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Canada and the cloud: adoption rates in the enterprise
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Canada and the cloud: adoption rates in the enterprise 

It would come as no surprise that some countries have higher rates of cloud adoption than others. How does Canada stack up? IT in Canada turned to three Canadian cloud experts to explore how widespread the cloud is across Canadian businesses and what the True North can do to raise the rate of cloud adoption within its enterprise sphere.

Where We Stand

Mark Schrutt, director, services and enterprise applications, IDC, pointed to his firm’s recent study on global cloud computing. Out of 1100 respondents, 110 were from Canada. “Comparisons need to be made for software as a service, platform (development or PaaS) and infrastructure as a service, both public and private delivery,” he said. “In that light, Canada is behind the other regions (Europe, Asia and in particular, the US) in adoption, but we have picked up the pace since the last survey.” IDC’s conducted its previous study on global cloud computing in the spring of 2013.

Wayne Hendry, account manager at the interactive menu firm Menyou.ca, added that Canada ranked ninth out of 24 countries in the BSA’s 2013 Global Cloud Computing Scorecard. He also cited IDC and TELUS’ joint 2013 study on the state of cloud adoption within the Canadian enterprise. “Cloud services are expected to generate $1-billion in 2014,” he remarked. However, in spite of that impressive sounding number, Canadian businesses have a long way to go. “Given that the entire IT services market in Canada contributed $20-billion to Canada’s GDP last year, cloud technology adoption does not even account for 5% of IT spending,” Hendry stated.

Martin Horne, CEO of Ottawa’s network optimization company LiveQoS, shared anecdotal evidence that the rate of adoption for cloud services in this country’s business community is low. “I think for Canadian enterprises cloud adoption is somewhat conservative,” he commented. There are some Canadian companies that buck the trend, though. LiveQoS has been using Gmail, hosted VoIP, Amazon EC2 and other cloud services since 2008.

All three experts agree that it is startups who are leading the charge when it comes to cloud services adoption within the Canadian enterprise. Schrutt noted that newer companies do not own legacy technology, which makes it easier for them to deploy cloud services. Horne echoed the IDC analyst`s sentiments, citing LiveQoS as an example of a startup that has readily embraced the cloud.

The Canadian Enterprise Cloud Mindset

Hendry explained that Canada’s lower adoption rate is a result of the Canadian enterprise’s attitudes towards technology. “Reasons for this rate include not having a ‘cloud-first mindset’ in Canada, which is the norm in the U.S.,” he asserted. Hendry believes that cloud service suppliers have invested in the U.S. to a greater extent because the demand for cloud services is higher there. Moreover, Canadian businesses still purchase traditional hosting and outsourcing services, which Hendry opined impedes cloud adoption.

Horne offered another explanation for Canada’s slower cloud services growth. “The resistance by Canadian enterprises to broad cloud adoption has to do with data security worries, regulatory compliance and, fear of government agency spying,” he commented. Canadian businesses are concerned that information stored on the cloud is not safe. The cloud also raises a host of regulatory issues, which create a burden for firms. In addition, allegations of spying by the American NSA and Canada’s CSEC are a cause for worry.

Schrutt sees the lower rate of cloud adoption as a temporary situation. “Adoption is lower but future growth rates are higher, indicating that we are a bit behind on timing,” he remarked. Schrutt echoed Horne’s analysis of Canada’s IT community. “Canada had been slower to adopt cloud due to the conservative nature of IT investments and CIOs, regulatory compliance concerns and lack of providers to build interest and market their products,” he observed. Those factors will not permanently affect the Canadian enterprise’s demand for cloud services, though. Schrutt predicted that the market will grow over the next few years.

A Shift towards the Cloud?

While the market is set to change, the IDC analyst acknowledges that there are other factors at play that will also need to undergo an adjustment in order for cloud adoption to grow. “The CIOs and executives we talk to are not necessarily taking risk, but realize the value that cloud has to enable their firms to move quicker, become more efficient and flexible to meet the needs of the market their firms play in,” Schrutt said. “Line of business users are also very active in driving technology solutions and cloud is in the forefront-as such, IT and Business need to work closely to determine when cloud makes sense, how to manage the vendor relationships and how best to quickly scale the solution so that the firm can realize the benefits as quickly as possible.”

Hendry admitted that it is difficult to pinpoint what sorts of changes would need to take place to increase cloud adoption within larger Canadian companies. He did have a few recommendations, though. “The declining cost of cloud services, more Canadian-based vendors and increasing security could motivate more enterprises to migrate,” he suggested. Hendry sees small and medium-sized businesses as being the drivers of cloud service adoption within Canada’s enterprise ecosystem. “SMBs may be quicker to adopt the cloud as they have less IT staff and may be able to make the switch faster thanks to what the cloud offers in terms of benefits and lower cost,” he remarked. Schrutt agreed with Hendry, noting that SMBs are one of the top cloud adopters among Canadian businesses.

Horne also offered his suggestions for improving cloud adoption within Canada’s business community. All of his advice involves more secure cloud solutions that appeal to threat-conscious IT professionals, such as advancing private cloud technologies, virtual cloud storage that keeps data inside a corporate firewall but is still accessible via cloud services and data centres located within Canada.

Other Barriers to Adoption

The three cloud experts shared other obstacles that exist to cloud adoption within the Canadian enterprise. One such hurdle is in-Canada solutions. “60% of Canadian buyers preferred to have IaaS delivered from within Canadian borders,” Schrutt noted, citing research. “But buying in-Canada solutions ranked unusually low on the list of factors that are weighed when making decisions around cloud.” He repeated his firm’s beliefs on this issue: “IDC believes that while the stated preference for in-Canada solutions is important in terms of relationship management, it is also a convenient excuse for other factors that revolve around knowledge and comfort with non-traditional vendors as well as inexperience in managing the reputational risk of outsourcing.”

Horne commented that application migration from on premise to the cloud is another impediment to adopting this technology for Canadian businesses. App migration is a daunting task, and it can very easily go wrong. It can involve redoing code or data in order to gain the highest ROI from cloud-native features. Applications need to undergo an optimization process so that they can operate at their peak efficiency in the cloud. While a successful application migration is well within the realm of possibilities, the very idea of this process is a cause for concern to many companies.

Hendry contended that ignorance of the opportunities that the cloud provides is to blame for the low adoption rates amongst the Canadian enterprise. Cloud technologies enable companies to easily put disaster recovery plans in place, to automatically update software, and do not require capital expenditure. Although the cloud is quite prevalent and many firms have a deep understanding of its advantages, many Canadian businesses are still unaware of how it could benefit them.

The Role of the Government?

Canada offers some of the richest tax incentives for research and development in the world for innovative companies. Is there a role for the government to boost cloud adoption within the Canadian enterprise? Schrutt rejected that idea. “The regulations in place are to protect consumers, citizens and businesses but there is a lot of flexibility there,” he said. “Education and IT buyers understanding what these regulations mean and how they can be compliant is a must, but that is not the government’s job – that is a CIO’s job.”

Hendry agreed with the IDC analyst. “I do not see the need for a major role for the government to speed up cloud technology adoption within the Canadian enterprise,” he remarked. His only suggestion was a possible tax break to entice Canadian businesses to implement cloud technologies.

Horne offered a different perspective. The federal government has regulations in place that prohibit the use of SaaS technologies within its offices and departments. “If cloud is the way of the future, then the Feds need to invest in removing the technology and legislation barriers and become SaaS advocates and users,” he asserted.

This article appears in the April-May 2014 issue of IT in Canada. To read the rest of the issue, click here

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