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Cloud computing for SME's

01 Feb 2011

What is cloud computing and why should a business owner be interested? Cloud computing generally means that a third party provider takes responsibility for delivering the firm’s software applications to its users, rather than the traditional ‘do-it-yourself’ in-house approach. Business owners would likely benefit from lower IT costs, stronger IT security and greatly improved business agility.

The most important decision for any business owner, with respect to IT, is to make a decision on which software applications best suit their business model. Many smaller businesses may only need simple functionality from an accounting system, together with email and Office. Conversely, other businesses may need specialist vertical market software which addresses the firm’s particular industry requirements with or without customisation.

In each case, the business owner should first select the best-fit software applications to support the business. Once that selection is made, the business owner may then choose how to have the software delivered to the firm’s users. There are two options available: running it on the firm’s own servers in-house, as has been the tradition for over 25 years, or having them delivered from the ‘cloud’.

Some software applications are only available from a cloud provider, while other applications are only sold as licences for the owner to take care of delivery and some have an option for either.

Cloud computing providers may deliver any software the firm owns, as well as renting Microsoft Office and email to the firm on a monthly basis. This means the firm can eliminate internal servers, wherever the firm’s software may have come from.

If you run all of your applications in-house, you may hear this described as a "private” cloud. This is just normal internal IT described by a different name by traditional IT vendors threatened by the fast-growing move to external cloud computing. It is also described as "cloud-washing”, which means the word ‘cloud’ is attached to everything in the hope that the market will be sufficiently confused to keep buying the same old stuff. To avoid this confusion, it is best to think of any in-house IT resources as an ‘internal’ cloud and cloud computing services provided by a third-party as an ‘external’ cloud.

How does an external cloud lower IT costs, increase IT security and make your business more agile?

Business owners with in-house IT resources are effectively in the IT business, taking responsibility for security and performance. Is this a good use of scarce time and talent?

Owning and managing IT resources cannot create any competitive advantage. Any firm can replicate the same resource quickly. It is the firm’s business model and the processes that enable the creation of unique value for the firm’s customers that matter. 

Owning IT assets, such as servers, to deliver the firm’s software to its users is a losing proposition.  You either have too much or not enough IT resource, never ‘just right’. IT costs of staff and equipment are fixed and must be met whether you need it all or not.

An external cloud services provider, by contrast, only charges for what IT resource is actually used. This makes the firm’s IT costs variable in nature. As the number of employees goes up or down, the costs move in direct proportion.

Most business owners know the pain of email outages, slow performance and lost data, while understanding that IT costs are not confined to just equipment lease costs. The critical reason why a competent external cloud services provider delivers stronger IT security is that security is a core competency and must be bullet-proof, or the provider will go out of business.

In addition, a competent cloud services provider employs highly skilled professionals focused on providing enterprise-class computing, delivered one user at a time. This means that a business of any size, from a single person start-up to a large organisation, may enjoy the same scalability, security and professionalism that very large organisations have, yet only pay a fraction of the cost.

Once the shackles of internal IT have been shed, the business owner may focus on the best use of their resources which create value for the firm’s customers. IT remains an essential service, but one which is provided by an external provider for a predictable fee.

Cloud computing is being rapidly adopted by business owners as an alternative to the risky, costly and inflexible traditional in-house computing environment.