How cloud computing can improve your operations and bottom line Featured

8:00pm EDT September 25, 2010

One of the hottest IT topics these days is cloud computing. Each day, more and more companies are turning to Internet-based service providers to meet some or all of their business application and computing requirements. IT experts at The Gartner Group have predicted that cloud computing usage will triple over the next three years.

Smart Business asked Steven Vicinanza, Ph.D., CEO of cloud computing provider BlueWave Computing LLC, to discuss why.

What is cloud computing and why is it becoming so popular?

Cloud computing is using the Internet from your office to run applications off of servers that are located remotely in the ‘cloud’ or Internet. The cloud is just a metaphor for the Internet, which is often represented in network diagrams as a cloud. There are several reasons that companies use cloud computing.

1. Ease and convenience. Cloud applications are ready to go. For example, if you want an e-mail account, you can sign up for Google’s gmail inside of five minutes and start sending and receiving e-mails immediately. Compare that to the time, cost and management expense of setting up and running your own e-mail server.

2. Ability to roam. With Web-based applications, you are not tied to a specific computer. This means you can run your application at your office desktop, at home, from your laptop at Starbucks, and even via a Web-enabled cell phone, all with full access to all your data and resources.

3. Economics. Cloud computing is based on shared resources and huge economies of scale. Million-square-foot data centers leverage backup generation, multiple Internet connections, security and redundancy across thousands of service providers. These service providers build massive computing infrastructures with low cost per CPU cycle. Software developers share applications among millions of users, lowering per-user cost. Consider that a full-blown CRM application like Salesforce.com could easily cost many thousands of dollars a month to purchase, install and maintain. Yet one can sign up for Salesforce.com for $125 per month.

4. Reliability. Service providers are able to build a level of fault-tolerance and redundancy into their systems that most small businesses will never be able to match. Cloud computing is many times more reliable than the networks run by small companies who cannot afford the benefit of redundant power feeds, on-site generation, hot backup systems, specialized management software and expertise in data center operations.

5. Flexibility. For companies that are growing or in transition, it is easy to add computing resources in a cloud model. As a company adds employees, the cloud provider can easily scale up to match. Similarly, if the company needs to reduce expenses, it is easy to reduce the user or server count and the resulting monthly expenditure.

6. Cash utilization. Buying cloud services is typically done via monthly payments instead of a large up-front payment. This makes great sense for growing companies that want to conserve cash for other investments and growing operations.

What if a company needs customized or specialized applications that are not offered as a service?

Applications that are specific to a company’s business require a different model, but can still make great sense to move to the cloud. Instead of using a SaaS provider’s software, a company can move its own data and applications to dedicated servers in the cloud. Users can then access via remote desktop technology such as Citrix or terminal services. This enables a company to have all the advantages of cloud computing while still running its specialized applications.

When should a company consider making the move?

The best time to consider a move to cloud computing is when there is a need to upgrade major components of the infrastructure such as buying new servers or upgrading software licensing. There are two reasons why this is the best time to move. One is that many companies prefer to take on operating expenses, which impact the P&L rather than capital expenses that show up on the balance sheet. Capital expenses consume cash, which is especially painful for smaller firms with limited access to financing. Cloud computing requires little up-front investment as there are no software licenses or servers to purchase or lengthy and expensive system installation and implementation.

A second reason why an upgrade is the best time to move to the cloud is that a significant cost of upgrading hardware or software is the labor component. Instead of spending that labor on moving data and applications to new hardware that is housed locally, a company can spend that same labor on moving to a cloud computing infrastructure.

Are there situations where moving to cloud computing doesn’t make sense?

Small, stable companies with one server where most all the work is done in the office may find it cheaper to keep their processing in-house. They may use SaaS providers for common services like e-mail and remote backup. But with stability, simple requirements and little need for Web-based access, there’s not a huge incentive for these firms to move to the cloud.

Companies that have graphic-intensive applications like graphic design, video production, computer-aided design (CAD) and other similar applications generally need fast local processing to handle real-time graphic and video rendering. The bandwidth required to make these applications run smoothly via the cloud is not yet cost effective. It will be a number of years before the technology is available to make these sorts of applications viable via the cloud.

However, the current trend is that the majority of small to mid-sized businesses are finding that the advantages of cloud computing are impressive and compelling enough to warrant serious consideration.

Steven Vicinanza, Ph.D., is CEO of BlueWave Computing LLC. For more information, visit www.bluewave-computing.com.