Have you been trying to figure out if this “cloud services” thing is a real revolution or just another gimmick for IT firms to repackage their services?
If you’ve been around long enough you will recall another “IT Revolution” known as Application Service Providers (ASPs) in the late 1990s. They professed that their service bureau could provide businesses with computer-based services and applications over a network. Their “on-demand” software application model soon became known as SaaS or Software-as-a-Service. But their services never got traction. What’s different now?
I think there are a few reasons this technology model may begin to gain traction this time around.
· More people have personal computers now. Relatively speaking, in 1999, the penetration of personal computers was at its infancy with worldwide shipments reaching only 100 million. By 2008, shipments reached 1 billion and it’s expected that another billion will be coming online in 2014.
·Acceptance and affordability of PCs has more people comfortable and literate in computing and using the web, especially for critical services like banking, bill payments, searching, and online shopping.
·There is higher broadband penetration now than there was in 1999, when it was less than 10%.Broadband penetration in the US is now over 70%.
·There are better standards in place now to facilitate better managed services (RSS, XML, PHP)
That plus the fact that the current economic environment is forcing companies, both large and small, to reduce their infrastructure costs portends a favorable scenario for cloud services.
But nothing is free and while IT firms herald the virtues of cloud services, saying, “Now you can focus on your core competency,” the cost of turning over your software applications can also have its own challenges and associated hidden costs.
Ownership and Control of Software Elsewhere
A wise IT professional once told me, “There is no such thing as free software in cloud services, you just pay differently.” You can pay on a “per use” basis (this will eventually evolve over time as many provider billing systems cannot accommodate such billing now) or you can pay on a “per seat” or simple monthly subscription basis.
Scalability and maintenance is no longer your problem. Neither is complete control.If something goes wrong, you have to rely on your service provider to resolve these issues, with little explanation of what went wrong. Unlike your IT manager who will give you explicit details of what went wrong and how he valiantly saved the company, the cloud service providers typically do not have Service-Level Agreements (SLAs) that are meaningful.
Security issues will always be a possibility. When companies such as Chase, Citi, Best Buy, and Sony have security breaches, what makes you think your cloud service provider is immune?We live in a web-based world where hackers will continue to attack websites for financial gains or malicious reasons. You can mitigate some of your risk by managing your own critical data and segmenting critical data behind your own firewalls.
The Benefits are Becoming Clearer
In a competitive business world where managers are trying to manage more with less, it makes sense to outsource those pieces of your operations that tend to be cost centers. IT services and maintenance can certainly become a cost impediment if not managed right. Between upgrades, launching and supporting new applications, and taking advantage of cost-saving services, cloud services can be quite helpful in that regard. Companies like Salesforce.com, Workday, and Aravo are making their mark with complete suites of services that include sales force automation, collaboration tools, lead generation, payroll, financial management, and supplier management.
Most make ordering a cloud-based, software-as-a-service application easy, allowing companies to get started in minutes, and providing plenty of readily accessible customization.
So whether you are a large enterprise, mid-sized company, or a small business, cloud services may help you run your business more efficiently and bring a service staff of experts you would not otherwise be able to afford.
(by George Moore, Chair of the Board of Advisors at Resolution Research)