August 2010: A Note from Jeff Mack
The Bottom Line: Is There a Cloud in Your Future?

Gartner, Inc., the highly respected researcher, predicts that the worldwide cloud services market will surpass $68 billion in 2010. Gartner and other technology pundits have been talking about and forecasting explosive growth in this market for several years now. But when you put some specificity to it, such as $68 billion and 16.6% year over year growth, it tends to get people’s attention. In fact, through 2014 they are predicting cloud services revenue to reach nearly $149 billion. Most of the growth and deployment to date has occurred in larger enterprises. Can the small and medium size business be far behind? And if so, what’s it going to take to attract us all to it?

As we all know, a cloud by its very nature can be nebulous and ever-changing. And the cloud we are talking about is no different. So let’s start by examining the landscape and clarifying some terms. First of all, we are referring to a public cloud as opposed to a private cloud. A public cloud would generally be defined as services and functionality provided by a third party that are located off premise and outside your corporate firewalls. The services are predominantly provided on demand and on a pay-as-you-go basis.

There are many layers to cloud services. Some of the more common layers include the following.

• SaaS (Software as a Service). This is the most commonly mentioned layer and it deals with applications. Horizontal applications with common processes amongst distributed virtual workforce are the current sweet spot of cloud services. Sage CRM is an example of this service.
• PaaS (Platform as a Service). This is the application development layer where developers can use the services to develop and test new applications. The Microsoft Windows Azure Platform is an example of this service.
• IaaS (Infrastructure as a Service). This layer provides computing capacity. Amazon Elastic Compute Cloud (EC2) is an example of this service.
• SIaaS (Software Infrastructure as a Service). This layer provides common infrastructure application services such as email, fax, SharePoint, and IP Telephony. Some examples include the following.
  • BPOS – Microsoft’s Business Productivity Online Suite
  • Microsoft Online Services (Exchange, SharePoint, Office Communications, Office Live)
  • Windows Intune for managing and securing PC’s
• Web 2.0 services. This is more difficult to define precisely, but it is essentially the ability for you to interact via a browser with another application or between applications.

There are many attractive elements to cloud services, or at least to the promise of cloud services. Chief among them are cost reduction, scalability and flexibility. While these terms are easy to toss around, and create an allure, they are not so easy to deliver. From a provider’s perspective , it is in fact very complex to deliver and manage cloud services. However, with the financial challenges businesses have faced in the last two years, any time there is an opportunity to deploy necessary IT functionality at a reduced cost, it is going to get serious consideration.

Cloud services are not a panacea, as there continue to be concerns. Security remains a primary one, as does the availability of the services and the response time associated with the services. The viability of the providers and the maturity of their offerings are also of some concern. In addition, a persistent high cost per user and lack of customization capability remain a concern. The good news is that progress is being made on all these fronts. For example, there is now a SAS 70 certification for transaction processing controls. This is an example of a point solution for a given situation, but indicative of the lack of a holistic solution for the entire cloud environment. However, five years from now, most of these concerns will likely be all but forgotten.

Financial services and manufacturing industries are the largest early adopters. Communications, high tech industries, and the public sector are also eagerly seeking to take advantage of cloud services. As stated earlier, the majority of the adoption so far has been at the large enterprise level. I suspect the lag in the small and medium business (SMB) sector is primarily because many of the applications and services needed by this group simply have not been readily available yet, and/or they have been too complex to take advantage of without lots of extra IT resources. For example, many of the fundamental accounting and business management solutions that are the lifeblood of a SMB organization have not been re-architected yet for the cloud. But they are coming, along with many of the other ancillary products and services that will round out the complete offering. As the gaps become filled in, the costs will come down and become more in line with the promise.

We are committed to staying on top of the cloud and its development. As it marches forward and evolves, we will be bringing new offerings to your doorstep when they become ready for primetime and can make an impact on your bottom line. And that’s the bottom line!

 

Many of the fundamental accounting and business management solutions that are the lifeblood of a SMB organization have not been re-architected yet for the cloud. But they are coming, along with many of the other ancillary products and services that will round out the complete offering.