The Case for Cloud Computing: Business Advantages and Costs

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1 Considering the Cloud: A Strategic Guide for Business and Technology Leaders Whitepaper Compliments of

2 Executive Summary It's nearly impossible to turn a page in a business journal these days without seeing an article about the "cloud" or "software as a service (SaaS)." These topics are everywhere you look and a common reason is the impact they have on the bottom line: software as a service often provides a more cost-effective alternative for organizations to achieve their business objectives than traditional packaged applications. But the rising popularity of the cloud isn't a sufficient reason to retool the underlying technology supporting your business. If you want to win more bids, increase your profitability and keep ahead of the competition, ignoring it isn't the answer either. Determining where cloud computing fits in your business and IT strategy is critical for ensuring you're driving the most value possible out of both capital and operational expenditures and/or equipping your team with the best tools for the job. This whitepaper examines the business advantages of cloud computing, as well as practical barriers facing most organizations, and concludes with advice for implementing an effective solution. Our goal is to help you make pragmatic decisions about deploying a solution (or blend of solutions) that makes sense for your business whether it's in the cloud, on-premises or a little of both. CONTENTS: Executive Summary Situation Analysis Talking the Talk (A Definition of Terms) The Cloud Creates Opportunity Business and IT Strategies: Separate No More Internal and External Considerations Licensing and Deployment Recommendations Conclusion 2

3 SITUATION ANALYSIS As the economy continues its recovery process, most field service-focused businesses are cautiously optimistic about what lies ahead. Still, economic uncertainties prompt many to hesitate making any investment that could be deemed as risky. Regardless of (and often because of) market conditions, you must always be looking for ways to improve and grow. The bar to deliver on-time, on-budget projects cost-effectively, as well as manage your service operations, continues to rise. But underneath all the buzzwords and hype, the fundamental role of technology is to make significant contributions to the bottom line. Despite your propensity to take risks, you must ensure your company is equipped with the best technology, deployed in the best, most cost-effective manner for your business. The software landscape has been expanding over the past few years. Not only are there many solutions to choose from, but the ways in which you deploy and implement them within your organization have proliferated as well. And with cloud computing rapidly transforming the IT landscape, the conversation about adopting cloud technology is progressing from "if" to "what and when." TALKING THE TALK (A Definition of Terms) Before jumping into the pros and cons of cloud computing as part of your business strategy, here are some key terms that will be used frequently within this paper: Software as a Service Software as a service is software that is delivered for a recurring subscription fee ("rent") that includes the hardware, software and maintenance of the solution and is accessed over the Internet. Unlike traditional packaged applications that IT installs on your computers or servers, the SaaS provider owns the software and runs it on computers in its data center. The "as a service" model has quickly become a mainstream method for delivering applications, as well as a testing and development "sandbox" for business, providing a compelling alternative to traditional software licensing models. Cloud Computing Cloud computing is known by various names (such as public cloud, private cloud or cloud IT services), but the idea is the same it's a computing model in which scalable and elastic ITenabled capabilities are delivered as a service to external customers via the Internet. For business users and IT decision makers, the appeal is huge. The net goal is to deliver simple and immediately useful technology for all types of end users that can be easily managed by your own internal IT team or a partner's IT team, depending upon your priorities, and that drives business value. Both private cloud and public cloud models are considered cloud computing. 3

4 Private Cloud Private cloud (also called "internal cloud" or "corporate cloud") refers to a cloud infrastructure operated solely for an organization. The service think infrastructure elements like security and tools is provided to an internal team via an internet connection; however, the infrastructure, software and back-end architecture are within the company's firewall. This model typically appeals to an organization that needs or wants more control over their data than they can get in a public cloud. Public Cloud In contrast to a private cloud, a public cloud model provides services to the general public over the Internet think , music or online storage. A public cloud makes IT resources available on a "pay as you go" billing model. The service provider manages a public cloud solution's core infrastructure, software and other back-end architecture in a multi-tenant environment removing that responsibility from the customer. Additionally, any upgrades or updates to the service are pushed automatically with no control by the customer organization. It is good to know the frequency of upgrades or updates that are provided by companies offering solution in the public cloud and what training must be done to keep end-users up-to-date on changes. Blended Model A blended deployment model is one where you select to have one or more applications onpremises and others deployed in a private or public cloud. There are many benefits to deploying applications in a blended model. It enables you to test applications in a cloud environment while a production version runs on-premises. You may want to leverage the benefits of a public cloud for some applications where you do not have the internal IT expertise and run other applications inhouse where you want full control of the system and have the IT specialization to run it. Fault Tolerance When choosing a provider for delivering applications in the cloud, it's imperative that you understand the provider's ability to keep the system up and running. When choosing a provider, be sure to understand their uptime guarantee and their level of fault tolerance: can they guarantee operation during a power failure? Do they provide the option for duplicate or redundant systems so that if one fails another can take over? And of course, you must understand what requirements you have for the applications you choose to run in the cloud. Perpetual Licensing Perpetual licensing offers you the ability to "license" the software up front and pay an annual enhancement and/or support fee. When agreeing to move forward with a perpetual licensing agreement, there is a larger capital outlay in the first year of your agreement with a lower cost over time. Often you will find a need to work with a vendor to assist with upgrades of the software or to customize the solution to work more directly with your company s specific needs. Perpetual licenses have the ability to grow easily with your company needs, but you may find it difficult to reduce the size of the license if your company needs are reduced. 4

5 Subscription Licensing Subscription licensing offers you the ability to pay a recurring subscription fee with a relatively low capital outlay in the first year. Your subscription fees will likely continue at a consistent rate, which can result in a higher cost over time. Often you will find the application maintenance is included in your regular subscription fees which will grant users access to the most up-to-date software at a predictable cost without the large upfront investment allowing you the ability to manage an even payment schedule for your IT needs. Subscription licenses have the ability to scale up or down very easily as the needs of your business change, but can be costly if your business growth happens rapidly and over time. Subscription fees are typically based on number of users, and fees are recurring for the life of the solution. On-premises On-premises relates to software installed and run on computers on the premises (in the building) of the organization using the software, rather than at a remote facility, such as a server farm or data center. The on-premises approach to deploying and using business software was the most common until around 2005, when software running at a remote location became widely available and adopted. Since the advent of software run remotely, on-premises software has sometimes come to be called "traditional" software, although it is still the preferred model in some industries, where the ability to supervise and secure data on premises that are locally owned or controlled is required. Hosted A hosted solution is delivered remotely using shared resources to benefit from economies of scale and repeatable business process-led services shared among several clients. It has other accompanying benefits: running software remotely can result in considerable cost savings because of reduced staffing, maintenance, power consumption, and other factors. Customers are typically charged in a subscription model, but others use "outsourced IT" with perpetual licensing. This model typically uses the Internet to remove the need for the user to install any software on premises. Regardless of size, organizations have the same basic IT needs, but not the same budget or unique solution requirements. That's why so many organizations are turning to hosted solutions for their lower costs and greater levels of versatility. 5

6 THE CLOUD CREATES OPPORTUNITY Economics are a powerful force in shaping industry transformations. During the mainframe era, client/server was initially viewed as a toy technology, not viable as a mainframe replacement. Yet, over time the client/server technology found its way into the enterprise. Similarly, when virtualization technology was first proposed, application compatibility concerns and potential vendor lock-in were cited as barriers to adoption yet underlying economics of 20-30% savings compelled IT leaders to overcome these concerns, and adoption quickly accelerated. The emergence of cloud services is again fundamentally shifting the economics of IT. Most organizations cite cost savings as the most immediate benefit of cloud computing. Cloud technology standardizes and pools IT resources and automates many of the maintenance tasks done manually today. Cloud architectures facilitate elastic consumption (meaning it can grow or shrink as you need more resources or capacity), self-service, and pay-as-you-go pricing delivering greater flexibility and agility to the subscriber. In return, the service provider recognizes significantly greater economies of scale by providing a standardized set of computing resources to a large base of customers. Many enterprise hosting providers are already well positioned in the market and have the core competencies (people, processes, technology) to deliver the promise of cloud computing to your business. What might this mean to your business? You can: 1. Get out of the infrastructure business In most businesses today, IT leaders face the very real problem that 80% of their budget is spent on maintaining their existing services and infrastructure. That means there are fewer resources available for exploring new opportunities and addressing the seemingly never-ending user requested "to-do" list. Additionally, IT too often finds itself with infrastructure designed for optimal peak workload performance, but whose excess capacity during idle time results in substantial waste. Cloud computing can get you out of the infrastructure business, freeing up significant resources that can be redirected to your key strategies. It enables your business to utilize IT infrastructure that you might not otherwise be able to afford, substantially decreasing the cost of growing your business, eliminating the need to set up additional infrastructure and cutting waste. Many IT projects that previously were cost prohibitive will now become viable thanks to cloud economics. 2. Improve time to value By replacing on-premises applications with cloud applications, you can shorten the time from when a project starts to when you see the system delivering ROI. You literally take your business from zero to cloud in a matter of hours vs. weeks with no servers, storage or software to maintain. As a result of this newfound "agile implementation," you'll recognize greater scalability allowing you to scale up or down as seasonal business fluctuations dictate or enabling you to try applications in the cloud and that you may later decide to deploy on premise considerably decreasing risk. Additionally, you can pursue new ventures and markets more easily. For organizations that often compete in an environment of uncertainty, this agility provides tremendous value. 6

7 3. Pay as you go Cloud computing offers cost savings in a number of ways. Instead of securing and outlaying a full software investment as a capital expense, you can move it to an operational line item with a recurring subscription payment and preserve your line of credit. This typically means a minimal barrier to entry. The "pay as you go" model also provides the ability to scale up or down very easily as the needs of your business change, so you can more predictably pay for what you need. This is especially beneficial to those who experience seasonal business variables. It is important to be diligent about monitoring usage. The "pay as you go" model can become a "pay-more" model if growth happens rapidly or if resources are not de-provisioned when not in use. 4. Leverage IT best practices One of the easier ways to begin to take advantage of outsourced IT via cloud computing is for backup, disaster recovery and security processes. Large commercial cloud providers are often better able to bring deep expertise to bear on these problems than a typical corporate IT department. Additionally, back-ups and restoring are part of the service and disaster recovery is planned for making it possible to have an excellent level of redundancy and availability without breaking the budget. This approach keeps operating expenses down while raising efficiency and you have the added convenience of accessing your data from anywhere on the planet when needed. 5. Another practical advantage is for IT testing and development. By creating a "test" environment in the cloud, you can keep your production environment up and running while you test scenarios and play in the virtual "sandbox" without impacting your normal routines and processes. 7

8 BUSINESS AND IT STRATEGY: SEPARATE NO MORE Until fairly recently, your business may have viewed your IT organization as the implementation arm of the business, not intrinsically involved in shaping the business strategy. But for today's IT and business leaders, the cloud provides an opportunity to redefine the role that the IT and non- IT business functions play in determining and implementing a business strategy. As more and more new business opportunities and channels to market are created by technology developments (think mobile, social and cloud), IT must play a proactive role in developing the long-term business strategy. The reality is time and financial constraints are forcing many CIOs to make difficult choices when it comes to meeting business needs. All the more reason that IT and business leaders must work together to establish and implement a vision, road map and governance to address the current needs of the business and support future growth. With the complete fusion of technology into the business today, technology and business cannot be separated. Together they are needed to address the bigger world, the bigger society, in which a business must operate. And so your strategy regarding where to leverage cloud computing as well as mobility and social technologies cannot be done in isolation by either part of the organization. Concurrent with the boom in cloud computing is the boom in mobility. While the two trends are tightly linked, employees and customers are using mobile devices to access back-end systems as well as cloud-based services like location coordinates and maps. As you roll out mobile elements, consider the culture of your workforce in your training plans from the way they do things to what they produce and build. Doing so will increase the probability that they embrace vs. reject these new devices and available services which in turn will help increase their efficiency, their job satisfaction and most critical of all the satisfaction of their customers. As organizations focus on growth, IT is becoming a bigger competitive differentiator. The way you manage this critical capability will have a major impact on your competitive position, your profitability, and your ability to quickly assess and drive new business. 8

9 INTERNAL AND EXTERNAL IT CONSIDERATIONS As you plan your IT approach from infrastructure to platform to applications you can not afford to ignore the potential return on investment of cloud computing, but you'll likely realize that not every workload is suited for the cloud. When considering your options, focus first on your organization's requirements. Following are some key areas to evaluate: Location With traditional onsite storage, you control both where the data is located and who can access it. In a cloud environment, that scenario is changed in that the service provider controls the location for the servers and the data. The physical locations of the cloud must be secure, and the business processes must be appropriate to the data and usage. The advantages can be persuasive as most providers deliver very secure networks (think DMZs, redundant systems and daily, or even more frequent, backups) perhaps more secure than you're able to deliver internally and with much more current and robust hardware and software than you may have in the office. To reap the benefits of cloud computing without increasing security and compliance risks, ensure that you're working with trusted and proven service providers that can address these and other cloud security challenges. Infrastructure From an on-premises perspective, expect to incur a capital expense with the upfront purchase. In a sense, it's very possible you will "over buy" capacity in preparation for future capacity needs. From a cloud perspective, instead of owning and running the facility, servers, and network, you'll essentially rent flexible computing capacity when you need it. Keep in mind that this doesn't have to be an "all or nothing" decision. Identify aspects of your infrastructure such as or document storage that make sense to run in the cloud offsite while you keep your core financials and employee applications such as payroll and HR on site. Be sure to consider hardware and software acquisition costs, ongoing maintenance costs as well as labor required for ongoing maintenance from both perspectives. Additionally, carefully estimate as best you can the capacity and scalability that you anticipate in all areas to ensure you prepare for fluctuations in utilization and the associated costs that come with each. Business Model This is an area where it's particularly critical for both business and IT leaders to carefully consider the full costs of software and hardware acquisitions and conduct business modeling to determine both from a workload capacity as well as from a financial position which model suits short- and long-term needs. There may be portions of the technology architecture that you start in the cloud with a long-term strategy and capital budget plan to bring in-house once you reach full capacity. In your discovery process, you will find that some vendors are uniquely qualified to deliver both on-premises and cloud through perpetual and subscription licensing options. Ownership Whether you select an on-premises, private or public cloud deployment approach, vendors should provide licensing options where you license the product perpetually (traditional "ownership") or in a subscription model (when you stop paying, you no longer have access to the product). Licensing and deployment are addressed in more detail later. 9

10 System Administration Moving any component of your technology architecture offsite shifts software deployment and maintenance burdens to the service provider, freeing up your resources for other projects. On the flip side, your internal IT team subsequently needs to align with the provider for availability, data security, regulatory compliance, and other key issues. Outages may halt business, and poor response times will hamper productivity, so be sure to inquire about downtime, fail safes, root backups, etc. for mission critical applications. Determine which applications, platform and infrastructure components make sense to move off site and which are critical for onsite management. Keep in mind that it's possible to set up a private cloud and outsource that management, as well. Technology Updates With on-premises software, you manage, plan and pay for technology updates. This allows you to ensure you fully understand the implications and value of updates provided by the vendor before pushing them out to your users. If you're hosting applications in a private cloud, you remain in control, as well. With a public cloud implementation, the technology rollout is determined by the vendor and understanding their communication plans and update rhythm is critical to ensure you have adequate time to prepare your users for the changes. Policy and Compliance Some organizations operate with a corporate mandate or a corporate culture of keeping critical business information behind the firewall for reasons of security or control, or others. Similarly, internal or regulatory requirements may drive other organizations to ensure that their data is stored within the boundaries of a particular jurisdiction (such as a country or region). If any of these scenarios apply to your business, hosted services may or may not be a suitable option for certain parts of your IT architecture. But you must understand the vendor's approach to storing data and the jurisdictions within which it operates before finalizing that decision. Explain your organization's position to prospective vendors to determine if their offerings are a match for your needs. Scale In a competitive market, your ability to move quickly and act on new opportunities as they arise is critical. Often your ability to react is aligned with your ability to get new applications up and running and to grow as the opportunity grows. It's important to identify the types of applications and processes you are comfortable with in the cloud, so that when opportunities arise you can quickly move on them. In most instances, the benefits of a cloud solution are the cost-effective manner to create a test environment, to go live and manage workloads effectively. 10

11 LICENSING NOT TIED TO DEPLOYMENT There is a misconception in the world of deployment and licensing that if you have a subscription licensing model, you must have your solution hosted or in the cloud; if you have a perpetual license, you must have your solution deployed on-premises. This is simply not true. You can purchase perpetual licenses, but have the solution deployed in a hosted environment. You can subscribe to a software program and install it on-premises. The best thing to do when deciding on your deployment and licensing options is to ask the following questions: What is our IT strategy? What is the best financial decision for our company today? Does the provider support the flexibility my organization needs? What are my choices and options? SUMMARY As a business leader, you're always looking for ways to increase your profitability and keep ahead of the competition and a significant component is the investment you make in the technology that runs your business. Whether you're deep in the strategic planning process or just exploring cloud services, there are many considerations to keep in mind as you determine the options that best suit your business requirements. While there are some clear advantages to cloud computing, it may not be right for each of your business processes. You need to carefully weigh both the control you need and the type of costs that make sense for you financially. By carefully considering the topics explored in this paper and developing a strategy that merges IT and business requirements, you can develop a plan that ultimately drives greater business agility and cost efficiency and provides the control you need. WennSoft has many customers who have deployed their software solutions in a traditional onpremises model as well as private, public and blended cloud environments and we'd like to work with you to determine the solution that's right for your business. Visit to learn more; or contact us and our team will work with you to explore the configuration that's a match for your business. 11

12 ABOUT WENNSOFT Founded in 1995, WennSoft provides business software solutions to organizations who want to better manage installation, maintenance and repair processes in equipment centric industries. WennSoft serves customers worldwide directly and through a global network of local partners. WennSoft products are Certified for Microsoft Dynamics (CfMD). Learn more about WennSoft at Or contact us at and info@wennsoft.com This document is for informational purposes only. WENNSOFT MAKES NO WARRANTIES EXPRESS, IMPLIED OR STATUTORY AS TO THE INFORMATION IN THIS DOCUMENT WennSoft, Inc. All rights reserved. WennSoft and WennSoft logo are trademarks of WennSoft, Inc. in the United States and/or other countries

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