Flexible business solutions move to the cloud Whitepaper
Whitepaper Cloud computing is hardly the newest buzzword on the block but it has now entered business consciousness through its frequent appearances at conferences, in strategic reports and in papers such as this. But there are reasons for this prevalence, as applications delivered over the web are now widely seen as the future of business computing. There s no denying that cloud, which offers more flexible and scalable installations for lower initial costs, has huge potential benefits. These have already been recognised by start-ups and companies serving the small business sector. While some sceptics still raise questions about perceived risks, this Sage whitepaper sets out to explain how cloud computing is now taking shape as the primary platform for all business software. Why is everybody talking about the cloud? The advent of the 21st century and widespread access to broadband internet capacity changed the underlying model for delivering large-scale computing power. In the client/server era companies traditionally maintained their own computer departments, with in-house teams responsible for administration, security and continuity of service. But the expanding internet opened the opportunity to migrate costly internal facilities to specialist, third party data centres and servers. This virtual, timesharing network model has been described as utility computing, where service providers made their vast data storage and processing facilities available to more users, allowing them to scale their usage up and down as needed. Cloud computing had its most visible impact in free online services for consumers, for example with email providers like Hotmail, Yahoo, and Gmail that let users store their email archives on the web. For those consumers who were running their own businesses, it was a natural progression to take advantage of similar capabilities at work - without the need to invest cash in costly computer hardware and business software licences. Soon the likes of Skype and Amazon saw their opportunity to offer external technology companies capacity on their servers, creating an infrastructure for delivering software as on-going subscription service at lower cost. Smaller firms were not the only ones to benefit from this development; larger firms stood to gain as much, or more by being liberated from the need to maintain their own data centres. Capital investment that would previously have been tied up in computing infrastructure could be applied more usefully to more rewarding areas of the business, and technology could be deployed more efficiently and quickly to exploit new opportunities. Benefits of cloud computing The main ethos behind cloud computing is that applications and software can be accessed remotely, meaning that the user is no longer chained to the desktop. The key benefits arise in the following areas: Cost Cloud computing can bring corporate technology within the reach of almost any business by reducing the cost of entry. The cloud service provider will host data for a number of companies, so if the infrastructure is shared; then so are the costs. This means it s cheaper for individual companies that would otherwise have to pay the cost of full infrastructure just for their own use. With the cloud model, businesses only pay for what they actually use rather than having to invest ahead of time in capacity to deal with anticipated workload peaks. From an accounting point of view, paying for cloud computing out of operating expenditure offers a cash flow advantage compared to investing capital to build your own data centres. Not to mention the ongoing savings on maintenance costs and upgrades. Operating expenses paid to a cloud service provider can also be fully deducted from the revenue in each year, rather than having to be deferred through complicated, year-on-year adjustments in the balance sheet. The out of the box factor While the majority of on premise solutions will need some form of set up assistance to ensure the system operates in the way the business requires, with the cloud option the absence of hardware procurement means it is a much swifter project to complete. The result is a much faster and more flexible implementation with less in-house disruption. Applications and other existing processes can also be moved to the cloud. The era of perpetual enterprise resource planning (ERP) projects, while not quite over, is certainly evolving.
Whitepaper Manageability Companies can tie up significant resources in maintaining on-premise technology solutions in the modern age. Cloud computing has largely solved this issue thanks to automation and external provision. Cloud vendors will do the server maintenance, which includes security and software updates. With cloud computing there are no legacy systems or expensive upgrades to negotiate. Scalability Cloud allows businesses to maintain multiple levels of service or productivity without having to pay extra for storage. This is thanks to a time-share mentality that spreads the costs out between other businesses hosted in the same facility, with capacity available to accommodate spikes in traffic or usability. This can be valuable for fast-growing companies that experience seasonal surges in demand, or surprise or irregular spikes. The capacity is there, and it can quickly be brought on stream without the business having to worry about overloading the system. Mobile-orientated As long as employees have access to the internet, the cloud allows them to work remotely. In a world where the workforce is becoming more and more mobile, the cloud can support true 24-hour a day operations. Transactional systems such as sales ordering can be available at all times and cloud software developers can make summary reports and business intelligence available to mobile devices. Within finance teams, for example, cloud tools can make it possible to submit and approve payments, expenses, timesheets and other accounting tasks without having to traipse into the office.
Whitepaper On-demand versus on-premise Despite the benefits, moving to the cloud is not necessarily an all or nothing decision. Companies will often retain on-premise solutions or even opt for a hybrid approach. Here s why: Businesses have a lot invested in on-premise systems Existing on-premise servers and storage may be playing an effective role and having invested in it, the company might well prefer to see a tangible return from the existing setup, and in-house adaptations of a system that is well understood can achieve faster solutions than introducing a new system. Some companies - particularly in highly regulated sectors - want to retain full control of their systems and data. But in the cloud era, they are likely to pay a premium for this privilege. Geographical locations Cloud data could be stored in data centres around the world in different countries, or indeed, continents. This could prove tricky for those working with sensitive data where different laws on data protection and privacy could apply. If you were based in one country and you were using a cloud company based in another, while your data was hosted in a third country whose laws would apply? While agreements can be signed specifying the storage of data in specific locations it could limit your options. This issue demands extra attention when considering cloud service providers. Larger multinational companies, particularly in regulated industries such as healthcare, financial services or energy may prefer to retain all control by keeping data in-house. Does the cloud argument still exist? Yes, to an extent. Businesses will continue to debate cloud versus on-premise computing; but the evolution of hybrid and private cloud installations has made this argument largely redundant. The company that is worldwide and contains multiple job functions is more likely to have the capital expenditure available to purchase its own setup, or already have one. It s IT department will also be better able to maintain the system. However, companies of all sizes are moving to the cloud, with many following the hybrid approach which sees them install certain cloud applications to meet specific need, while retaining other processes in house. Cloud: the security issue How safe is the Cloud? Data security is always a valid concern, but cloud service providers have proven their security credentials through years of reliable provision and adopting criteria frameworks such as ISO standards. The companies that have emerged as market leaders have proven their professionalism and those that don t provide adequate security will drop out of the market pretty quick. Organisations looking for cloud-based business software are best advised to find a provider with a proven history in all the areas they are likely to need - from financial software to ERP. Understanding a vendor s security practices can be based on the following questions: Who has access to the data? Where is the data stored? What certificates or standards do they work under? What happens if there is an unforeseen outage? Cloud computing is a partnership between company and vendor understanding the process for back-up, redundancy, cryptography and any other safety measures is the key to protecting your business in the cloud. Technology has changed, which means the cloud has too The cloud has come a long way even since it gained a foothold in the business world. The technology and security capabilities have changed to accommodate the demands of business-critical software users. The cloud lets business add or expand core processes as needed and helps them manage the transition and support remote teams with easy data entry and reporting tools. Thanks to its low-cost, subscription-based payment the cloud also brings a new level of flexibility in the way it s paid for. The cloud has become a utility. It has moved to a serviceoriented model that reflects technology s evolution from luxury to an expectation. Costs are based on what s actually being used much like gas, electricity and water. You wouldn t be expected to keep large gas reserves in case of an unpredictable weather, so why should you keep extra server resources in case of unpredictable usage? When it comes to keeping the lights on, technology has fast become as important as the power it runs on. Conversely, smaller companies are likely to be based in one location, have less access to capital, and maintain a work ethic akin to all pitching in together, where multiple job functions are applied to an individual. For smaller firms, the cloud decision is often answered out of necessity.