Cloud computing is the "next big thing" in IT, or so the media would have us believe. The reality is that cloud computing has been around for a while, it is however only recently that the “cloud” has started to get mainstream media attention as the big players like Google, IBM, and Microsoft are pushing their “cloud” solutions. You may be more familiar with the term utility computing. Whatever you call it, the shift to the cloud is gathering momentum. We should understand it, embrace it, and where possible replicate it.
IT enterprises have been consolidating and centralising services over the past 20 years. High speed networks, outsourcing, ISPs, and virtualisation have all helped to fuel the trend. So, it is inevitable that we now take a step further to find suppliers offering IT services to multiple companies. So what is different between cloud computing and outsourcing? The answer, if anything, is the pricing model.
Cloud computing, in its simplest term, is where an external provider offers IT services on a transparent pricing model based on consumption, rather like how we all buy electricity or telephone services. The classic cloud computing model (in a software as a service model) is Salesforce.com whose customers can make use of a powerful and flexible CRM system for a fixed price per user. When you compare the simplicity of the Salesforce pricing model with the complexity of the costs (not to mention effort) associated with hosting an internal CRM system (licensing, storage, servers, data centre, upgrades, network bandwidth, backup, technical support) – you can see why CIOs and CFOs find the cloud computing model attractive.
The downside to the cloud is three-fold: flexibility, security, and risk. Firstly there is the loss of control or flexibility in the solution; there is only so much you can customise the cloud solution. Secondly, relying on a third party to manage sensitive corporate data is a step too far for larger enterprises. And lastly, what do you do when the cloud provider lets you down? There is not an obvious disaster recovery option.
So in short, if you work for a large enterprise, the key IT applications will probably remain in-house in the short term. But ignore cloud computing at your peril. Instead, learn from the providers. Identify key services, understand service consumption, understand infrastructure utilisation, understand operational cost, and understand how cost will change as consumption (or business) grows or shrinks. Why? That is exactly what the cloud providers have to do. Their profits depend on it; they have to account for complex service costs beneath a simple pricing model. This is also what your CFO craves – financial transparency. And once you have that – you’d be amazed at how you can optimise.
If you want to know how you might achieve all that - give us a call.
Posted by Mike Allan, Sumerian Partner
