There's been plenty of discussion about the security implications of cloud computing, and many insurance IT executives have been understandably reluctant to move to the cloud for this reason.

But there's always been an underlying assumption that the value proposition of the cloud is too compelling to ignore—the provisioning of applications and processing power almost “too cheap to meter.”

One new study, however, questions the assumption that companies will kick into hyperdrive as they adopt the cloud model.

A recent analysis out of the UK, however, says that aside from some cost savings up front, cloud may not help all that much. Gary Kim, writing in InfoTech, reports that the findings of a report by the Centre for Economics and Business Research concludes that cloud computing is not going to yield much, in terms of growing small business productivity.


Overall, the CEBR analysis is favorable to cloud computing and, indeed, the cost savings are nothing to sneeze at. CEBR estimates that private cloud could cut IT capital costs by at least 17%, along with an 18% reduction in storage costs and 44% in network hardware costs. Adoption of public cloud services could shave 40% off IT capital budgets.

However, as Kim highlights in his article, any benefits beyond cost savings will not be realized. The CEBR reports it examined the productivity metrics of various companies between 1997 and 2007—a period of intense digitization—and found squat. No productivity improvements resulting from technology adoption. There's no reason to assume cloud-delivered IT would change this equation.

The authors of this study hit the proverbial nail right on the head here. Years ago, Michael Hammer, co-author of the classic business book Re-engineering the Corporation, A Manifesto for Business Revolution, put it this way: “Automate a mess, get an automated mess.”

In other words, if you have inefficient processes or a creaky, hidebound management culture, don't expect technology to smooth things over. If anything, it could amplify the problems, and you will be making the same mistakes a lot faster. The move to new technology paradigms needs to be part of an overall transformation strategy, one that emphasizes innovation and inspired leadership. You won't find those qualities in the cloud, just as you won't find them in the server closet.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

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