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Cloud computing — cloudy no more

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FINEX Folio -- Reynaldo C. Lugtu, Jr.

FINEX Folio

IT WAS in 2007 when I started to talk about cloud computing in public fora, company and client meetings, and articles in newspapers. It was too early during that time. I remember presenting its concepts during a management committee meeting in a global IT services company, and I either got blank stares or jokes about cloud. One executive asked, “So what is cloud?” I said, “Cloud is what you want it to be — software, hardware, security, etc.”

Now, cloud computing is already mainstream. Those who heeded the call of opportunity command large market shares. As of third quarter of 2018 according to Synergy Research Group, Amazon Web Services (AWS) holds 34%, Microsoft 14%, Google 7%, and the rest are with other players like Alibaba, IBM, and others. Globally, 80% of large companies or enterprises are both running apps on or experimenting with AWS as their preferred cloud platform; 67% of enterprises are running apps on (45%) and experimenting on (22%) the Microsoft Azure platform. 18% of enterprises are using Google’s Cloud Platform for applications today, with 23% evaluating the platform for future use according to RightScale’s 2018 survey. Cloud adoption is growing more than 50% year on year.

If you’ve been living under a rock, “cloud computing is the on-demand delivery of compute power, database storage, applications, and other IT resources through a cloud services platform via the internet with pay-as-you-go pricing”, as defined by Amazon. Cloud provides a host of benefits such as trading capital expense for variable expense, benefiting from massive economies of scale, increasing speed and agility, stopping spends on running and maintaining data centers, and going global in minutes.

In the Philippines, conglomerates use cloud for as much as 80% of their workloads whereas medium-sized companies use as much as 40% in our estimates. Amongst small enterprises, around 30% of them already use some form of cloud may it be subscription email, apps, or storage. Overall, we estimate that 30% of the total workloads in the country are already in the cloud.

But it shouldn’t stop here. The multiple benefits cloud brings to transform organizations cannot be overemphasized. Interestingly, our country is ranked 9th in Asia Pacific when it comes to Cloud Readiness Index, according to the 2018 study of Asia Cloud Computing Association (ACCA), which evaluated four areas such as cloud infrastructure, cloud security, cloud regulation, and cloud governance. We are ahead of Thailand, Indonesia, India, China, and Vietnam which are ranked 10th, 11th, 12th, 13th, and 14th, respectively. But this is no reason to celebrate.

While we are ahead of many countries, our country has regressed in the area of cloud infrastructure. Specifically, we have regressed in the aspects of international connectivity and broadband quality which declined to 10th in 2018 from 7th in 2014, and 13th in 2018 from 12th in 2014, respectively.




In my conversations with small and medium enterprises (SMEs), there is willingness to move to the cloud; but they always highlight the issue of connectivity. Our country is still reputed to have the slowest and most expensive internet in the region, preventing SMEs to take advantage of the cloud.

But technology is also adjusting to the internet situation of countries like ours. In my conversations with rural banks and technology providers, there’s already close to 40 rural banks using core banking system in the cloud.

I wondered how and why. It turns out that technology providers have adapted their cloud applications to make it lightweight, i.e. does not require much bandwidth, and has on offline mode, i.e. can still run processes without internet connectivity. If technology providers can achieve this, then they can capitalize on the close to a million SMEs in the country.

An additional challenge among SME owners is that still a lot of them think cloud in not secure. In fact, cloud from known providers is more secure than legacy systems on premise. Cloud providers invest heavily in securing their data centers, hiring the best security professionals, and instituting controlled access. Cloud providers need to reach and better educate SMEs on this aspect.

Cloud computing is already in the mainstream consciousness of business owners. Our regulators should push for a better internet infrastructure to enable massive and fast adoption among enterprises.

 

Reynaldo C. Lugtu, Jr. is President & CEO of Hungry Workhorse Consulting, a digital and culture transformation firm. He is the Chairman of the Information and Communications Technology Committee of the Financial Executives Institute of the Philippines. He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com