The business benefits of sourcing platforms, infrastructure or applications via internet-based public services or private enterprise services have been much hyped over recent years. Dubbed cloud computing, public and private cloud computing is a major topic in enterprise technology at present. However, there can be no doubt adoption of both types of cloud services has reached the corporate mainstream.

Cloud services, which include Software as a Service (SaaS), Platform as a Service (PaaS) where the underlying platform and software stack is delivered, and Infrastructure as a Service (IaaS), have been adopted by a host of the UK and European companies of all sizes across a wide variety of key verticals. And the business benefits from adopting the model are often compelling.

Cost reduction is frequently cited as the headline benefit of cloud computing, but experts caution that saving money is often not the principal advantage of cloud migrations. Gartner notes that, particularly in private cloud deployments, cost savings are far from automatic. This is because private clouds require investment in automation software, and the savings alone might not justify the cost. “As such, cost reduction is not the primary benefit of private cloud computing. The benefits of self-service, automation behind the self-service interface and metering tied to usage are primarily agility, speed to market, ability to scale to dynamic demand or to go after short windows of opportunity, and ability for a business unit to experiment,” said Tom Bittman, vice president and distinguished analyst at Gartner.

“IT organisations need to be careful to avoid the hype, and, instead, should focus on a private cloud computing effort that makes the most business sense."

Another much-touted benefits of cloud computing is the ability of the model to deliver increased IT responsiveness. This consideration was key for UK engineering group Bodycote, a global provider of thermal metal processing with plants in 27 countries. Its services are used in the manufacturing networks of multiple industries, including aerospace, oil and gas, and automotive production.

The company, which in 2011 saw pre-tax profits increase from £45 million to £76 million, has been pursuing a global expansion strategy and has acquired businesses and signed joint ventures in countries including Brazil and China. As a result Bodycote’s IT systems, which are used to control much of the metal processing machinery, were becoming fragmented and network security was identified as a priority – especially as many plants had just basic antivirus software to protect their systems.

Garry Joiner, head of global IT services at Bodycote, conceded that the company’s services were reactive rather than proactive: “The situation was unsustainable for a business continuing to acquire new companies. To support development, we needed to standardise our IT worldwide and centralise a number of operations, not least network protection.”

To solve these issues the company selected a cloud-based firewall and intrusion detection system managed service provided by Dell SecureWorks. The service has been rolled out over all Bodycote sites in the UK and an increasing number of plants across Europe, the United States, Asia and to South America. Joiner explained that the cloud service is “incredibly flexible and straightforward to implement and it’s helping us drive expansion.”

A further advantage of the cloud pay-as-you-go model is that services can be scaled up or down in line with the needs of the business. Such flexibility was essential for Irish company TradeFacilitate, which offers a system for importers and exporters worldwide to exchange data using a paper-free online system. The technology was originally developed for small and mid-sized businesses involved in cross-border alcohol trade in the EU. However, the company needed to scale up when the EU requested that it ramp up operations to serve thousands of importers and exporters. The firm turned to cloud-based provisioning based on Microsoft’s Azure cloud platform hosted in Microsoft data centres. The offering provides an operating system and a set of developer services that can be used together or individually. It enabled the Irish firm to scale its existing solution for a much larger market, but without proportionally adding more personnel and technology resources.

Elastic provisioning was similarly vital to UK publishing group Guardian News & Media (GNM), the publisher of the national newspapers The Guardian and The Observer. As GNM launched new online services, it needed to quickly scale in response to hard-to-predict changes in demand caused by new applications and developers joining its network. With outside business running applications on the media group’s Open Platform, GNM had limited insight into the scaling issues that these new businesses bring to the platform - in contrast to the relatively predictable demand growth for GNM’s own products.

GNM turned to Amazon Web Services (AWS) for an infrastructure that can change in scale quickly, both up and down. “We use AWS when we are uncertain about demand and are unwilling to commit to hardware purchase until we have a clearer idea of usage and performance patterns. With the Open Platform launch coming up, we are in a position to rapidly scale the number of instances to suit the launch demand and scale back post-launch and to suit demand thereafter,” said GNM’s director of technology development, Mike Bracken.

He added that GNM measures the savings from using AWS in terms of reduced lead times. Using the cloud service it takes GNM a total lead time of around half an hour to provision a cloud-based server. This compares to a possible three weeks for hardware to be delivered and installed plus additional time for budget approval.

The ability of cloud on demand services to transfer IT expenditure from often significant up-front capital expenditure to predictable operational expenditure is also often cited as a fundamental advantage of the cloud model. UK photographic retail group Jessops, estimates that rolling out cloud-based analytics technology to online shopping service generated 600% return on investment in two months.

The transition to cloud services came after the retailer realised that it was not closing a high enough percentage of sales when customers visited its ecommerce website. Jessops deployed the Coremetrics web analytics system from IBM, which was delivered over the cloud as a fixed-fee subscription service, to capture browsing behaviours and shopping histories. The company uses that intelligence to build customer profiles that serve as roadmaps for directing each customer through the website. The website now intelligently qualifies shoppers, presenting them with alternative products for possible up-sell and cross-sell. The result of this deployment is an increase in cross-sell conversions by 13% by providing online visitors with related products suggestions throughout their browsing and checkout process and increases of up-sell conversions by 17% due to improved product recommendations.

The bottom line is that cloud computing is not a panacea that can address all technology issues facing CIOs, but rather just one of the many weapons in a CIO’s technology arsenal. “There are numerous trade-offs between cloud, cloud-like, and traditional computing options, so to make an informed business decision, one must understand how cloud offerings fit with and change decision models for the full range of cloud and non-cloud options,” said Randy Heffner, Forrester’s vice president, principal analyst serving application development & delivery.

“Thus, rather than creating a siloed cloud strategy; integrate cloud options into your existing strategies for the organisation’s business solution portfolio, application platforms, and computing infrastructure.  This report is designed to help CIOs create a strategic investment plan for cloud computing that influences and enables agile business strategy.”