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Survey Quantifies Costs of Poor Cloud-App Performance

Why doesn't IT adopt more cloud-based applications? According to a new survey of almost 700 businesses in North America and Europe, it could be the cost of poor performance and the complexity cloud apps impose on an enterprise.

To better understand the impact of IT’s ability to manage cloud apps and the impact of poor cloud-app performance, Compuware wanted more than anecdotal evidence about expected revenue loss, hence the survey.

Poor performance hits organizations in a big way, according to the Performance in the Cloud report. When asked to approximate how much money an organization would lose in a year from the performance problems of their cloud-based applications, the weighted average of North American firms was $985,000; for European firms the loss averaged $777,000. That’s just the average. Almost one in three North American firms (29 percent) estimated their yearly loss would be at least $1.5 million; for nearly one in eight firms (14 percent), the minimum loss was estimated at $3 million.

Poor performance also has IT wary of cloud apps: 58 percent of North American respondents and 57 percent of those in Europe indicated that because they couldn’t manage application performance, they were forced to delay or even stop cloud-based application adoption.

Furthermore, 65 percent of North American firms and 72 percent of European enterprises agree with the statement, “As cloud applications are delivered to end users over the internet, our IT department’s ability to guarantee service levels is severely restricted.” That’s no surprise, given that Cloud apps are more complex because of a variety of elements along the delivery chain, such as Internet and network speeds.

This complicates application performance management (APM) tools, which often can’t monitor cloud-based applications because they can’t be seen. Furthermore, unlike traditional applications that run in-house, cloud apps share an environment that includes resources over which IT may have no control, so application performance can drop without warning.

SLAs must grow more complex to handle cloud environments. A whopping 94 percent of North American firms agree that “If or when we start to use cloud-based applications, I would expect very rigorous SLAs that go beyond simple availability metrics. For cloud-based applications, I would expect SLAs based on end-user experience.” (The figure is 84 percent for European firms.) About two-thirds of all respondents say they’re up to the task, agreeing that their “IT team has the skills and knowledge to negotiate the more complex SLAs for issues such as Internet connection and performance, end-user experience, and other factors.

Compuware says its previous research “clearly demonstrated that there is a direct link between application performance and revenue.” For example, it found that problems start when a Web page response is nearly 4 seconds; at the 6-second mark, one-third of users abandon the page. “Not only does this represent lost revenue, but it also creates a poor perception of the company in general, making it far less likely that the customer will return anytime soon.”

The bottom line, says Compuware, is that “Without an APM strategy capable of managing this extended delivery chain and the unique properties of the cloud, there is a very high risk that companies will be completely unaware that their internal users and customers are experiencing performance problems [with cloud applications] until it is too late.” In fact, rather than enjoying the economic benefits promised by cloud apps, enterprises actually suffer from a decrease in revenue.

-- James E. Powell
Editorial Director, ESJ

Posted by Jim Powell on 03/03/2011

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