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Can I Run My Business Using Just the Cloud?

By Scott Archibald

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Statistics show that it took nearly 15 years for businesses to shift from mainframes to client/server. cloud Computing is arguably the next paradigm shift we will see, but the jury is still out as we are only about halfway through the 15-year period.

While isolated cloud services have existed for five years or so, the full spectrum of cloud offerings has only emerged in the past couple of years. New services and paradigms inevitably raise the question: “Do I need to use this?” Sometimes the question is more attuned to timing than necessity: “When do I need to use this?”

Before we dive headlong into the “cloud services ready for primetime” debate, let’s talk fundamentals.

Prior to moving forward on any front, it’s crucial to examine and understand (and possibly develop) your company’s cloud strategy. If you don’t have one, develop a strategy asap to ensure the cloud services you are currently using, or are about to use, provide the most benefit to your organization. As always, before getting sucked into the technology vortex, make sure you understand the strategy and the business problem(s) you are trying to solve.

Now, back to the question at hand: Namely, can I run my business in the cloud? In short, the answer is: "Yes, but ... " because there are caveats.

Decision points

Let’s differentiate between using a service that would be “nice to have” and a business-critical service. There are many applications and services that we may use in a day. However, few of these services may be necessary for the actual running of your business. For example, you may use Facebook, Twitter, LinkedIn or some variation of these types of cloud applications, and you may even have a business purpose for using them. But if one of those applications is unavailable for the day, it likely won’t bring your business to a halt. Now, if you outsource your phone system through a VoIP provider (through the cloud) and your phones stop working for a day, that could be problematic. If it's email, then there will be problems.

Smaller companies will leverage cloud services more broadly and more quickly than their larger counterparts. If I am the IT person in a SMB, then I will probably be more successful if I can get my email, phones, web hosting, file storage, electronic fax, etc., from cloud Vendors. This assumption is based on a premise that “IT guy” can be more successful since they don’t have to be a jack of all trades and won’t pose a business continuity issue should he/she leave.

I can use a combination of client and cloud based applications for each PC, laptop, PDA or tablet in the office. However, while this strategy is reasonable and can be successfully achieved in a small-business setting, the IT person has essentially morphed from being a pure IT person into a combination of IT/vendor procurement specialist. Signing up for all the cloud services and understanding the rates, consumption and service levels is no quick and easy chore. On top of understanding the business aspects of engaging with a vendor, it’s also critical to manage the vendor in an ongoing capacity while ensuring that the services are working as planned.

Beyond SMB

Large enterprises should target areas of highest payback that fit into the overall cloud computing strategy mentioned above and move those services to the cloud first. Large enterprises will always have more skill sets than smaller businesses, which can help ensure the vendor negotiations, management and evolution of services happen in a manner most productive to the organization. However, the larger the enterprise the more risk associated with making a paradigm shift (and sometimes more reward when it offers a leg up on competitors). >

So, no matter the answer to the question at hand (and I think the answer is yes), I believe that 99 percent of large enterprises will be slow to adopt cloud services across the board. Some large enterprises are already asking why move to cloud services when they believe that they already have the economies of scale within their own data centers. The very large enterprises don’t see the financial benefit of moving from their large server farms to even larger external server farms.

The top 100 enterprises may be able to add some cloud based tools and processes to become more efficient with their internal data centers, but the skeptic in me asks: “Why didn’t you do that three to five years ago?” My suspicion is that if organizations couldn’t (or didn’t want to) make this shift and run their data centers more efficiently over the past five years or so then what makes them think they can do it now?

Some will probably make the transition and use this paradigm shift to run their data centers much more efficiently, but it remains to be seen if they can also modify their business processes to really deliver faster turn-around time, elasticity of bandwidth, etc. However, these internal cloud designs still don’t leverage the shift from capital to more expense-based spending, nor will they see much improvement in labor optimization or global labor arbitrage.

So, back to the question at hand: Can I run my business using cloud services? For the sake of argument, I will define several fundamental service categories that most businesses require as follows:

With these services in mind the simple answer is: “Yes, I can run my business using cloud services.” There are numerous choices for email, including Google; Skype for telephone services; Box.Net and other providers for file storage and a multitude of Web hosting vendors.

But, just like you would have for any other IT service, think about your backup, Plan B and DR and business continuity plans. For instance, the usually reliable VoIP service, Skype, recently experienced an all-day outage for many of their customers. This caught many small and medium businesses off-guard without a formal backup plan other than cell phones (which didn’t work very well for clients trying to call the main company number).

So, in a nutshell, we’ve seen a tremendous amount of progress and innovation around outsourced cloud services -- and a few hiccups lately a la Amazon Web Services, Microsoft's BPOS and, most recently, Dropbox's privacy issues. But many organizations can realistically run the entire operational side of their business using nothing but cloud services. But, with everything, there is a price. Weigh the pros and cons of any cloud initiative, as you would of any IT project, to ensure it provides the right value at the right cost to your organization.

There will likely be pressure from the c-suite to implement a cloud initiative based on all the exposure cloud is receiving, but resist the temptation to implement a program simply because the CEO wants it. Especially, if it doesn’t fit within the overall business strategy.

 

Scott Archibald is a managing director at Bender Consulting, a management consulting firm based in San Francisco.