Beware the cloud, SA firm says

Internet services. (Duncan Alfreds, News24)
Internet services. (Duncan Alfreds, News24)
Cape Town - Internet cloud adoption has seen a major growth in SA, but an industry insider has warned that businesses may incur increased costs and security risks by rushing into cloud services.

"The value that the companies are getting by moving into the cloud is different to what the vendors are selling," Appie Pema, CEO of Aptronics told News24.

Cloud services are generally seen as a way to reduce capital expenditure while maintaining operational efficiency, but Pema argued that the savings would be offset by increased operational expenditure (opex).

"Everybody's trying to drive opex down; cloud is going to increase your opex. If you go into cloud, you're not going to have capital expenditure, but you're going to have a fixed operating cost."

Pema illustrated his point, saying that cost of hardware in the cloud had to be financed by customers.

Cloud solutions

"That's what people are marketing. I'm going to buy R1m of kit and finance it with a cloud contract over five years, whereas before I would sell it to you, make my 15% margin. You maintain it and operate it," he said.

"I'm going to buy the hardware... I'm going to have my opex cost on top of that and you are going to fund it. It's not cheaper."

Many South African companies are offering enterprise cloud solutions but Pema cautioned that the industry was a bit too fluid, much like the move to internet offerings in the past.

"If you want internet connectivity you're not going to go to Joe Soap down the street who's got a POP and connect to him. You go to Internet Solutions, the telcos or to MWEB. You're going to go a company that's got a reputable infrastructure and service and actually deliver what you want at a cost-effective value.

"For me, cloud is the same."

He also warned against contracts that locked users in and made it both difficult and expansive or businesses to migrate to alternative service providers.

"Remember, once you move into cloud, you are hooked. If I provide you bad quality of service or the solution does not meet your requirements, do you know how difficult it is to move out of my space and go to somebody else and the impact to your business?" said Pema.

Multiple clients

He conceded that cloud services may be beneficial if there was a definite case for business efficiency. Pema cited the example of a call centre based in the UK that was more expensive than a locally hosted one, but increased customer service and business efficiency.

"That is a point in time solution, isolation; providing me help desk, fantastic. There would say: 'Cloud I like.' It is there for a purpose," he said.

One way that companies can make cloud infrastructure viable in the short term is to scale an offering by sharing it with multiple clients.

"If anybody says it's cheaper, yes, in economy of scale when I share my infrastructure with multiple customers, it becomes cheaper. When I do that, I inherit a security risk - my data; my infrastructure is being shared with other people," Pema warned.

He accepts that cloud services may indeed become more acceptable in the future, and suggested that hybrid systems may hold the answer, but warned that there was a material risk to a business taking all its key systems into the cloud.

"Business in the cloud, for me, people need to unpack; you do not just need to sign contracts."

- Follow Duncan on Twitter
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