Why the cloud will never (entirely) replace in-house applications

Cloud computing, with its promise of cheap, easy access to enterprise-class applications via the internet, is a seductive concept for many cash-strapped organisations as it seems to offer state-of-the-art infrastructure without the need for epic IT integration projects — or expensive staff.

At the moment cloud still accounts for a relatively small slice of enterprise IT spending — perhaps no more than five or six percent of the total software market, although one prediction sees this climb to 20 percent by the end of the decade.

That's partly because companies remain cautious about the new technology, but also because they have significant investments in their existing on-premise IT infrastructure, both hardware and software.

Indeed, the rapid growth of cloud (and Software as a Service in particular) has made some question whether on-premise applications have a long-term future at all, or whether all applications will eventually be cloud-powered.

But it's also possible that on-premise applications still have some use — and some fight — left in them, at least as far as CIOs are concerned.

 When asked "Is there a future for on-premise enterprise software?" the TechRepublic/ZDNet CIO Jury voted yes by a margin of 11 to one, with security and reliability two of the key areas where the panel said on-premise will retain the edge over cloud applications.

John Gracyalny, VP IT at SafeAmerica Credit Union said: "I don't consider the internet stable enough for truly critical functions. I'm also reluctant to trust a third-party datacenter's security."

Ibukun Adebayo, director of IT at social care organisation Turning Point said: "As more organisations begin to trust and subsequently invest in cloud applications, this is slowly beginning to translate into a gradual decline of on-premise enterprise software."

But she added "sectors that are required to comply with stringent data protection and privacy regulations such as the financial services sector, plus organisations keen to protect proprietary applications developed as their intellectual property are unlikely to see any reason to retire such on-premise applications in the short-to-medium term at least."

Decisions about cloud versus on-premise come down to the level of complexity in your IT infrastructure, said Michael Hanken, VP of IT at Multiquip: "For the regular 'bread and butter' processes there is no compelling reason to have it on premise; however if you are tightly integrated with important real-time components and/or very high data volumes there is still a case for on-premise ERP."

Jerry Justice, IT director with SS&G Financial Services said that the way on-premise applications are built will change as a result of the cloud: "There will still be reason for on-premise, localized, cached and/or hybrid delivery of pieces of technology services, but the pieces that make that up will be different."

And the impact of cloud is also likely to affect the way on-premise software is sold, said Mike Tonkiss, IT director at Neopost: "There will still be an opportunity where firms have invested in their own facilities, but any new firms will probably prefer the flexibility of the subscription model. However, notwithstanding this, software vendors may need to be more entrepreneurial when it comes to on-premise pricing to compete and survive."

There is absolutely a place for cloud services, but for large organisations these are likely to be add-ons to on-premise enterprise software, according to Jeff Canon, CIO of Fire and Life Safety America.

That's because the enterprise has much more control over its use of on-premise software — also, with on-premise software, "I get to add back the depreciation expense related to the software license purchase. I don't get to add back the monthly recurring cost for cloud services," said Canon.

Mike Roberts, IT director at The London Clinic said: "In specific specialist areas such as process control, manufacturing and health, the relationship between the application and the physical system still requires some application element to be local." Smith C Scott, director of technology at 32Ten Studios added: "Clients/vendors can be very superstitious about data living in the cloud."

Today's TechRepublic CIO Jury was:

• Richard Storey, head of IT at Guy's and St Thomas' NHS Foundation Trust

• Dan Fiehn, Group Head of IT Markerstudy Group

• Tim Stiles, CIO at Bremerton Housing Authority

• Mike Tonkiss, Head of IT, Neopost

• Mike Roberts, IT director The London Clinic

• Ibukun Adebayo, director of IT at social care organisation Turning Point

• Gavin Whatrup is group IT director at marketing services company Creston

• Jerry Justice, IT director with SS&G Financial Services

• Steve Williams Director of Information Systems and Services Newcastle University

• John Gracyalny, VP IT at SafeAmerica Credit Union

• Neil Harvey, IT director, Sindlesham Court

• Delano Gordon, CIO at Roofing Supply Group

Want to be part of TechRepublic's CIO Jury and have your say on the hot issues for IT decision makers? If you are a CIO, CTO, IT director or equivalent at a large or small company, working in the private sector or in government, and you want to join TechRepublic's CIO Jury pool, or you know an IT chief who should, then drop us a line at steve.ranger@techrepublic.com.