Industry affi liation of users and non-users .....................................................20

Fig. 9 Cloud applications used in the surveyed companies .......................................22

Fig. 10 Satisfaction of cloud users with the services used ..........................................22

Fig. 11 Disadvantages associated with the use of cloud computing ............................23

Fig. 12 Respondents knowledge of the location of the processing centres where

their data is stored ..........................................................................................24

Fig. 13 Location of the data processing centres used by respondents ..........................24

Fig. 14 Future use of cloud computing by respondents who currently do not use cloud

computing ......................................................................................................26

Fig. 15 Reasons for future use of cloud computing among respondents who currently

do not use cloud services ................................................................................27

Fig. 16 Types of future cloud services respondents who currently do not use cloud

services plan on using .....................................................................................28

Fig. 17 Reasons cited by non-users for not employing cloud computing .....................29


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What is cloud computing and what can it do?


Cloud computing lets companies draw on IT resources via the internet

exibly, eciently and virtually without limits with usage-based pricing.

Computer capacity, data storage and applications must not, or not entirely,

be maintained and operated by the company.

IT-on-demand? Just as flexible and easy to use as TV-on-demand? That would have been

hard to imagine a few years ago, but now its a reality through cloud computing.

The use of cloud computing can save costs because the underlying pay-per-use model

reduces companies expenditures for the purchase, operation and updating of ITstructures. It also provides greater cost transparency. Costly investments in hardware

and software can be avoided, as memory space, development platforms and applications

are used and paid for as needed. The cloud service provider assumes installation,

operation and maintenance costs and includes these in the monthly fee. Fixed costs

become variable costs. But cost reduction is not the only advantage of cloud services:

Because IT resources must only be available as needed and can be scaled easily, a more

efficient allocation of resources is possible.

Cloud computing also promotes innovation in the IT and other departments, as it allows

new services or business models to be quickly and flexibly deployed in conjunction

with business developments (business agility). IT-based processes can more quickly be

brought to market due to the shorter duration of IT projects (time to market). Whatsmore, product and service offerings can be dynamically expanded (portfolio agility)

and adjusted according to capacity needs and customer demand (business scalability).

Cloud users also benefit from the up-to-date hardware and software provided by the

cloud vendor as part of its cloud solutions. This could be of particular use to mid-sized

companies that have a limited IT budget and often cannot or do not want to invest in

current and high-quality IT infrastructure. Another advantage for dynamically growing

mid-sized companies is the ability to centrally operate and manage IT resources

leaving more time for core business activities.

Cloud computingpromotesinnovation


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Despite these advantages, mid-sized companies especially continue to have concerns

about moving their IT to the internet. This may be due to questions that remain with

regard to practical implementation, such as: How can the benefits of cloud computing

be identified for my company? What business processes are best suited to be outsourced

to the cloud? What legal, regulatory and internal requirements must be satisfied in

order to use the cloud? What technical requirements are necessary? What tax issues

should be considered? What performance and management indicators can help measure

the expected benefits of cloud computing? All of these questions can and will be

answered. In the last chapter, we provide some starting tips for the successful use of

cloud services.

Because IT resourcesmust only be availableas needed and can be

scaled easily, a more

efficient allocation ofresources is possible.


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Summary

A Summary

Key findings

Awareness and prevalence of cloud computing in the middle market1.

58% of the respondents know what cloud computing is all about and could

explain it correctly. 12% gave a wrong answer. Just under one in ten definitions

(9%) could not be clearly assigned. 21% of respondents do not know what cloud

computing is.

12% of respondents already use cloud computing, primarily as: Software as a

Service or SaaS (66%), Infrastructure as a Service or IaaS (42%) and Platform as

a Service or PaaS (37%). It turns out that cloud services are used more in (oftenlarger) logistics companies and service centres. On the other hand, (smaller)

retailers and manufacturers of capital goods are underrepresented.

54% of respondents who do not use cloud services have not yet looked into the

advantages and disadvantages of cloud computing.

Experiences of cloud users in the middle market2.

Almost all respondents who use cloud services say their expectations have been

completely (46%) or at least partially (47%) met. Only 7% are dissatisfied.

Two out of three respondents (66%) know where their data is stored.

know what cloud computing is all about58%of cloud users say their expectations have

been completely or at least partially met93%

of respondents who currently do not

use cloud services are planning to12%


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Summary

Potential of cloud computing in the middle market3.

12% of respondents who currently do not use cloud services are planning to do so

in the foreseeable future.

Respondents cited the following as the main reasons behind their planned

introduction of cloud computing: cost savings (83%), low investment costs (78%),

pay-per-use (78%), location-independent access (78%) and rapid implementation

of innovations (67%). A good half of the companies (56%) view cloud computing

as a way to focus on core business while outsourcing IT. The short time to market

(42%) and the elasticity and scalability of cloud computing capacities (42%) arealso key factors.

Challenges of cloud computing in the middle market4.

Respondents who do not use cloud services say they dont because of a lack of

advantages (73%) and security concerns (70%). A little over half (54%) have not

yet dealt with the subject and 46% are concerned about problems with system

integration. 43% of respondents cite compliance violations as a disadvantage of

the cloud. Another 42% consider the market too complicated at present to be able

to make a decision.

The companies surveyed that use cloud services also perceived some

disadvantages, although in their view within limits: 44% mention reliance

on outside companies, along with the transfer of data sovereignty to the

outside company and a lack of data security (34%). 20% consider increased

administrative costs and costs for staff education and training as downsides.

A good half of the

companies view cloudcomputing as a way to

focus on core businesswhile outsourcing IT.


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Survey methodology and par ticipants

B Survey methodology and participants

This survey will shed light on how extensively mid-sized companies in Germany use

cloud computing, what advantages and disadvantages they expect and what risks they

associate with it. In addition, the survey will show how the middle market can benefit

from cloud computing.

PwC commissioned an independent market research institute to conduct the survey of

351 executives of mid-sized companies active in Germany. It was done from February

14th22nd 2011 using computer-assisted telephone interviews.

The respondents were divided into the following size categories:Mid-sized companies: those with a staff of 50499 (244 interviews)

Larger companies: those with a staff of 5002,000 (107 interviews)

This categorisation was chosen to identify whether there are differences in the

behaviour of mid-sized companies (50499 employees) and larger companies

(5002,000 employees).

Fig. 1 Proportion of respondents by number of employees in Germany

50249

48%

250499

22%

500999

17%

1,0002,000

13%

Total sample

The companies surveyed were also categorised on the basis of annual net revenue:

5% of respondents earned 500 million or more in net revenue in Germany in the

previous year. 14% of respondents generated annual net revenue of between 100

million and 500 million. Consequently, nearly a fifth earns at least 100 million.


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Survey methodology and participants

What industries do the participants come from? Half of the companies are active in the

manufacturing sector. Trade and services account for 13% and 11%, respectively, of the

companies; finance and the transport and logistics industry each account for nearly a

tenth of the respondents.

Total sample

Fig. 2 Proportion of respondents by annual net revenue last year

Do not know/

no answer

27%

500 million

5%

100499,999 million

14%

2099,999 million

31%

< 20 million

23%

Mid-sized companies

2099,999 million

35%

< 20 million

32%

Do not know/

no answer

27%

100499,999 million

6%

Larger companies

500 million

14%100499,999 million

32%

2099,999 million

22%

Do not know/

no answer

29%

< 20 million3%

At 54% of the surveyed companies, net revenue in Germany last year totalled less than

100 million.


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Survey methodology and par ticipants

Fig. 3 Proportion of respondents by industry

Total sample

Transport and logistics

9%

Manufacturers of

capital goods

35%

Manufacturers of

consumer goods

15%Services

11%

Banks, financial institutions

and insurance companies

9%

Other, such as

construction and mining

8%

Trade

13%

Mid-sized companies

Transport and logistics7%

Manufacturers of

capital goods

37%

Manufacturers of

consumer goods

13%

Trade

14%

Services

12%



9%

Other, such as


8%

Larger companies

Other, such as


6%

Manufacturers of

consumer goods

20%

Services

9%

Trade13%

Banken, Finanzinstitute

und Versicherungen

11%Manufacturers of

capital goods

29%

Transport and logistics

12%


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Awareness and prevalence of cloud computing

C Awareness and prevalence of cloud

computing

1 Conceptual understanding

Cloud computing is not new: the possibility of moving IT to the cloud was already being

discussed at the CeBit trade show several years ago. Access to data in the cloud has

long been established in the private sphere. The services range from e-mail to pictures

to social networks and video. And now, cloud computing has found its way to business

customers.

In an open question, executives were asked to explain what they understood the

term cloud computing to mean. 58% of respondents demonstrated a mostly correct

understanding of the term; 12% gave a mostly wrong answer. Just under one in ten

responses (9%) was incomplete (not really wrong, but also not right). Every fifth

respondent gave no answer (21%). Even among companies that already use cloud

computing, only three out of four executives answered correctly.

Notably, IT managers from the mid-sized companies defined the term correctly more

often than their counterparts at the larger companies (61% to 49%). This shows

that mid-sized companies are attuned to this issue. Further results, however, show

that especially when it comes to value proposition, there is still significant need for

clarification.

Cloud services offer middle market users the chance to increase their

competitiveness on a global scale while also reducing costs. Many companies

are just beginning to use cloud services. They will use cloud computing more

widely when their high demands for data protection, information security and

integration capability with ex isting IT systems are met. These are issues that

cloud providers continue to work hard on.

Mathias Weber, Head of IT Services, BITKOM (Federal Association for

Information Technology, Telecommunications and New Media)

As I see it


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Fig. 4 Respondents definition of cloud computing

Total sample Non-users of

cloud computing

Users of cloud

computing

Larger companiesMid-sized

companies

Mostly correct

Mostly wrong Do not know/no answer

Unclear

58% 56%

9% 9%

12% 12%

21% 23%

5%

23% 17%12%

12%14%

4%20%

10%

73%61%

49%

2 Current use

Cost savings, more flexibility, increased potential for innovation and faster time to

market: all these advantages would suggest that cloud computing is well-received

among mid-sized companies. However, most respondents remain cautious about moving

their IT to the cloud. Among larger companies the user rate is 18%, twice as high as

among mid-sized companies (9%). But cloud services are still far from qualifying as a

mass market. Usage among all companies is currently only at 12%.


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Fig. 5 Current cloud computing usage among the surveyed companies

Larger companies

No

81%

Yes

18%

Do not know

1%

Total sample

Do not know

1%

No

87%

Yes

12%

Mid-sized companies

Do not know1%

No

90%

Yes9%


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3 Comparison of users and non-users

A comparison of the 41 cloud users with the 310 non-users confirms that it is the larger

firms who tend to use cloud services. This seems to be true with regard to both staffsize and annual net revenue: the larger the company, the more likely it is to use cloud

services.

Fig. 6 Comparison of users and non-users, broken down by number of employees in

Germany

Total non-users

50249

Employees

49%

250499

Employees

23%

500999

Employees

15%

1,0002,000

Employees

13%

Total users

500999

Employees

29%

250499Employees

17%

50249Employees

37%

1,0002,000

Employees

17%


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Fig. 7 Comparison of users and non-users, broken down by previous years net

revenue

Total non-users

Do not know/

no answer

28%

100499,999 million

12%

500 million

4%

< 20 million

24%

2099,999 million

32%

Total users

500 million

7%

100499,999 million

24%

2099,999 million

24%

< 20 million

20%

Do not know/

no answer

25%

What is also clear is that cloud services are more likely to be used in (often larger)

logistics companies and service companies. (Smaller) retailers and capital goods

manufacturers are, on the other hand, underrepresented. This may be mainly because

the processes of logistics companies are closely tied to IT solutions a fact also

confirmed by a 2009/2010 market study by the Fraunhofer Institute which looked at

the acceptance of Software as a Service (SaaS) and cloud computing in the logistics

industry.1 In that study, 60% of the surveyed decision-makers would be open to using

logistics IT services from the cloud. As such, this industry seems to already have a fairly

high level of acceptance for cloud services, while acceptance among smaller retailers

and capital goods manufacturers is rather low. The result is surprising as retailers could

profit from the flexible scalability of cloud services especially in light of the intense

competition and price pressure in the sector, as well as the need for scalable services in

order to counteract possible seasonal variations.

1 Cf. Fraunhofer Institute for Software and System Engineering (ed.): Cloud Computing fr den Mittelstand am

Beispiel der Logistikbranche. 2010.


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Fig. 8 Industry affiliation of users and non-users

Total non-users

Services

10%

Trade

14%



10%

Manufacturers of

consumer goods

15%

Manufacturers of

capital goods

35%

Transport and

logistics

8%

Other, such as


8%

Total users



7%

Trade

7%

Manufacturers of

capital goods

27%

Manufacturers of

consumer goods

15%Services

20%

Other, such as


7%

Transport

and logistics

17%


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Behaviour patterns among users

D Behaviour patterns among users

1 Forms of cloud use

Moving IT resources to the cloud or to external server farms can be done in different

ways. Depending on the type of service, one could use storage space and computing

power over the internet. This is known as Infrastructure as a Service (IaaS). With

Platform as a Service (PaaS), in addition to the hardware and operating system that

comes with IaaS, application infrastructure is provided over the internet in the form of

databases and development tools. And with Software as a Service (SaaS), companies

buy software applications over the internet. SaaS is the most common and currently

most widespread form of cloud computing and is found, for example, in the use of web-based e-mail services. Business Process as a Service (BPaaS) offers the opportunity

to outsource entire business functions and processes, such as in human resources or

payroll. In this form, the cloud provider combines software and process services.

The surveyed companies primarily use SaaS offerings (two out of three users). IaaS and

PaaS are also relatively common application forms (42% and 37%, respectively). Almost

a third use consulting services related to cloud computing. However, respondents use

BPaaS offerings comparatively rarely.

The cloud services I use have met my ex pectations. And every day I use them, I

discover new ways to optimise work processes in future. Taking that into account,

Ive got to say: my expectations of cloud computing and the benefits that come

with it continue to grow.

Kay Lied, Cooperation Manager Logistics & Mobility, German Association forSmall and Medium-sized Businesses (BVMW)

As I see it


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The most commonly used SaaS services are e-mail, web conferencing, collaboration

(such as the joint editing of documents) and security applications like anti-virus or

anti-spam programs. In addition, services relating to content management, supply

chain management, personnel management, enterprise resource planning and financial

accounting, customer relationship management, and credit card payments are used, as

is office software such as word processing.

2 Cloud user experiences

The reluctance towards cloud services seems given the experiences reported by cloud

users unfounded: almost all of the cloud users surveyed said their expectations hadbeen realised. Only 3 of the 41 users said their expectations had not been met.

Fig. 10 Satisfaction of cloud users with the services used

Yes, fully

46%Yes, partially

47%

No

7%

Fig. 9 Cloud applications used in the surveyed companies

No answer

Software as a Service (SaaS)

Infrastructure as a

Service (IaaS)

Platform as a Service (PaaS)

Consulting services related to

cloud computing

Business Process as a

Service (BPaaS)

66%

42%

37%

29%

24%

2%


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Fig. 11 Disadvantages associated with the use of cloud computing

Loss of control over the data (to

an outside party), dependence on

outside companies

Loss of data (security)

Increased administrative costs;

staff training/education,

expenses

44%

34%

20%

Whats interesting in terms of data privacy and security: Two out of three users know thecountry of the data processing centre where the exported data is stored. No users have

knowingly made use of cloud offerings where customer data is stored in data centres or

servers in countries outside Germany, the EU or the US.

In response to the (open) question What advantages does cloud computing give

companies that use cloud services?, the 41 managers responded most often with cost

savings through the pay-per-use model. About a third of users cite simple, centralised

management as an advantage, and one in five say its the flexibility of use. Otheradvantages mentioned include the rapid availability of resources/services, the reduced

need for hardware and processors, and energy/resource savings. Of lesser importance

are better protection against external attacks; the use of the latest technology;

temporary, short-term use; high-availability; or location-independent access.

Among the major disadvantages cited by the companies were lack of control over data,

along with dependence on outside companies (44%) and lack of data security (34%).

Other challenges include increased administrative costs and staff training/education,

and data privacy issues. The loss of core competences and know-how, costs for additional

necessary security technologies, or potential system failures are also considered

disadvantageous by some users.


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Fig. 12 Respondents knowledge of the location of the processing centres where their

data is stored

Yes

66%

No

34%

Fig. 13 Location of the data processing centres used by respondents

In the USA

Within the EU

In Germany

15%

11%

89%


How many current users plan to eventually fully transfer their IT to the cloud and no

longer retain their own IT resources within the company? 2% of surveyed users have

already fully migrated their IT to the cloud. At least, nearly every second company that

currently uses cloud services can imagine fully migrating to cloud computing in the

future. The majority, however, have no current plans to do so (51%).


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Behaviour of non-users

E Behaviour of non-users

How is the growth of cloud computing fairing in the middle market? How many

companies are planning to move their IT to the cloud? What services are attractive, and

what are the concerns?

Companies that currently do not use cloud services remain hesitant about using them

in future. Larger companies tend to be more open, even though there are very few

differences in their reasoning. The more critical attitude of mid-sized companies may

be largely due to the fact that they have not really engaged with cloud computing, andthat there is thus probably no transparency about available offerings and their possible

benefits. The survey results suggest as much: more than half of the companies surveyed

have not yet delved into the issue. Although this is more true for mid-sized companies

(55%), 52% of the larger companies also state that they have not yet dealt intensively

with the possibilities of cloud computing.

Overall, 12% of the companies surveyed that have not yet used IT cloud services plan

to do so. A slight difference can be seen between mid-sized companies (11%) and larger

enterprises (14%). In addition, more international companies (13%) than companies

active exclusively in Germany (9%) are planning to use cloud services.

1 Potential

Our core business is soccer. We need to make optimum use of resources in

managing the club. Therefore, it is important to simplify structures and work

processes. We dont want to close ourselves off to new approaches, but instead be

open to innovative solutions. We are implementing an ERP cloud service to deal

with sponsors and members and would opt for the cloud again.

Roy Stapfelfeld, Managing Director FC Carl Zeiss Jena

As I see it


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Total Larger companiesMid-sized

companies

International Active only in

Germany

12%

1%

11%

1%

14%

2%

13%

2%

9%

1%

87% 88% 84% 85% 90%

Fig. 14 Future use of cloud computing by respondents who currently do not use cloud

computing

Yes Do not know/no answerNo

2 Reasons in favour of the cloud

Non-users who are planning to introduce cloud services expect cost savings above all

else (83%). Three out of four companies appreciate the low investments costs associated

with introducing cloud computing. The pay-per-use model and the possibilities for

mobile access are also viewed as positive (78% each). For more than two of three

companies, the rapid implementation of IT innovations through cloud computing is adecisive advantage (67%). Every second company (56%) sees cloud computing as an

opportunity to focus on core business while outsourcing IT. The shorter time to market

(42%) and the elasticity and scalability of cloud computing capacities (42%) also play a

role.

Mid-sized companies in particular cite the focus on core business as an advantage of

cloud computing. This is not surprising, given that smaller companies typically have

only limited resources to deal with IT. The expected low upfront investment and the

prospect of implementing innovation processes in IT more quickly using cloud services

also (still) weigh more heavily for mid-sized companies than for larger enterprises. The

cost arguments (pay-per-use model and general cost-savings expectations) seem to be

equally important to both classes of companies.


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Fig. 15 Reasons for future use of cloud computing among respondents who currently

do not use cloud services

We expect cost savings from cloud computing.

Cloud computing does not require high upfront

investment in expensive infrastructure.

Cloud computing enables worldwide access to

data, even from mobile devices.

We pay only for what we use (pay-per-use model).

Cloud computing lets us implement innovations

faster and better. For example, we can quickly

draw on new cloud services in response to

changes in business models and processes.

IT is not a core competency of our company and

cloud computing is an efficient and cost-effective

alternative for outsourcing IT.

Peak loads or seasonal and cyclical business

developments can be mitigated through cloud

services.

Better time to market: the shorter duration of ITprojects.

83%

78%

78%

78%

67%

56%

42%

42%

Executives of larger companies also gave the following reasons for introducing cloud

services: optimal level of service; special software can be used; additional resources

can be used; and you gain the flexibility to quickly respond to new needs.

Answers to the question of what cloud services companies may want to employ in

the future mirror the current usage patterns of those companies already using cloud

services. In particular, mid-sized companies have identified SaaS as the primary field of

application, while larger companies see possibilities for the outsourcing of development

platforms (PaaS) or a need for processing and storage capacity (IaaS) in addition

to SaaS. Two out of three companies plan to use PaaS (64%). Similarly, 64% of non-users planning to introduce cloud computing will turn to SaaS offerings. Only 19% of

current non-users but 33% of larger companies would like to use BPaaS (complete

outsourcing of business processes) in future. A good third plan to procure consulting

services related to cloud computing (42% of larger companies, 33% of mid-sized

companies).


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Fig. 16 Types of future cloud services respondents who currently do not use cloud

services plan on using

Not specified

Software as a Service (SaaS)

Infrastructure as a

Service (IaaS)

Platform as a Service (PaaS)

Consulting services related

to cloud computing

Business Process as aService (BPaaS)

75%42%

64%

58%

67%

64%

42%

47%

58%

42%

33%

36%

33%

13%

19%

8%

4%

6%

Larger companies

Mid-sized companies

Total

3 Reasons against the cloud

While the benefits of cloud computing are constantly highlighted and discussed in

the media, mid-sized companies, in particular, still seem to be holding back. What

are reasons against the use of cloud computing from the perspective of the companies

surveyed? Three out of four respondents dont think cloud computing will offer any

advantages to them. This may be largely because inspired by recent incidents the

opportunities and potential of cloud computing are being far less discussed, at present,

than issues like data security, privacy and compliance. In fact, about 70% of companies

surveyed (68% of larger companies and 71% of mid-sized companies) fear that the

security of their business data cannot be adequately guaranteed in the cloud. This

perception is consistent with that of the cloud users.

Surprisingly, more than half of the companies (54%) have not really engaged with theissue. This is more so the case among mid-sized companies with 55%. But 52% of larger

companies have also not yet concerned themselves with cloud computing.

Almost 50% of larger companies fear that they will have problems with system

integration through the use of cloud services. At 40%, compliance considerations play a

not surprisingly lesser role for mid-sized companies than for larger companies (51%).


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Other reasons to not use cloud services include cost uncertainty, technical

considerations (are technically well equipped; internal or external technical

reasons; inflexible cloud offerings, only standardised solutions that are not suitable)

and internal management issues (decision from management; corporate decision;dependence on corporate structure; want to avoid dependence on external

providers).

These results alone reveal little difference between the views of mid-sized and larger

companies on the subject of cloud computing. But in the course of the survey, it became

clear that more of the larger companies have engaged with the issue of cloud computing

some even extensively. Their answers to certain concrete questions were more pointed

than those of the mid-sized companies. In total, the mid-sized companies responded to

the six different prompts with Do not know/no answer 45% of the time; among the

larger companies it was just 34%. That may be because we reached more specialised

(IT) executives in the larger companies than in the mid-sized companies.

Larger companies

Mid-sized companies

Total

Fig. 17 Reasons cited by non-users for not employing cloud computing

Why doesnt cloud computing currently play a role in your company?

The market is currently toocomplicated to be able to make a

decision.

We see no advantages to our

company through the use of cloud

computing.

The security of our business data

cannot be adequately guaranteed in

the cloud.

We are concerned with violating rules

and regulations (ie, compliance

infractions) through the use of cloud

services.

40%47%

42%

40%51%

43%

We have not yet looked at the issue of

cloud computing for our company.55%

52%

54%

Integrating cloud services in our IT

landscape is too costly.

48%

46%

45%

71%

68%

70%

72%

75%

73%


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Outlook

F Outlook

The survey results show that the hesitation of mid-sized companies in particular stems

from uncertainty over information security, data protection and compliance, and that

many companies despite the attention the topic has received in the (trade) press and

the IT industry in general do not clearly see the benefits of outsourcing their IT to the

internet. But despite all the hesitation: the survey results also show that users have had

good experiences with cloud services and that they have reaped measurable benefits.

What remains is to overcome any lingering scepticism among non-users especiallysince more than half the companies surveyed had not yet engaged with the subject.

The survey results showthat users have had goodexperiences with cloudservices and that they havereaped measurablebenefits.

The results of PwCs survey of the middle market highlight what still has to be

done: if some 80% are still sceptical about u sing cloud computing, then we have

to shed more light on and raise awareness about cloud computing among smaller

companies. We also have to address the biggest concerns mid-sized companies

have about cloud computing, namely privacy and data security.

Hans-Joachim Otto, Member of German Parliament, Parliamentary State

Secretary at the Federal Ministry of Economics and Technology

As I see it


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Outlook

But how?

First off, providers have to present transparent concepts that clearly articulate the

benefits of cloud computing and alleviate uncertainties and, in particular, concerns.Solutions are necessary in terms of information security, data privacy and compliance,

all of which were cited by the mid-sized companies surveyed as the biggest obstacles to

cloud computing.

Providers have received support from policymakers who have themselves recognised

the potential of cloud computing and who are working on pragmatic solutions for its

successful application. As such, the Federal Ministry of Economics and Technology has

announced a technical competition around cloud computing: Trusted Cloud aims to

promote research and development activities that will generate efficient and innovative

cloud structures and innovative cloud-based services. The project focuses in particular

on aspects like data security, trust and reliability. Pilot projects chosen as part of the

competition will receive financial support totalling about 50 million.

But satisfied users, too, can help to alleviate the current concerns: through progress

reports and the sharing of best practices. No argument carries more weight and is better

suited than the opinion of a satisfied user when it comes to raising awareness among

companies about the benefits, challenges and solutions surrounding cloud services.

with which selected pilot projects will be supported

50million


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Tips for the successful use of cloud computing


We would like to end by providing mid-sized companies with some tips for succeeding in

the cloud. Here we address the main concerns of the middle market.

Concerns about cloud computing and its disadvantages stem in part from the fact that

there are no binding standards or best practices that could provide guidance on how to

use cloud technology in everyday business. Users report, however, that cloud services

can already be used profitably. Good preparation is the most important foundation for

a successful experience. Ahead of outsourcing their IT, companies should consider the

following:

Define your goal in using cloud computing and develop an appropriate strategy.

Decide what business processes and services are suitable for being outsourced to thecloud.

Set clear and quantifiable goals for example in terms of cost savings, increased

innovation potential and optimised use of resources. Confirm these goals in-house.

Involve all relevant people and competencies in your cloud project, because: important

competencies dont only reside in IT, they also lie in the different departments as well

as in the areas of information security, data privacy, compliance, purchasing, finance

and contracts. Establish important frameworks (including with regard to information

security, data privacy, compliance, technology, contracts) and formulate guidelines.

On this basis, develop a filter for evaluating and selecting cloud providers.

Take stock of your situation and identify the areas where some adjustments are

necessary and what costs are associated with them.

Determine the costs and benefits of your cloud project in the form of a feasibility

study.

When drawing up a contract, it is imperative to detail services and obligations between

cloud providers and cloud users in order to protect against later surprises. It should

also be determined whether software licences are adequate (for example in terms of

transferability). Data privacy should also be addressed. The contract parties also need to

decide whether subcontractors can handle the data. This is especially important when

From the perspective of the EU, cloud computing means that we have huge

potential, and that as part of the digital agenda we must set standards for its use.

Because we do not yet have such standards in the EU. This will be addressed by the

Commission in the weeks and months ahead.

Matthias Groote, Member of European Parliament

As I see it


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data is transferred across borders between different servers and processing centres.

Other important components of a robust contract include guaranteed service availability

and the return of data post-cloud. Thats because at the end of the contract, upon sale

of the provider to a third party or in the event of insolvency the data must be returnedsafely and its entirety. A transfer of data to a third country should only be considered if

there is a level of data protection equivalent to that in the EU.

These preparatory steps quickly pay off and ensure companies will reap maximum

benefit from cloud services.

To alleviate companies concerns about information security, data protection and

compliance requirements, many cloud providers are currently working on viable

solutions. PwCs 2010 study Cloud Computing Navigation in the Cloud also

showed this. However, there is still work to do, as evidenced by the results of our

survey. Providers should therefore take advantage of all available certifications from

independent third parties to do what is obviously missing: build trust.

Users report that cloudservices can already beused profitably. Good

preparation is the mostimportant foundation fora successful experience.


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Contacts

Contacts

Markus Vehlow

Olof-Palme-Strae 35

60439 Frankfurt am Main

Tel.: +49 69 9585-2293

E-Mail: [email protected]

Dr. Peter Bartels

New-York-Ring 13

22297 Hamburg

Tel.: +49 40 6378-2170E-Mail: [email protected]

Cordula Golkowsky

Friedrich-Ebert-Anlage 3537


Tel.: +49 69 9585-5022

E-Mail: [email protected]

Dr. Christina Mller

Olof-Palme-Strae 35


Tel.: +49 69 9585-1714E-Mail: [email protected]

About us

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clients is particularly important to us the better we know and understand our clients

needs, the more strategically we can support them.

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auditing and consulting firm in Germany.


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Documents

Cloud Computing in the german middle market