A Cloud Boom in the Time of COVID-19

How is the pandemic impacting digital transformation and the move to the cloud among enterprises?

By Terrance J. Mintner • May 25, 2020

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The coronavirus has been like a giant pause button when it comes to the flow of business and innovation. But in other ways, it could greatly accelerate certain IT trends – one is cloud computing.

The virus is putting streaming and e-commerce services, online apps, and websites to the test. In the U.S. and Canada e-commerce has exploded since the start of the crisis, registering 146% growth in all online retail orders, according to Forbes.

Since lockdowns went into effect a few months ago providers have been trying to accommodate a tidal wave of users. Without the cloud, some analysts believe they wouldn’t stand a chance of reliably and securely scaling to meet the surge.

As enterprises reconfigure their internal systems so employees can work from home and make more services available to consumers, they may look to the cloud as the ideal solution for these changes. A Gartner survey of 317 CFOs published last month found that 74% of them believe their companies will shift some of their employees to permanent remote work as soon as the crisis recedes.

“Enterprises” is the key word. Everyone knows they’re slower to embrace new realities than nimbler operations like start-ups. Executives worry that shifting sensitive data to the cloud will expose their companies to hackers. They’re also concerned about the costs of doing so as well as efficient ways of retooling their workplaces.

Spectory spoke with several Israeli business leaders about how the pandemic is affecting decision-making.

Avner Strauss is the CEO at Strauss Strategy, a leading consulting and project management company in Israel specializing in innovation, digitization and technology. “Before COVID-19 many enterprises were sitting on the fence about moving to the cloud,” he tells Spectory.

“Now we’re seeing a tremendous acceleration in digital initiatives, transformation and implementation. Utilizing the cloud model is part of this.”

Yet many CIOs still see the cloud as a threat, he explains. “Enterprises need character and openness. They need to understand that everything has changed and they don’t have to wait until the next meteor crashes into Earth. I must say frankly that not all of them have come around.

“It’s all psychology at the end of the day. This is fact: Israel is somewhere between five and seven, maybe even 10 years behind the US and the EU in terms of moving to the cloud. We’re much more conservative.

“It’s an amazing contradiction between Israel’s hi-tech sector – one of the most advanced in the world – and the IT operations of Israeli enterprises which are the opposite in terms of their reservations about the cloud. But with COVID-19 they’re now moving in this direction in a profound manner.”

Dr. Jimmy Schwarzkopf, the CXO & Innovation Analyst at STKI, points to other factors.

“What will change things is that one of the big three – Microsoft – will open a cloud data center region in Israel. And by having a region here, plus now with the coronavirus, we’ll see a big move among the enterprises in this direction.”

Pini Cohen, Executive Vice President and Senior Analyst at STKI, adds that the cloud is a better fit for enterprises in the post-corona era than the traditional data center.

“It allows for remote work and is also elastic. You can have more or less of it as you want, which is important given the uncertainties of this virus.”

Enterprises are realizing that agility is valuable but also speed. “They’re attracted to the large variety of cloud services. With just a click you don’t have to configure or install these services – you get them immediately,” Cohen says.

Natan Friedchai, VP of System Group at Taldor, shares a similar sentiment: “The most dramatic issue for moving to the cloud is the necessity for a company to move quickly.

“One of the major advantages of the cloud is the ability to bring a project to market in a very short time. The infrastructure, resources, hardware, storage, connectivity and security – all of this can be purchased at Google or Microsoft Azure.”

Data Security
A big obstacle in a company’s decision to move to the cloud is data security. Since the start of the pandemic, businesses have registered a spike in attempted and successful security breaches and phishing scams.

Even before the coronavirus, analysts “projected that the market for cloud- and software-based security tools would grow by 17% during 2020,” as reported in The Wall Street Journal. Now, as the pandemic unfolds, they believe companies will dedicate more and more of their budgets to cloud-focused security defenses.

Dr. Alex Coman, a professor at the Interdisciplinary Center Herzliya’s Adelson School of Entrepreneurship, tells Spectory that moving to the cloud would require a dramatic change in cyber strategy.

“When you’re on-site at your organization the protection is much more rigorous than when you are at home on your computer, laptop or mobile phone. We’ve had problems with Chinese hackers taking advantage of this situation to steal secrets.

“We would need to see a distributed cyber approach. This is ‘do or die’ because if you fail to protect peoples’ laptops and mobile phones, you would be exposed to unimaginable penalties when intellectual property is stolen,” Coman adds.

“The jury is still out on whether security measures provided by Google or the other big companies are serious enough. Zoom has been disappointing in this aspect. There have been many incidents lately where hackers have been able to crash its system.”

Liran Mor, director of Cloud Technology at Taldor, takes a different stance. “The fear about security in the cloud is unjustified. Most of the security breaches occur in on-premise infrastructure, not in the cloud.

“I understand the fear because people don’t understand the cloud. It’s in many cases much safer. Take Amazon Web Services (AWS) or Microsoft Azure. When they buy security products for their services they purchase the best of the best. They also must meet different regulations such as Europe’s GDPR, ePR (ePrivacy Regulation), and APAC (Asia-Pacific).

“I don’t think there is any enterprise in Israel – maybe in the world – that has all the components (hardware and software) to meet all these regulations.”

And when it comes to security risks for employees working from home, Mor adds, “there’s a product called CASB [Cloud Access Security Broker] which gives you the option of logging in from your home computer to your company’s infrastructure. You can also make an encryption through the cloud and from the cloud back to your infrastructure.”

Yet what about a different kind of data breach, one that’s “legal”?

“Imagine you’re an Israeli company and you go to the cloud,” Dr. Schwarzkopf says. “Let’s say it happens to be Luxembourg or Belgium and someone there – let’s say a judge – doesn’t like Israel. He or she can open the data to see if there is something it.”

This lack of legal protections abroad is a source of great consternation for Israeli enterprises eyeing the cloud.

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Banking
Turning to banking, Strauss says, “You don’t have to be a prophet to see that everything is going to be on the cloud.”

“The financial sector still has regulations which prevent banks from moving their core systems to the cloud,” he adds, explaining that the Bank of Israel will likely give full authorization for this to happen gradually within a few years.

“An average bank in Israel – even its core banking system – will be on the cloud.”


You don’t have to be a prophet to see that everything is going to be on the cloud


First Things First
If enterprises can find ways over these hurdles, as well as their preference for face-to-face meetings and sluggishness toward change, they have much to gain, analysts contend.

It may even be a question of survival. Strauss warns that “enterprises shouldn’t wait until the next coronavirus to change or adapt.” Darwin’s idea of the “Survival of the fittest” certainly applies here.

Moving to the cloud will not be cheaper but it’s the right model, he explains.

But where to begin?

“In practical terms this means you map each asset you already have in terms of systems, services, components and infrastructure,” Strauss advises.

The next step is to go from the borders toward the center. “Start with your peripheral business processes, services, computing environments and then move to your core abilities, assets and systems.”

Friedchai advises enterprises not to waste time, for the cloud is “here to stay.” As soon as they recover from the dip in investments caused by the crisis they should act.

“I believe that particularly when a company needs to do a change it needs to be done quickly,” he adds.

Forever Overhead
As we’ve seen, Israeli enterprises are confronting concerns about data security, budgets, and rethinking a working culture resistant to change. Nevertheless, as our analysts suggest, their interest in the agility, speed, and convenience of the cloud is rapidly growing. The pandemic could very well establish the cloud as the preeminent feature of our digital lives, a cloud forever overhead.

Speaking of the plague, who knows if this virus is seasonal like the flu or has more staying power like HIV? In any case, more lockdowns and economic disruption could be in order. Enterprises would be wise to prepare for the worst.

The good news is that they appear to be moving fast.

“For the last four or five years enterprises have been moving to the cloud. COVID-19 is just giving them an extra push to make this transition faster,” Mor concludes.

“Just like after a war we see a ‘baby boom,’ there will be a cloud boom after this crisis.”

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