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Big Canadian companies slow to dive into the cloud

Toby Chu


Three months ago, Toby Chu began experimenting with cloud computing. The president and chief executive officer of Vancouver's CIBT Education Group, a company that owns colleges in 18 countries, needed a better way to share files among his 700 employees.

He decided to try Dropbox, a file-sharing system that operates in the cloud. He also needed to improve staff scheduling and thought a cloud-based calendar would be the best way to go.

So far the results have been mixed. Dropbox has worked wonders, he says – employees don't lose files by dragging them to the wrong folders on their hard drives any more. But the calendar trial was a disaster.

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"We couldn't synchronize the different smartphones, and appointments were erased," he says.

Unlike a lot of top managers, Mr. Chu is at least willing to try the cloud. But until the technology improves and he can be certain there won't be any security breaches, he won't move his more complex programs, such as accounting and payroll, to a virtual environment.

Mr. Chu's attitudes toward cloud computing aren't surprising to Warren Shiau, the Toronto-based director of research with Leger Marketing. Mr. Shiau has found that full-scale adoption among medium- and large-sized companies is almost non-existent.

Leger Marketing has performed numerous surveys on cloud-related issues, including four over the past year. When companies with more than 50 employees are asked whether they used cloud computing software, between 20 per cent and 35 per cent say yes, Mr. Shiau says. When respondents are asked whether the cloud is the "primary delivery model for your organization," only 2 per cent or less say yes.

FreshBooks, a Toronto company that offers online invoicing and accounting services to businesses, has more than 3.5 million users in countries around the world. About 90 per cent of its clients are sole proprietors or small businesses with a handful of employees.

The software can be used by large companies, but FreshBooks rarely gets calls from the big guys, says Stuart MacDonald, FreshBooks' chief marketing and revenue officer. "We don't actively seek these companies out," he says.

FreshBooks would rather focus its resources on small businesses. At least half of small companies – those with between two and 50 employees – use cloud applications to run their business, Mr. Shiau says.

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The cloud, he explains, is ideal for small operations. It's cheap, generally easy to use and the software provider is the one responsible for maintenance and updates. Cloud computing doesn't take up hard drive space and businesses don't need to house their own servers.

So what's holding back larger companies? One big barrier is that businesses have invested so much time and money into their current systems that it's hard to justify switching.

"A lot of companies have legacy technology," says Nicholas Bayley, partner and global IT transformation lead with the management consultancy Accenture. "It's not going away quickly."

Cloud solutions, he explains, can be difficult to integrate with existing software. Also, many programs don't offer the same capabilities as other applications on the market.

Control is another issue. Many executives are wary of someone else taking responsibility for their company's IT needs and holding data in the cloud, Mr. Bayley says.

Another factor is company ownership. Widespread adoption by Canadian companies won't occur until more domestic firms offer cloud services, Mr. Shiau says

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Most cloud data today is stored on U.S.-based servers, which means that information, even it's gathered by a Canadian business, is subject to the U.S. Patriot Act. The American government can seize private information without any say from the Canadian company. That has kept a lot of homegrown businesses, which want to protect customer details, from moving to the cloud.

Some companies are thus creating private clouds. Data is stored on company servers, and programs are developed in-house. Rather than having to log into a company network to access an internal server, an employee can access information by just firing up a Web browser and entering the right URL.

The private cloud, Mr. Bayley says, is often the first step for large companies. It helps them become more comfortable with the concept. After business executives see how it works, they are more willing to move to the "public" cloud, or cloud solutions offered by third parties.

Eventually, companies will have to adopt the cloud. As more employees do work on smartphones and tablets, the demand for cloud-based programs will increase, Mr. Shiau says. And, as the technology matures, concerns about data residency, security and legacy will disappear.

While Mr. Chu understands the benefits of the cloud, he says he will wait until it's a more proven alternative.

"We know that offsite data storage is the direction things are going," he says. "But we want to wait until these programs go through a few versions. We'll [hold off]until the cloud proves itself."

Special to The Globe and Mail

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