How to Determine if Your Business is Ready for Cloud Computing

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1 How to Determine if Your Business is Ready for Cloud Computing A plain English report on cloud computing for the non-it business executive THE DIRKS GROUP 2012

2 How to Determine if Your Business is Ready for Cloud Computing A plain English report on cloud computing for the non-it business executive Many remember seeing advertisements run by Microsoft about going to the cloud. However, when asked, the average person has little understanding of cloud computing. Gartner Inc, the world s leading information technology research and advisory company defines cloud computing as:... a style of computing where scalable and elastic IT-related capabilities are provided as a service to customers using Internet technologies. For business executives with little or no knowledge of Information Technology (IT), that definition means nothing. A simple definition for cloud computing more understandable to non-it business executives is: The process of taking the services and tasks performed by our computers and bringing them to the web in a way that changes as your business needs change. So how does cloud computing help your company, and does it make sense for your needs? The following special report discusses: What cloud computing is How cloud computing works Pros and cons of cloud computing The financials of cloud computing Deciding if cloud computing is right for your company This report is presented in a style that minimizes technical computer-speak. It presents a straightforward discussion on the topic to ensure your company has the information it needs to make an informed decision on its future computing needs. Cloud Computing: Exactly what is it? First, it might be helpful to understand what cloud computing is not. Many IT people frequently refer to terms like front end and back end when discussing a computer network. The front end is what the computer user sees the computer (or workstation) and the application needed to access the cloud computing system. 1

3 The back end consists of computers, servers and data storage devices. This is where the cloud is located (or at least could be located if your company had cloud computing). These connect through a network to the front-end workstations. The term cloud computing is a catch phrase of several different services offered. These services, discussed in depth below, have traditionally resided in servers and computers at your company. An example of this could be a software suite like Microsoft Office. Small and medium size businesses typically purchase this software and install it on each of the business computers. The business is required to pay a license to install that software on each computer. Cloud computing allows each computer to access that software from one remote location. The following are variations of cloud computing for a variety of different applications. Cloud computing is expected to more than double by Web-based cloud services. Have you ever used Google Maps? If you have, then you ve used a web-based cloud service. Web-based cloud services rely on an application programming interface (API). This allows businesses to communicate data to each other without exposing intimate knowledge of each other s IT systems behind their respective firewalls. 2. SaaS (Software as a Service). Most small and medium size companies own their software. They ve purchased user licenses for each computer upon which the software is installed. SaaS allows a company to use the application over the Internet for a fee. This is the most common understanding of what cloud computing is. 3. Platform as a Service. This is a variant of SaaS. It is the virtual renting of servers, hardware, storage, operating systems and other data storage capacities. In other words, you run your own applications but you do it on the cloud provider s infrastructure. While more variations exist, most relate in part to these three main areas. How Cloud Computing Works Can you use the Internet? If the answer is yes, then you can use cloud computing. Instead of opening a program like Microsoft Word that s housed in the PC on your desk, cloud computing houses that program in a remote location. The whole concept of cloud computing is to deliver IT capabilities as a service through the Internet. More than that, cloud computing has the potential to deliver multiple users computer services at a lower cost. So is cloud computing right for your company? The following provides details on the benefits and shortcomings of cloud computing. 2

4 Pros/Cons: Cloud Computing As with anything, cloud computing has both advantages and disadvantages. The advantages are: 1. Easy implementation: Businesses, especially those moving to a new location or expanding could benefit from cloud computing. Using cloud computing, your company doesn t purchase hardware (servers), software or related licenses. There also are no implementation costs. You order the number of workstations you need and your cloud provider does the rest. 2. Accessibility: Cloud computing allows businesses to be mobile. Unlike current computing practices where data and software are stored on-site, the cloud allows access from any computer (with Internet capability) with the proper security precautions. This means your staff is no longer tied to their workstations or laptop computers to access data (no more failed presentations because a critical piece of information was left behind). 3. Data backup/updates: Cloud providers generally back up data--automatically. And because cloud providers use redundant systems, the likelihood of backup failure is remote. The data your company backs up is located off-site, making it safer in the event of common disasters like power outage, weather, employee error and malfeasance. Additionally, the cloud provider also does any updates required for your network to function. 4. Minimal downtime: Downtime caused by power outages, weather or maintenance that lasts for a significant period of time has a disastrous impact on a business. Here are some startling facts for businesses to consider: a. 93% of companies that suffer a significant data loss are out of business within five years (U.S. Bureau of Labor). b. 43% of U.S. businesses never reopen after a major disaster and 29% (more) close within two years (University of Wisconsin). c. Two out of five companies that experience a catastrophe or an extended system outage never resume operations. Of those that do, one-third go out of business within two years (Gartner Group). While far from perfect, it is unlikely you will experience much downtime if any should the cloud malfunction. Cloud providers use redundant systems for Internet, power disruption, and physical issues like fire or temperature. Should one cloud server experience downtime, others will automatically take over seamlessly. 5. Cost: Cloud computing allows companies to eliminate hardware, software, license, maintenance and upgrades as major expenditures. Your company uses a portion of the capacity from a cloud provider with other companies, changing the line item in your budget from a capital investment to a monthly fee. The only hardware expense you have is for individual workstations. The cloud provider handles the rest. 6. Increased scalability: Cloud providers operate large data centers able to handle large amounts of data and storage capacity. This saves your company expanding (or contracting) to meet the conditions of the business climate. There are also disadvantages to cloud computing: 1. The cloud is not dial-up friendly: Low speed Internet connections are not compatible with cloud computing. Therefore, if your company does not have access to high-speed connections or if the majority of your sales come from areas without consistent high-speed connections, cloud computing may not work for your application. 2. No control over where your data is stored: Cloud computing has no borders. As a result, cloud providers may have data storage centers next door, across the country or even in other parts of the world. This can lead to security issues. In addition, there is very little legislation between states (let alone countries) regarding the interpretation of rules pertaining to data security and ownership. In other words, should your information be hacked in another state or country, the rules of that jurisdiction may apply instead of those based upon where the data originated. 3

5 3. Ownership of data: Related to #2, there is no clear interpretation of who owns the data being stored in the cloud. Is it the property of the cloud provider or the company purchasing the cloud service? Legislation will likely settle the issue to a degree. However, what would happen should a company have financial issues? Can a cloud provider withhold data? These and other items will eventually make its way through the courts. Until then, companies must be aware and take precautions before signing an agreement. 4. Privacy. The ability to access company files from any computer is a double-edged sword. There is greater flexibility. There is also a possibility of sensitive information falling into the hands of the wrong people. 5. No Internet = no cloud. While becoming less of an issue with improved services by Internet Service Providers (ISP), outages of Internet service means no cloud. And no cloud means no access to company data or software. 6. Not all software is cloud ready. Most software available in the cloud today is primarily customer relationship management (CRM), accounting, supply chain management, enterprise resource management (ERP), and communications ( , social media, etc.). Microsoft offers variations of its Office products, but these are not equal to the standard full-feature software you may currently use. Very few graphics programs are compatible with cloud computing at this time. The Financial Cost of Cloud Computing Cloud computing is a service-based IT model offering flexibility and scalability, which is why it is attractive to many companies. It eliminates major costs normally associated with that part of a company s budget. Still, those same variables that attract companies also prevent a definitive cost without exact numbers. Fortunately, there are indicators you can use to determine an accurate estimate. Cloud providers charge for the service in a variety of different ways: Number of users Bandwidth of data (incoming, outgoing and data being stored) Software used Optional services The value with cloud computing is there are no large capital expenditure for hardware, software, and certain maintenance services. Instead, you pay a monthly fee based upon your usage level. That monthly fee only increases (or decreases) based upon how much you use. Now, there may be some hidden fees related to cloud computing. For example, how does the cloud provider approach the transfer of existing data from your location to the provider s cloud? Most do not charge a fee at this time, however, you should always ask. Another question to ask is what happens should you decide that your provider s cloud isn t the fit you wanted. What happens to your data? Can they transfer it to another provider or back to you? Is there a charge associated with this service? Is Cloud Computing Right for Your Company? Cloud computing offers many advantages to companies. The ability to increase business without the expense and delays associated with purchasing and installing expensive hardware and software is very appealing. Having automatic updates and backups off-site can be invaluable should disaster strike. The flexibility of accessing company data anywhere there is an Internet connection opens the potential for new opportunities. 4

6 However, cloud computing is not right for every business. So how do you determine if the cloud is right for your company? The first step is to talk with your IT staff or third-party vendor if you do not have an in-house IT staff. Determine your existing IT costs and forecasted data needs. Keep in mind that data storage and software requirements will likely increase over time. Compare that with the short and long-term outlook for growth of the business. Then contact a reputable cloud provider to explain the exact benefits and disadvantages of cloud computing based upon your needs. You should receive an accurate assessment of value and cost from the provider which will help determine whether cloud computing is right for your company. About the Dirks Group The Dirks Group is an IT solutions provider with offices in Wausau and Eau Claire, Wisconsin. The company offers solutions for hardware, software and network design based on an expert analysis of the needs of each client, instead of being influenced by an exclusive product line loyalty or preference. With 13 years of service to North Central Wisconsin, The Dirks Group offers expertise in cloud computing, managed services, voice services and network services. On-site or remotely, The Dirks Group is the choice of more than 400 clients large and small for their information technology management. Contact The Dirks Group representative in your area for a free, no obligations assessment of your needs. Call or today to schedule your assessment. You can also find The Dirks Group online at or via 5

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