Your IT Strategy & Cloud Computing: Where Does It Fit?

Fact or Fad?

It’s 2013, and if you haven’t at least started to contemplate the Cloud as part of your overall IT strategy, you could be putting your business at a significant cost disadvantage versus the competition. This is a fact.

Why?

First of all, the Cloud should not be considered the latest technology fad. It’s not hype, it’s not marketing and it’s not only for consumers. It is a business-driven phenomenon born out of the executive mandate to dramatically reduce the cost of IT while maintaining or improving security, availability, and stability. It is about consuming technology in a different way; as an operating expense rather than a capital expenditure. There is a reason the US Federal Government mandated that all areas of government look at Cloud computing as a first source when looking to acquire new technology.

In today’s economic climate, the reality is that capital should be preserved for uses that directly generate or grow revenue. Most technology, while necessary, simply doesn’t meet that test. So IT expenditures, like all operating expenses, must be kept in line and if possible, reduced.

Enter the Cloud

Think of technology as a utility, like electricity. Your business can’t operate without it, but you don’t buy and maintain generators to provide the electricity you need. You buy electricity from a supplier instead, as you consume it, at a far lower cost than you would pay if you produced it yourself. This is much the way Cloud computing works.

The core benefits of Cloud computing are:

  1. Cloud solutions require little to no capital outlay. They are consumed on a subscription basis with all aspects of the offering provided by the supplier, thereby requiring no major upfront investments in software, other licenses, or hardware. Services are the only investment required.
  2. Cloud solutions cost less, and are forecast to continue to reduce in cost as more competition comes on line.  Because Cloud offerings are provided by larger entities (Microsoft, Google, and Amazon) that effectively aggregate volumes and thereby achieve economies of scale unavailable to all but the largest enterprises, a business can typically lower its overall technology costs. You also do not need internal technology resources to maintain Cloud offerings; that is taken care of by the supplier, as part of the subscription.
  3. Cloud solutions are more flexible. An organization can use as little or as much Cloud technology as is needed, scaling capacity up and down without incremental infrastructure costs. You pay only for what you consume, and always have access to as much as you need.
  4. Cloud solutions decrease risk. Because Cloud offerings are “evergreen” services, there is no risk of the technology becoming obsolete. You are always using the most recent version of any particular technology, and do not periodically need to rip out the old and replace it with the new.
  5. Cloud solutions are secure. Arguably, your data is safer in the Cloud than on servers in your business, given modern safeguards. Every aspect of our personal finances are stored and accessed in the Cloud these days, for example, and we think nothing of that.

To be sure, you can’t move all your technology to the Cloud overnight, nor should you even try. Some IT elements that you need to operate your business simply aren’t available as Cloud offerings yet, or at least aren’t ready for prime time in my opinion. Other technology may be specific to your business and a source of competitive advantage, so it shouldn’t be moved.

The fact is most businesses will be operating in a “hybrid” environment (some Cloud and some legacy applications) for some time. But the important thing is to identify where you can achieve long-term reductions in your technological cost structure today, and start realizing them by moving those more “generic” IT elements to the Cloud. In one case study from 2012, a medium sized financial institution moved 2,000 of their investment advisors’ office productivity and email platforms to the cloud and in so doing, cut their annual IT cost per FTE by 75%; this was a significant cost saving in the mind of the CFO.

And your competitors are moving, if the growing demand for Cloud solutions is any indication. Forrester Research currently pegs Cloud computing expenditures at more than $40b globally, and growing at over 20% per annum.1 Clearly, this is no passing fad.

We believe that all businesses must start the process of considering the pros and cons of moving to the Cloud and prepare to capitalize on this opportunity both from a cost reduction point of view, as well as a scalability perspective. There are significant issues to consider as any business contemplates this move, so having time on your side and not being in a reactive mode will assist in driving the right strategy going forward.  The best place to start is always by re-visiting your overall IT Strategy and how it supports your business needs over the next 3 – 5 years.


[1] Based on an analysis of Gartner Group, Forrester, IDC, Wall Street Journal, and MarketsandMarkets.com projections and forecasts.


– Software Delivered as Promised. No Surprises.

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George Brown

Insight written by George Brown

Senior Vice President at Rand Group

A thought leader and pioneer in the areas of cloud computing, sales and marketing, George is a highly regarded subject matter expert and leader with over 30 years’ experience in strategically propelling businesses forward.

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  • Rajesh Chinnakutty

    if any company providing cloud computing and its services, does they could also start cloud computing with ERP system????