When businesses consider moving their information technology to the “cloud”, the problem is often approached with a thought that things will have to change dramatically in order to achieve a fully online working model. In many cases, business owners are left believing that any business use of cloud technologies is the equivalent of changing software and systems over to SaaS solutions, enabling the much-desired anytime/anywhere working model. What too many businesses aren’t being told is that there are a variety of ways to move to the cloud, and changing software and systems isn’t necessarily a prerequisite.
The benefits of a cloud computing model are many, with mobility and managed service being the most obvious. Less evident are the potential cost savings, because the subscription approach to paying for IT services may, on the surface, look like an equivalent or even higher cost over time. What isn’t being factored in to the cost (savings?) is the potential to improve processes and increase productivity. These benefits are often achieved simply due to a centralized management and access approach, and are not necessarily attributable to the adoption of new software tools.
For many businesses, the cloud is the right answer for deploying and managing IT and should be considered first, before changing out the software and tools in use throughout the organization. This approach has been widely adopted by businesses using Microsoft Exchange messaging solutions, where in-house Exchange servers are being replaced by outsourced Exchange providers and users experience the same functionality but with far better uptime and protection. The same approach is working for businesses electing to move their in-house business software and systems to the cloud, engaging with application hosting providers to install and manage existing desktop and network applications and to secure business data on the host. Users are able to access their native desktop applications via the cloud, allowing businesses to retain their investments in people, processes, and business knowledge.
Particularly as Microsoft and others continue to move away from packaged all-inclusive solutions for local installation, small businesses are finding that the cloud, hosted applications and remote access provide the answers to a variety of business IT problems. Even more, those answers are being provided affordably, with a simplicity of setup not previously available, and with higher levels of service than was reasonably available with localized IT.
The Apps on Tap solution is the easiest and most seamless way to move your native applications to the cloud with an experienced cloud provider. Call for a free cloud assessment today.
Recently, I was having a conversation with a prospect about what’s going on with cloud computing offerings. He related to me how his management team was confused with all the “Cloud Washing” going on and was having difficulty evaluating our integrated end-to-end solution against other individual cloud solutions. Truthfully, if I didn’t know what’s going on, I’d be confused, too. So many companies have called themselves cloud providers when they are nowhere near the cloud.
Cloud Washing Defined
So what is this so called “Cloud Washing”? Marketing people seem to latch onto the cloud to get attention. If you are not savvy to the cloud hype cycle, that strategy will work on you. Because the definition of the cloud is sometimes unclear, the marketing departments tend to call everything the “Cloud”. In my humble, but accurate opinion, the cloud is Information Technology Services delivered over the Internet to the Customer, exactly like a utility. It doesn’t matter if it is Software as a Service (SaaS), Infrastructure as a Service (IaaS), or Information Technology as a Service (ITaaS), it must be delivered like Electricity, or Water and Telephone. Unfortunately, we have Managed Service Providers and Software Development companies slapping the cloud onto existing products and services.
If you find yourself paying the same rates or higher than traditional IT costs, you probably have a pig with lipstick. Those falling for ‘private’ cloud are not achieving their objectives. Cloud services should have a significant savings compared to hardware, software, and salary costs you pay now. This will depend a lot on how much of your IT you have already outsourced but nonetheless you should receive greater value and a reduced cost. You should NOT be buying expensive Internet bandwidth or VPN hardware to get your cloud service projects off the ground. Now you will have to pay a fee for numbers of users when it comes to software licensing, but that’s to be expected. Cloud Solution Providers should have their systems baked and ready for consumption over existing Internet connections with a business firewall at your end. The order process should be smooth and fluid. If you find them writing a Statement of Work that looks like a project, start asking questions. In addition, they should be able to provide meaningful Service Level Agreements that start at 100% for data centre availability and work down from there for individual applications or dedicated Servers.
Another thing to be greatly concerned about are data centers with fancy buildings and gear, who sell real estate in their data center, and have decided to add Cloud Solutions as an afterthought because they figured out they can make more margin. Many only offer cage space, racks, services, ping, power, and pipe. They leave the rest to you. Well times have changed. Companies are burdened with certifications and compliance, which requires extensive expertise. If you want to be a true cloud provider in 2013, you need to have Cloud Security, Cloud Back Up, and Disaster Recovery built into your cloud service. Otherwise you are not securing the cloud. PERIOD.
The cloud provider should be able to show past performance, and have case studies, and testimonials.
In short, your cloud services should be easy to acquire, easy to implement and safe and secure. Having a cloud provider with experience in the small business market; able to deal with both the commodity based services like Hosted Exchange and Microsoft Office while integrating your industry specific applications all under one solution will also make your experience in the cloud a better one. So beware of the charlatans, be smart, and come on in. The cloud is fine.
Invariably, when I sit down with a small business decision maker and propose our cloud computing model, Apps on Tap, the conversation always comes around to cost. After all, these people would not be running a successful business today without keeping an eye on the bottom line. After I listen to their individual situation and ‘pain points’ I typically make a bold statement, “The cost of our cloud computing model is equal to or less than what you pay now”! This gets their attention immediately and they want to learn more about this transformative way to deliver and consume IT-as-a-Service. To date, I convince about 70% to move to the cloud and the adoption rate has been increasing steadily over the last ten years.
Cost of Ownership (or Total Cost of Ownership, TCO) analysis is meant to uncover all the lifetime costs that follow from owning certain kinds of assets. Ownership of an asset includes purchase costs, of course, but ownership also includes costs for installing, deploying, operating, upgrading, and maintaining the same assets. For many kinds of acquisitions, TCO analysis finds a very large difference between purchase price and total long term cost.
Those who purchase or manage computing systems have had a high interest in TCO since the 1980s, when the potentially large difference between IT hardware prices and their cost of ownership started drawing the attention of the IT consulting community and IT vendor marketers. Competitors of IBM, for instance, used TCO analysis to argue that an IBM computing environment was an overly expensive ownership proposition. The four or five year cost of ownership for major hardware and software systems—from any vendor— can be five to ten times the hardware and software purchase price. The same argument holds true for many of the on-premise IT environments of small businesses we see today. Unless you clearly know what it costs to continually support and maintain these IT architectures, you really don’t know your TCO.
By taking prospects through a TCO analysis that shows them the ‘tangible’ costs of their current on-premise IT spend, you get fewer objections than you do with Return on Investment (ROI) calculations which can be easily manipulated to suit the user’s purposes and mean very little to most business owners. If you can deliver on the ‘Promise of the Cloud’ at the same or similar cost to what they are paying now, you will have their attention.
The following tables are actual TCO models (existing clients) of companies of varying size. It’s clear from the comparisons that regardless of the size of the company you can usually make a strong ‘cost’ argument to move to an IT-as-a-Service model utilizing the cloud.
Other points to consider:
TCO can bring out so-called "hidden" costs of on-premise IT ownership.
In these examples, not only are costs for IT infrastructure and system software included but the cost to support that infrastructure is also included.
Some companies have in-house IT support, some have outsourced IT support and some have a combination.
When deciding whether or not to acquire a new solution, it is easy to become distracted by hardware and software costs alone, but in fact the "support" costs amount to over 50% of the TCO. How well the people who support your IT are trained, employed, and managed will be far more important in determining actual cost of ownership than other factors, such as the choice of a HW or SW vendor.
What about the Controller who spends a significant amount of time each month dealing with IT issues instead of strategic business objectives? Does this distract them from their job and cost the company money?
TCO can identify how much you spend on capital expenditures (CAPEX) versus operating expenditures (OPEX).
This is important because one of the benefits of the cloud is that it reduces your CAPEX dramatically. In these examples, CAPEX is reduced between 85%-90%. As a business owner, you can put this money to use elsewhere in the business and get immediate results.
TCO analysis is blind to business benefits (except cost savings).
It is important to note that a TCO analysis is not a complete cost benefit analysis. TCO pays no attention to many kinds of business benefits that result from implementing cloud computing such as eliminating risk, improving business continuity, faster time to market, faster remote access, or the ability to redeploy strategic personnel where they can have an even greater impact on the business. When TCO is the primary focus in decision making, it is assumed that such benefits are more or less the same for all decision options, and that management choices differ only in cost. This is not necessarily true where cloud computing is concerned.
What are the business implications of cloud computing? If the cloud’s only impact was on companies’ IT budgets, the implications would be minor, but as we have seen, this is not the case. How would you feel if your main competitors started pulling away from you simply by changing their computing infrastructure? And how much worse would it be if this change created other benefits that are not yet obvious?
If cost is the determining factor in how you make decisions, sit down and do a TCO of your current IT infrastructure and then find an IT-as-a-Service company to compare it to. You may be surprised by what you find out.
A recent article I read had some interesting predictions about what IT will look like in the near future. It appears that Cloud computing is changing the landscape dramatically. Here are the predictions that the experts came up with and that are in line with what we see at Apps on Tap.
The IT department won't be physical.
There's a dramatic shift to the cloud, but most of us can still tell you who works in IT, where the department is located and who is in charge. By 2020, there will be a shift from an IT department for end users to a "follow me" IT service provider mentality. In other words, IT itself will move to the cloud. The concept will shift from a department that manages cloud services to a cloud service itself.
CIOs will be managing fewer humans, especially for security.
By 2020, the role of CIO will shift away from one that is mostly about managing humans in a large workforce. While that may seem too far-future for some, the reality is that computing is becoming much more autonomous, requiring less dependence on human intervention for systems to run correctly.
End-users will not be in departmental groups.
That shift will be one of the most critical changes for CIOs, who often meet with teams to collaborate and strategize. Instead, IT will become a service provider to individuals, making sure their gadgets, software and systems work.
Bring Your Own Desktop (BYOD) will be the norm.
In the future IT department, employees will bring their own devices to work and IT helps makes them secure. Today, that remains an exception to the rule in most cases; IT still provides hardware to employees and manages the infrastructure. IT will mostly be charged with managing employee-owned devices. For the most part, workers will find their own computing devices and use them at work.
CIOs will impact business direction.
Many CIOs of today meet with business leaders and contribute to the overall direction of the company. In the future, the CIO won't just contribute. He or she may be the main thought leader, moving from an advisory role to one more focused on direct innovation. The CIO will be involved in every key business decision, from marketing to product design to logistics, because technology will play a pivotal role (or even the major key role) in those areas.
It has never been easier for business to acquire IT. Call today and set up an appointment to discuss how your business can be part of the transformation taking place.
When asked to do a Total Cost of Ownership (TCO) for comparison between on-premise and hosted IT in the cloud we always mention the intangibles that most companies don’t think about when comparing the two models. I have yet to find a Controller or CFO who has a line item on their IT budget for the cost of ‘under utilized infrastructure’ or the cost of ‘lost business’ when their infrastructure is unable to meet customer demand.
I don't have anything against corporate IT, but if your cloud runs on your own infrastructure, you have deployed infrastructure ahead of customer demand and are paying for the privilege. The primary value in the cloud is the ability to leverage on-demand capacity of an external provider to align your infrastructure and customer demand. By running your own cloud (a.k.a. Virtualization 2.0), you are betting that your IT department can manage efficiencies comparable to public cloud providers.
With one of the biggest reasons for cloud adoption being cost savings, don’t forget to look at the ‘intangibles’ when it comes to cost as you decide on what your IT budget will include moving forward. At Apps on Tap, we will do a comprehensive analysis of your current IT budget and compare it side by side to our solution. The decision then becomes one of ‘when’ not ‘if’ you should move to the cloud.
Everything you’ve read about who is using cloud computing and why is pretty much true, so says at least two industry studies.
According to a recent Cloud Industry Forum (CIF) survey of 400 public and private companies of varying sizes, flexibility is the number one reason companies adopted the technology in 2011. Cost savings eked out second place.
Of the 31% of respondents who listed flexibility as the top reason for adopting cloud computing services, the majority were SMBs — tiny companies with up to 20 employees (40% adoption) . Such companies tend to have limited in-house technical resources, and cloud offers self-service capabilities, on-demand scalability and the ability to quickly launch new services that might otherwise be delayed or pushed to the backburner completely.
The ability to use cloud technology to launch a completely new service was a draw for 22% of respondents, while only 8% looked to cloud to either offset a lack of internal IT or because it was seen as a low-cost project.
Companies that jumped into cloud in 2011 must be seeing its benefits; 94% of respondents who adopted cloud have plans to expand cloud services in the next 12 months, according to CIF.
In another study, SMBs are jumping in with both feet when it comes to leading the way to cloud. In fact, small and medium-sized businesses are out in front of enterprises, according to a survey of nearly 1,300 staffers at companies with 1,000 or fewer employees.
"It has to save my company money, time and resources ... My CFO won't give me money if I say something is really cool." Justin Davison, senior systems engineer, RJ Lee Group
The survey, which was conducted in the early fall by Spiceworks, a social business network for IT that claims to have 1.7 million users, found that some 46% were using cloud services by the second half of this year. That's up from 28% in the first half of 2011, which was also an increase from 14% in the second half of 2010.
"[SMBs] have less to lose and more to gain because the benefits are more obvious and easier to acquire," said Charles King, principal analyst at IT advisory firm Pund-IT.
"For enterprises, there's an institutional reluctance to engage with outside services, especially when it comes to private information and custom applications," King added. SMBs, by contrast, tend to go with packaged software and are looking to cut costs for infrastructure.
As the studies continue to pour in and adoption rates increasing, it may be time for you to look at cloud computing for your business in 2012.
Cloud computing has definitely progressed from a few early innovators to widespread adoption, but let’s take a look at the classic Technology Adoption Model to understand this a little more closely. Geoffrey A. Moore, in his book entitled “Crossing the Chasm”, divided the market into the following categories in its adoption of new technologies:
New technologies are first embraced by a small group called Innovators, who appreciate the technology for its inherent “bells and whistles.” Business value is secondary to this group.
The next group is called the Early Adopters, and these are visionaries who recognize the business value of a new technology and are willing to take some risk to reap the benefits.
The Early Majority is a large group who are ready to adopt the new technology because the bugs have been worked out, the early risk takers have taken their lumps, many companies have introduced products and services so there are many options to choose from, and this new venture is now a safer decision. This group now enjoys the added benefit of an infusion of competitors which in turn drives down pricing.
The Late Majority has sat on the sidelines, seen the benefits their peers have enjoyed, are jealous and now want the same great benefits for themselves.
The Laggards are those people that are always the last to adopt, are extremely conservative, and want to make sure ALL risks have been removed.
Looking closely at the market today you can see: The early risk takers have taken their lumps, there is a flood of new vendors on the market and prices are being driven down.
According to this widely accepted model, ‘cloud computing’ has now entered the Early Majority phase of the Technology Adoption Lifecycle which means there is a large group of people ready to adopt this new technology.
Because of the options that exist today and the maturity of the offerings, Cloud Computing is enjoying mainstream success. Up to this point, the Early Adopters and Innovators were the primary consumers of Cloud services. This group was primarily interested in the features and functionality and less concerned about market adoption:
Because of the sheer size of the market opportunity that the Early Majority represents, Cloud Computing has now been flooded with thousands of vendors both large and small to capitalize on this spending wave. In recent months, big firms such as Google, IBM, Microsoft, EMC, HP, Dell, and others have introduced their own brand of Cloud services.
For those organizations that are interested in leveraging new technology to gain a competitive advantage but need a certain comfort level before doing so, many vendors are rich with Customer Case Studies, Testimonials, and various endorsements all designed to provide that decision safety. Most importantly, with the introduction of many new players, the price points for Cloud services are at an all-time low.
If you believe in the Technology Adoption Lifecycle, now is the time to embrace the Cloud.
Cloud is a new computing paradigm that opens the door to bold new possibilities. Cloud is already having a broad impact, with implications that are relevant even to the most non-technical person.
As business leaders, we expect technology to deliver cost efficiencies, improve customer experience, drive revenue growth, and foster innovation. At the same time, we expect constant availability and end-to-end security.
This combination of rising expectations and a rapid rate of change challenge traditional approaches for information technology. Business cycles keep shortening, but business system complexity keeps escalating. Information technology is too often described as equal parts business accelerator and business obstructer.
Cloud will change the way the world lives, works, plays, and learns. Imagine having access to nearly unlimited computing power on any device from anywhere. Imagine bringing new products to market months faster than you can today. Imagine speeding up your innovation cycles, with fewer barriers to scaling up successes and shutting down failures. Imagine accessing your content—music, movies, books—from any location. Imagine connecting with friends, family, and colleagues around the globe with a rich and secure experience, accessible to everyone.
A new approach is needed to free individuals and organizations from the constraints of traditional information technology. I believe that Cloud is part of the answer and will play a central role in the next era of IT.
Though Cloud is a reality today, even greater functionality is on the horizon. As Cloud continues to mature into a market-place, we can expect more revenue opportunities, shorter time-to-market, and a richer set of applications and services. We will witness more powerful development capabilities, accessible even to non-technologists. We will experience better quality communication platforms. Lastly, we will achieve more efficient, scalable, and environmentally sustainable IT infrastructure.
Technology leaders have confirmed these points of view with Eric Schmidt, Chairman and Former Chief Executive for Google®, calling cloud computing the ‘defining technological shift of our generation’!
In my next article we will look at whether or not today is the right time to move to the Cloud.
Cloud Service Types
Once you understand the approach to the cloud you would like to take, you then decide on the types of services you would like to receive.
Software as a Service (SaaS): Pronounced “saas” enables users to access applications running on a Cloud infrastructure from various end-user devices (generally through a web browser). The user does not manage or control the underlying Cloud infrastructure or individual application capabilities other than limited user-specific application settings. Also called “software on demand,” it’s the simplest and most common form of cloud computing. You tap software from the cloud (rather than buying it outright and loading it onto your computer), often paying for usage in time increments. SaaS provides a ready-made application platform for users to start using once they sign up for the services.
Platform as a Service (PaaS): Pronounced “pass,” enables users to deploy applications developed using specified programming languages or frameworks and tools onto the Cloud infrastructure. The user does not manage or control the underlying infrastructure, but has control over deployed applications. Rather than just renting individual Web based applications when you need them, you’re tapping an operating system that your applications will use; a network; and a service provider that will perform basic maintenance of this network when necessary.
Infrastructure as a Service( IaaS): Pronounced “Ias,” is closer to the full monty of cloud computing services. You rent just about everything as you need it: virtual servers and storage space, virtual routers and other hardware, networking capabilities, an operating system and applications. Your host (cloud provider) will offer more extensive services and maintenance with an ‘IaS’ model. You still pay as you go (usually hourly or monthly), and you can scale up or down.
Now that we know what cloud computing is, its characteristics and how it is classified, let’s try and understand why we are talking about it so much. In my next article I will discuss why the ‘Cloud’ has become more and more relevant.
The first thing a business needs to consider as they look towards the cloud is which approach to the cloud they want to take. It may surprise some to learn that despite all the press and discussions around the cloud, there are only two classes of clouds: public clouds and private clouds. There are significant differences between the two classes and each has its own unique set of advantages and disadvantages.
Public clouds are cloud services provided by a third party (vendor). They exist beyond the company firewall, and they are fully hosted and managed by the cloud provider. Public clouds attempt to provide consumers with hassle-free IT elements. Whether it is software, application infrastructure, or physical infrastructure, the cloud provider takes on the responsibilities of installation, management, provisioning, and maintenance. Customers are only charged for the resources they use, so under-utilization is eliminated.
However, this comes at a cost. These services are usually offered with "convention over configuration," meaning that they are delivered with the idea of accommodating the most common use cases. Configuration options are usually a smaller subset than what they would be if the resource was controlled directly by the consumer. Another thing to keep in mind is that since consumers have little control over the infrastructure, processes requiring tight security and regulatory compliance are not always a good fit for public clouds.
Private clouds are cloud services provided within the enterprise. These clouds exist within the company firewall and they are managed by the enterprise. Private clouds have similar characteristics to that of public clouds with one major difference: the enterprise is in charge of setting up and maintaining the cloud. The difficulty and cost of establishing an internal cloud can sometimes be prohibitive, and the cost of continual operation of the cloud might exceed the cost of using a public cloud.
As the name suggests, private clouds are designed to be visible only to the organization that creates them. They are essentially private datacenters that an organization creates with stacks of servers all running virtual environments, providing a consolidated, efficient platform to run applications and store data. Private clouds provide a lot of the same benefits to the organization that a public cloud does, but still allows the organization to maintain ownership of the data and equipment.
However, where private clouds differ from public clouds is that private clouds can require a significant investment.
Hybrid clouds combine two or more clouds that remain unique entities but are bound together by technology that enables data and application portability.
A hybrid cloud blends the public and private cloud models. It assumes some level of interoperability between the two.
Due to the demand for the cloud to be more flexible and fully optimized, “hybrid clouds” will give companies an opportunity to pick which applications and IT services they want to provide and which they want to purchase from a cloud provider. These decisions will be based on costs, information risk and the functionality available from cloud providers on a workload-by-workload basis. In this model, your IT staff can keep internal control of data and processes, but you can also tap a public cloud for pay-as-you-go use of applications, computing power and scalable storage. The hybrid cloud leverages services that are in both the public and private space. Hybrid clouds are the answer when a company needs to employ the services of both a public and private cloud. In this sense, a company can outline the goals and needs of services, and obtain them from the public or private cloud, as appropriate.
Once you understand the approach to the cloud you would like to take, you then decide on the types of services you would like to receive. In my next blog article we will look at the three services which make up cloud computing.