The Pros and Cons of Cloud Computing Transaction Systems

Cloud Computing continues to mystify and challenge even the greatest of technically savvy people. Often times when I discuss Cloud Computing with my clients they say "What is a cloud and why would I want to connect to one?"

If you read Wikipedia, I thoroughly enjoyed its attempt to explain "Cloud Computing": "The Cloud Computing Manifesto is a manifesto containing a "public declaration of principles and intentions" for cloud computing providers and vendors."

Although vendors love the term "Cloud Computing" the term itself actually gives us a way to easily explain to smaller and medium size companies that you no longer have to do everything yourself. Some larger companies still believe they can do it better internally than outsourcing to "The Cloud." However, bigger corporations will be forced to look at this as an option to reduce costs.

There are three main events that have occurred over the last two years that have created a type of "Perfect Storm" to causing the explosion of "Cloud Computing":

1) The Economy - which of course has affected almost all Information Technology departments. Some of the larger Fortune 500 companies have already downsized and lost some of their employees with higher salaries and tenure, as a result they also lost Subject Matter Expertise (SMEs) on their core revenue generating applications and systems. This has forced IT Managers responsible for availability of those systems, to survive by leveraging current employees, making them work longer and harder hours to keep the proverbial "lights on". To add to this problem of retaining SMEs, many businesses are very cautious about re-hiring and therefore have opted to take advantage of the mass of people currently looking for work. Many of these businesses are reaping the benefits of lower costs by accepting lower IT contractor rates. Contractor rates have dropped anywhere from 20% to 30% over the last three years, as the unemployed accept lower salaries and rates. This situation has worsened because the unemployed are promised work on three to six months contracts with the promise to be hired. Many companies are using this to their advantage by promising to hire with no intention of doing so. This is called "Try and Buy" in many staffing organizations. This creates greater turnover in many departments and thus less "Subject Matter Expertise."

2) Server Virtualization - The second and probably more important is Server Virtualization. Defined as multiple server environments or "virtual servers" housed on a single piece of physical hardware. Companies like VMwarehave revolutionized the industry and spent the last four to five years explaining ways they can use this technology to reduce start up costs in new application development by virtualizing many of the common server activities, such as email, file and print. Many companies have already completed this cost saving initiative by migrating many of their common platforms to virtualized environments. There are many advantages to server virtualization, but most important, as good as private companies have become at virtualizing, hosting providers have become even better. Cloud computing services now include virtualization, dedicated VMware expertise and the option for "Fully Managed, "Partially Managed" or "Dedicated Virtual" environments for servers and network devices. This allows businesses the flexibility of speed without having to grow the size of their own data center foot prints and IT staff.

3) Lower Total Cost of Ownership (TCO) - In this new economy, there is the need for many businesses with fewer resources to understand how to transact at a lower Total Cost of Ownership (TCO), with ongoing savings. These organizations need to be able to respond fast enough to their customers by still being flexible enough to provide vital and necessary "On Demand" solutions. This has led to greater effort being spent on application development and less on commodity based Infrastructure needs. Areas of Information Technology such as desktop support, help desk, installation of software on computers and network can be automated and outsourced and these are usually the first areas a CIO looks to cut costs.

Cloud computing therefore represents a paradigm shift for business and IT management with two primary attractions:

a) Moving IT off the capital expenditures budget and reclassifying it as a reoccurring monthly operating expense, like a utility. Many offerings come with the ability to price by user and this is often cost justified by reduced IT Infrastructure salaries.

b) Providing small and mid-sized companies with access to the sophisticated, state-of-the-art technology. Small and medium size companies, who are just hearing about virtualization and arriving somewhat late to the game, can now benefit from the lower costs and best practices that have been developed by many providers.

This has opened the door for hosting providers who in the past had to choose whether they offered managed services or just rack space and power. Now the hosting provider can "spin up" standard configurations much faster and more cost effectively. The good ones have already created well scripted methodology and procedures to creating virtualized modular servers, which now can be hosted in "The Cloud". This has created more vendors to offer this as a service.

"The Cloud" therefore simplifies the access to the hosting centers. This represents the connectivity that connects back to employees and potential customers. This can be the Internet, private line (something called MPLS) or site to site Virtual Private Networks (also known as VPN). This was born from the traditional private networks used internally by private organizations and now extends this connectivity to a company's preferred hosted environment. This is now represented as a cloud or the "virtual cloud" because it no longer matters where your user is connected. This connection however needs to be highly available depending on your business needs.

Moving an application to the cloud can be a complex decision which may have significant positive (or negative) impact on your organization. Many providers will list the pros and cons and work with your IT resources to help make sure that your internal infrastructure can either consider or even support the change. While this is a technology implementation, it is more of a business decision about what best fits your organization today and will in the future.

Benefits (Pro's)

There can be many benefits to using "The Cloud" based upon your organizational needs:

If you are Sharing Large Amounts of Data - between several offices, having the data on a virtual server might be beneficial. Web-based applications that can be used seamlessly by people traveling without having to connect back to the office over a virtual private network (VPN) can save a lot of time and frustration. Reduced costs - often "The Cloud" can save you a lot of money, but in order to compare costs you have to be able to understand your own cost per user. The hosting provider will be able to provide you with a cost per user and you will need to understand your staffing costs in the same "units of measure" in order to compare "apples to apples" costs. This means you will need to understand what your costs per user are to say provide an email mailbox. Once this analysis is understood, comparisons can be easily made. Lowered risk to service interruptions with 24/7 monitored systems - since many operations with small staffs cannot watch all applications and devices on a 7 x 24 x 365 basis, cloud hosting centers can provide better monitoring and escalate back to the company for critical events. Faster access to technology solutionswith reduced business risk - the hosting company will be dealing with many different business and can therefore offer great advise on technology solutions that can enhance your business. Access to skilled technical experts across multiple technologies. Single point of accountabilityfor technology infrastructure management & support.

Disadvantages (Con's)

Managing the "Beast" of an Application - in some organizations managing an application with a tremendous amount of data or high input in to the cloud requiring a large amount of output back out to the client or desktop needs to be examined very closely. Remember you still have to pay the price for bandwidth going in and out of the hosting provider to make it cost effective to use. Agility- Some businesses need to take a careful look at the speed of which the chosen hosting provider can turn around an application. For retail companies seasonal peaks always need to be looked at very closely, so that technical staff can be available quickly. An example is "Black Friday" the day after Thanksgiving. The Bigger You are The Harder You Fall - hosting providers offer that unique opportunity to "blame the other guy." As a result, smaller IT staffs and their IT Managers need to work closely with the hosting provider on Service Level Agreements (SLAs). If an IT manager is leaning to heavily on a hosting provider to provide all of their services and in-house talent than they have to negotiate very tight SLAs and be ready to take responsible when the hosting provider cannot turn around service as quickly as possible. In House Technical Talent - Obvious, but needs to said. In-house talent is the corner stone to any great IT organization. Cloud solutions are still very complicated and you need to have at least one person in your organization who knows more about your application than the hosting provider does. Often times this is forgotten, and when you get comfortable with the hosting provider than it is easy to rely on them too much for your core business.

Cloud Computing will continue to mystify even the greatest of senior level executives but what is important to determine before talking with the service providers is how I can reduce costs while adding availability. To do this go in with a plan of what you do well and probe your providers on hosting best practices. Make sure the hosting providers also own their processes and they are not offering it as third party service.

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