The ubiquitous presence of the Internet has created a business environment enabling businesses of all sizes to sell their products and services on a worldwide basis. The challenge to small businesses with limited financial and human resources is creating a robust and scalable IT infrastructure to support their “global” business plans. The internal costs of enterprise class solutions for client relationship management, accounting, e-commerce and a physical IT infrastructure are too expensive to acquire, implement and maintain for most small businesses.
Cloud based solutions create an economically feasible method to access enterprise class applications and support services for both front and back office operations. These solutions enable small businesses to focus on their core competencies, conserve precious capital for use in building their brand, and implement a scalable solution to support business continuity and future growth while reducing many of the risks inherent with internal solutions.
Defining Cloud Solutions
Cloud Computing can be defined as simply as “Utility computing, basically virtual servers available over the Internet to anything you consume outside the firewall… including conventional outsourcing” (Infoworld.com).
Cloud computing enables business to expand their IT capabilities on a pay as you go basis without the need to spend limited capital on equipment, software and potentially under utilized technical personnel. Cloud services are focused in three core categories.
• Infrastructure as a Service is where “users rent use of as many servers as needed from a cloud provider” (Wikipedia). The user Business provides all the operating system and application software to run their applications. Rackspace, Cisco and Amazon EC2 are a few of the best-known examples of IaaS providers.
• Platform as a Service (“PaaS”) is an extension of IaaS and “provides a computing platform and a solution stack as a service including networks, servers and storage”. (Wikipedia). The service provider rents the servers, operating systems, and support systems such as firewalls, connectivity, power redundancy, and data storage solutions. The user Business provides the software applications to run on the platform. Rackspace, Amazon EC2 and Microsoft are also PaaS providers.
• Software as a Service (“SaaS”) “is a software delivery model in which software and associated data are centrally hosted on the cloud and accessed via a web browser” (Wikipedia). By its nature, SaaS applications encompass PaaS platforms as part of their overall offering. Applications for Accounting, Business Productivity Suites, Enterprise Resource Planning (“ERP”), Customer Relationship Management (“CRM”) and Human Resource Management (“HRM”) are common examples of SaaS platforms. Some of the best-known offerings are Netsuite and SAP for accounting, Salesforce.com for CRM, Microsoft 365 and Google Apps for business productivity and email, Paychex and ADP for HRM, and Avaya and Cisco for IP Telephony solutions.
Leveraging Cloud Computing
When leveraging cloud-based solutions, business owners should carefully evaluate each option to fulfill the following criteria:
• Accessibility on a global basis
• High availability – available 24/7/365 with redundancy/failover capabilities
• Scalability – expand easily as your business grows
• Compliance – meets all necessary regulations
• Security – best available systems to prevent hacking and other intrusions
• Reliability – 99.999% uptime guarantee
Cloud Computing Advantages & Benefits
• Lower initial investment costs – utilizing a cloud-based infrastructure eliminates large upfront capital outlays for hardware, software and specialized support personnel. This solution converts the IT expenses to a predictable operating cost versus a capital expenditure.
• Shorter Start up times – cloud service providers can be engaged and be operational almost instantly versus the extended time to assemble an internal infrastructure.
• Availability / accessibility to the application from any web browser – a cloud based infrastructure allows the business to have operational flexibility to enable access to both employees and customers from anywhere in the world.
• Business Continuity / Disaster Recovery – cloud based services have a robust and redundant infrastructure to ensure maximum uptime. Providers build in multiple levels of hardware, power, and connectivity redundancies in order to meet high service level guarantees of 99.999% uptime. 24/7/365 customer and technical support are integral to their standard offerings. The major providers such as Rackspace and Amazon have multiple geographically dispersed locations to facilitate failover capabilities in case of natural disasters or Internet service interruptions.
• Security – cloud service provider’s focus on data security, storage and back up procedures as part of their core service offerings. In addition, the providers invest in the latest anti-virus software, firewalls, and failover solutions to ensure the protection of client information from hackers, denial of service attacks and other potential threats.
• Scalability – since the application is subscription based, the business can easily add users or processing / storage capacity at a low incremental cost increase. Additional capacity can be added almost instantly to meet expansion needs on either a temporary or permanent basis.
• Reduced risk of obsolescence – Cloud service providers constantly maintain and upgrade their applications. Providers also maintain a higher level of staff expertise to support their applications beyond what the typical small business can afford or justify.
Cloud Computing Risks & Disadvantages
• Higher potential long-term costs – Businesses would be basically “renting” their solutions, so there is a potential for higher long-term costs but this negative is typically offset by the elimination of a large upfront capital investment.
• Compliance issues – each business has to analyze and insure that their service providers adhere to applicable financial regulations and privacy rules regarding how financial and personal data is stored, managed and protected. According to a recent Microsoft article “Public Cloud-based data has additional challenges. Regulations vary between countries with stricter privacy controls forced by law in Europe compared to those in the USA” (Microsoft.com). Other considerations beyond where the data is stored include who can access and view the data and how the data will be segregated from other companies’ data.
• Data privacy / security – There is a risk of intentional or accidental exposure of sensitive information that travels over the public Internet. A careful review of the service provider’s contract and service level guarantees must be undertaken to insure the appropriate measures are in place to protect the business’s data and clients.
• Loss of Internet connectivity – All applications are web-based so loss of connectivity means loss of ability to operate even the most basic business functions. Each business must determine the best methods to insure redundancy both internally and external to their facilities from their local ISPs and phone companies.
• Cloud related hardware, application or power failures – Beyond the loss of the Business’s Internet connectivity is the failure of the public Internet or one of the cloud service providers.
• Financial Stability – Businesses need to fully scrutinize the financial and operating health of their providers to insure the provider has adequate resources and long-term financial stability to deliver the contracted services.
• Compatibility issues between cloud-based and business applications – an analysis of how the business’s proprietary applications would interface with cloud based applications had to be performed to insure compatibility.
• Loss of control – the business does not host the application so there is a risk of data loss should the service provider suffer an outage or failure.
• Switching Costs due to Provider failure or dissatisfaction if the business becomes dissatisfied with the service provider, there may be significant costs both financially and operationally to switch to another provider or internal solution.
Utilizing cloud based services and applications for critical business infrastructure and back-office support functions are an essential tool to ensuring the long-term viability of your business if a highly available, scalable and robust 24/7/365 online presence is desired. Creating a cost effective plan on a stand-alone basis would create a large upfront capital expenditure that would be required every three to five years. A cloud-based solution can be predictably budgeted as annual operating expenses while achieving the objective of a cost effective, accessible, secure, stable and scalable environment for the day-to-day operations of the business. A cloud-based structure also allows your business and all of its employees to operate from anywhere in case the main office ever became inaccessible. Businesses should always build a plan for the “worst case” scenario, to the maximum affordable extent. Cloud based services provides a cost effective and operationally efficient means of building an enterprise class infrastructure without consuming a significant portion of a small business’s limited capital.