While Polish firms produce some of the best cloud-based apps, the country’s own SMEs are reluctant to adopt cloud solutions. Customization costs, legacy software, and regulations are some of the factors that are preventing cloud solutions from spreading in Poland
by Beata Socha
Poland took first spot in the SaaS Summer Games 2016, in the Most Popular Apps category. The contest, organized by software evaluation firm GetApp, looks at applications working in the cloud, in seven individual categories as well as at countries where the vendors of the applications originate.
Apart from the team gold medal, there was another prizewinner among Polish contenders. SalesManago Marketing Automation placed second in the Marketing Automation category, after US-built Autopilot. “The Polish-built software has been praised for its range of capabilities which extends beyond marketing automation to include CRM, email marketing, and more,” said the contest organizers. While Poles seem so capable of making high-quality cloud applications, one would think they are equally eager to use the cloud in their own businesses. The truth is, however, that Polish firms are still very reluctant to adopt cloud technologies. In fact, most of the cloud-based software made by Polish start-ups is exported. “A recent poll of 2,400 Polish start-ups shows that 39 percent are dedicated to creating SaaS software, which is a huge portion of the start-up scene, many of them exporting their products to the UK and the US,” said Suzie Blaszkiewicz, a researcher for the software evaluation firm GetApp.
The cloud market in Poland is worth PLN 611 million, according to this year’s edition of Computerworld TOP200 report. That is less than 1 percent of the entire IT market, which is valued at PLN 105.3 billion, and less than 5 percent of the IT service providers market in Poland, worth PLN 12.8 billion. According to research firm IDC, the cloud’s share in the IT services market is around 4 percent.
No wonder the market is so small if only 34 percent of large corporations in Poland use some form of cloud, according to the latest report by research firm IPSOS conducted for Intel. As far as the public cloud is concerned, only 19 percent of large Polish enterprises use it. Still, “over a half of them use some form of private cloud, which means their own infrastructure, which they make available to their employees via secure connections, such as VPN,” said Krzysztof Jonak, director at Intel for CEE. It appears that managers do see the need for the cloud and making resources available to their employees, but they would rather not release their data to a third party. “The level of acceptance for public cloud solutions is quite small. We still mostly use private cloud solutions, which means we want to have full control over our data. We are still learning to use the public cloud,” Jonak concluded.
Legacy systems and bottlenecks
Why is the cloud not happening in Poland? One of the key reasons is the cost of switching technologies. “To my knowledge, Polish small and medium-sized enterprises are burdened with legacy IT systems. In that area we are lagging behind the rest of Europe, as well as the CEE region,” said Ronald Binkofski, CEO of Microsoft Polska during a Cloud Up Poland debate organized by Google Polska and Computerworld. Switching from on-premises infrastructure to cloud solutions is simply too costly.
That’s why cloud-based solutions are employed mainly by firms building their systems from scratch. “It is young entrepreneurs and start-ups that are the most eager to adopt cloud solutions. They decide to use it from the get-go, particularly the IaaS model,” said Piotr Pietrzak, CTO at IBM Polska.
The legacy problem is compounded by the fact that adding another player into the IT infrastructure – the cloud operator – creates bottlenecks between the on-premises and cloud components. “Most large companies operate on the assumption that all of their resources are kept in one data center. That means fast connections, data processing done at night, and terabytes of data moving through the company network. It works because we are located in a single data center. But when we pull one part of the infrastructure and place it outside, we no longer move through a 100 GB optic fiber. We have to make do with far smaller bandwidths,” said Krzysztof Dąbrowski, CIO/CTO at mBank. He concluded that cloud solution providers are generally not ready to handle systems comprised of many interconnected components.
Scalability and standardization
Analysts agree that cloud solutions work best for standard purposes. Once a client requires a lot of customization, the cost incentives of a cloud solution decrease. More complex companies usually need more tailor-made solutions, which generates additional costs.
Once again, cloud solutions seem to be more suitable for start-ups, which often use the most basic and standard solutions that cloud computing providers offer. They are much cheaper than developing the firm’s own solutions. Similarly, cloud computing can be very efficient for businesses that are either growing very quickly, or whose use of IT resources changes from one period to the next. “Upward and downward scalability is an advantage,” admitted Dąbrowski. However, if a company uses a similar amount of resources over time, it is often cheaper to maintain its own on-premises infrastructure. After all, cloud providers also have profit margins, and the greater the infrastructure, the bigger the margin gets. “Providers don’t offer enough incentives for us,” he concluded. Regulations – good or bad? Then there is the whole security problem. Finance, banking and telecoms, industries that are at the top of the list of tech innovators and should be leading the way into the cloud, are at the same time some of the most heavily regulated industries in Poland. “Before you get consent to go into the cloud, no one will want to take the risk that in two years’ time, his auditors will tell him he made the wrong decision and now he has to switch back to his old IT systems,” said Dąbrowski, and added that in these industries, “if you don’t get a green light, you have to assume it’s red.”
And yet, Poland is not so bad when it comes to legal regulations for cloud solutions. Poland was ranked 10th in the latest BSA Global Cloud Computing Scorecard 2016, which ranks 24 countries that account for 80 percent of the global IT market on the basis of how supportive their regulations are of cloud solutions. Compared to the previous edition of the ranking carried out in 2013, Poland moved up two spots thanks to its “impressive gains in both its legal and regulatory framework and information technology (IT) infrastructure,” the ranking analysts said. They praised Poland’s up-to-date laws for privacy, electronic signatures, electronic commerce, and cybercrime, as well as its comprehensive regime “for the protection of intellectual property, including specific rules for internet service provider (ISP) liability.” Where it fell short, however, were some gaps in enforcing its laws and regulations.
Some also point to mental barriers that make Poles distrustful of storing their data in the cloud. The fact that there have been some highly publicized security breaches over the past few years doesn’t help matters either.
Regulations and trust issues are the two main obstacles to cloud use in Poland, according to Intel’s Jonak. “Once legislation becomes clearer and once the trust level in cloud solutions increases, cloud-based solutions will take off in Poland, and other CEE countries,” he said. Also, Poles like to “own” things that are essential to their well-being: for instance, unlike in many Western European economies, the majority of Poles prefer to own their home rather than rent. The same could be true for IT resources: keeping your own infrastructure gives you the feeling of being in control. If that’s the case, then the cloud should eventually win people over, with its simplicity, scalability and possible greater cost-effectiveness.