The Ins and Outs of Cloud Computing

A member of your team just suggested, “Let’s move to the cloud.” Now what?

While there’s been a great deal written about cloud computing, there’s a lack of understanding about what cloud computing is, and whether it’s appropriate for a given organization. Broadly defined, cloud computing is the use of remote computers that are housed somewhere else, generally accessed through the internet, to replace internal computers in your office.

Many of us already use forms of cloud computing for online data storage (e.g. iCloud, Google Storage), backups (e.g. Carbonite, BackupMyInfo!), email (e.g. AOL, Gmail), or specialized applications (e.g. SalesForce, QuickBooks Online). Technically, we’re using a “private cloud” when we’re accessing our office from home or working remotely from a branch office.

Cloud computing offers several advantages, or possible advantages over in-house servers:

• Cost savings: Committing to a cloud-based solution for at least seven to eight years can eliminate the capital costs of two server upgrade cycles, thus offsetting the operating costs of using the cloud. (Utilizing a cloud-based solution for a shorter period of time will generally not save money on infrastructure.)
• Access to specialized software: For specialized applications that are expensive to license or that are used infrequently or by a small number of users, using the cloud may allow for less expensive “rental” of the software rather than more expensive outright licensing.
• Simplified support: A cloud-based system is supported by the solution provider, reducing the need for in-house staff or consultants to support servers and applications.  By offering a single solution, the provider can focus on delivering outstanding support for that specific solution.
• Latest versions: Cloud-based solution providers generally need to keep their systems up-to-date with the latest version of applications and security updates to avoid complaints from customers and a loss of competitive positioning.

However, there are also risks and costs associated with cloud computing:

• Security: By placing data onto someone else’s servers outside of your organization’s “four walls,” you’re relying on others to protect against risks of security breaches and data loss. With in-house computing, your organization has more direct control over implementing, managing and testing its own security and backups.
• Dependence on communications: The cloud introduces a far greater dependence on internet connectivity than exists with in-house computing, resulting in recurring operating costs for redundant high speed internet circuits. If you’re relying on in-house servers and your internet circuit goes down, you lose the ability to exchange email and browse the web, but you retain full access to your data files and applications. If you’ve moved to the cloud, then without internet access, nothing is accessible and your work grinds to a halt. 
• Cost of exit: While most cloud-based offerings make it easy to sign up, there are often high hidden costs and barriers to exit, including the need to buy new servers and licenses to accept the systems back in-house.
• Vendor stability: Moving your data and systems to an outside vendor requires a lot of trust that the vendor 1) will provide the services that its offered at a price and level that meets your needs, 2) won’t increase prices or lower its quality beyond your tolerance over the next few years, 3) won’t drop support for the specific services that you’re using, and 4) won’t go out of business.
• Unchanging needs: Committing to a cloud-based solution for several years requires that both the vendor’s offering and your organization’s needs remain consistent.

The decision to move to the cloud requires a careful assessment of the options, potential benefits and possible risks. Below are some questions you should ask:

• What functions are you considering moving to the cloud?
• What service providers are able to provide the functionality you need?
• Are you confident that the service provider will provide security and backups that meet your requirements (and your clients’/customers’ requirements), and that they are at least as good as what you have in-house?
• How long must you commit to the cloud solution to break even on the direct and indirect operating costs vs. reduced capital and support costs?
• How likely will your business focus remain consistent, and the selected vendor be able to meet your needs for several years?

In short, cloud computing can offer some real benefits for a small business, but is not a panacea for all. Caveat emptor.