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Assessing the Impact of Cloud Computing on Your Business

A Cloud Computing White Paper


Cloud computing is a popular buzzword among business owners and technology professionals, but the actual definition is far more difficult to pin down. According to a report published by McKinsey and Company, there are more than 22 published definitions of cloud computing, and many industry expectations about the cloud may be inflated. So how do you sort through all of the clutter – and figure out what cloud computing means for your business?

The answer is due diligence.

Eventually, most businesses will migrate some of their applications to the cloud. The questions really become when and for which reasons. The needs of every business and their IT departments are different, and costs and benefits of cloud computing can only be measured on an application-by-application, and provider-by-provider basis. To figure out if cloud computing can benefit your business, it is important to first understand the basic principles of “the cloud.”

Cloud computing is defined by five unique characteristics:

  • Broad network access – access from anywhere and any device
  • Rapid elasticity – ability to rapidly scale computing power and storage
  • Measured service – metered billing such as per seat or per GB
  • On-demand self-service, and – ability to add or remove capacity and services as needed
  • Resource pooling – ability to achieve the benefits of a large scale computing infrastructure by sharing resources across a pool of customers

Much of the cloud industry has yet to fully integrate all of these characteristics resulting in partial cloud computing models such as “private clouds” in which the resource-pooling is applied across a single enterprise to reduce complexity and risk. In fact, very few clouds in operation contain all of these characteristics.

Nonetheless, a number of viable cloud service models have been deployed. Companies like Microsoft and Salesforce.com deliver on-demand software as a service (SaaS) applications in the cloud; Amazon, Google and Microsoft provide platform as a service (PaaS) applications that enable developers to build, host and scale applications in proprietary cloud-based datacenters; and IBM, Joynet and Amazon provide scalable and relatively inexpensive cloud computing platforms referred to as physical infrastructure as service (IaaS). Over time, it is expected that IaaS and PaaS will be combined into one cohesive cloud offering.

Cloud computing is currently deployed in four different models:

  • Public clouds
  • Private clouds
  • Hybrid clouds
  • Community clouds

Public deployment models are characterized by multiple users working from the same shared “cloud space”; private deployment models use a personal cloud that is dedicated to one customer; and hybrid models use applications from both public and private cloud providers. Community clouds are semi-public clouds where select stakeholders have access to the cloud.

The most common cloud types today are private, or hybrid clouds – primarily due to concerns about privacy and security. However it is unlikely that a private cloud is cost effective for many businesses. In fact, many IT experts argue that cloud computing in a private deployment model is more expensive that traditional IT. The problem is that comparing different types of cloud computing is like comparing “apples to lizards,” according to research conducted by Mr. Kirkland, CEO of artweb.com. Each application, platform, provider, and deployment model (and their pricing structures) are so different that it becomes impossible to judge whether or not cloud computing is universally cost effective. Instead, we must determine the needs of each individual business, and then conduct a cost analysis for each application that will be considered for a transition to the cloud. The costs and benefits of each application will vary based on necessary software updates, security measures, available providers, etc.

Cloud computing costs has declined overall in the past few years due to increased competition in the provider market but agility, not cost, is the driving factor in the expansion of cloud computing today. Understandably, agility and rapid deployment are more important to developers and early adopters who work in dynamic computing environments, for example, than for mature application environments such as those found in professional service businesses, which are more dependent upon certain desktop resident applications. Ultimately, professional service businesses may migrate to the cloud when their application providers make the model available.

As the cloud computing market expands and develops, cloud computing is expected to impact business in five distinct ways: economically, operationally, technologically, culturally, and in terms of security management.

Economically, businesses will begin to realize savings and economies of scale as they begin to pay only for the services they use. With effective IaaS and SaaS platforms, the need to purchase expensive hardware and software upgrades dissipates resulting in significant start-up and maintenance savings for businesses. Likewise, software and hardware that have traditionally been capital expenditures will become operational expenses as fee for service applications migrate to the P&L.

The operational impact of cloud computing will be a lessening of control for IT managers, as the majority of IT maintenance and support will be outsourced to cloud providers. Cloud providers will provide standard options and packages for maintenance and support, but the offerings will be much less collaborative than traditional service provider applications. On the plus side, increased agility, scalability and changes in billing models will benefit organizations adopting cloud-based applications.

Regulatory and security enforcement measures are also likely to become more stringent with wider adoption of the cloud. In a cloud-based world, cloud providers handle the majority of regulatory issues, and IT managers are relieved of the direct responsibility for some layers of security – but not for the required due diligence in vendor selection or their own compliance requirements.

As a general rule, when you transfer applications to the cloud, the security of the application is carefully scrutinized. And since cost of security management is shared among a number of clients, cloud providers, in theory, are able to devote significantly more time, energy and expertise to security management than a single company normally would. This is highly dependent, however, on the vendor. Some cloud providers are simply better equipped and more capable than others when it comes to security. Likewise, there is also a risk that large cloud providers will be targeted by hackers than a smaller, individual company. Witness the fact that Sony’s Play Station cloud was taken down by hackers for over a month1. Again, as an IT manager, it’s important to do your homework and evaluate providers carefully when transitioning to the cloud.

The cultural impact of the transition to the cloud is likely to be significant. It will involve redefining the roles of IT professionals and business owners, and restructuring IT support for end users. Business owners will need to decide who makes decisions regarding the selection of cloud vendors, applications, etc. Likewise, end users may need to redirect their IT help desk concerns from internal IT resources to the cloud provider’s IT service. In order to maintain relevance in the industry, IT professionals should begin learning the business side of the job, as many IT professionals will move into the roles of business analysts and application specialists once the cloud takes hold.

Here at Systems Engineering we have already begun the transition to the cloud by making a strategic investment in data center resources that define our cloud space. SE Cloud Backup, for example, is a cloud-based remote backup and recovery solution with agent-less architecture, data de-duplication and intelligent, easy-to-use management tools. SE Cloud Backup gives businesses the capacity to scale for virtually unlimited data growth and disaster recovery protection with automatic off-site storage. Likewise, our SE EventWatch® managed security offering provides both perimeter defense and event correlation in a controlled environment for clients subscribing to the service. We also offer cloud based email encryption, hosted Exchange and security features such as spam and content filtering. Presently, Systems Engineering is developing a hosted telephony service as well as additional IaaS products, SE Cloud.

Importantly, Systems Engineering has obtained its SOC 2 to provide assurance to compliance-driven organizations that are subject to higher standards of security and regulation. Financial institutions and healthcare providers that outsource to Systems Engineering can be assured that our policies and procedures are followed consistently – we do what we say we are going to do. IT decision-makers evaluating cloud providers are well advised to confirm that providers are following consistent operational protocols.

While cloud computing is not yet fully developed, and still has room for future improvement, it is very likely that all businesses will work at least partially from the cloud within the next couple of years – most businesses already do. The most important thing to remember when deciding when moving your business to the cloud is to do your due diligence! There are so many different cloud services available, and each vendor has a different billing structure, deployment model, contract length, etc. Take your time, get the information you need, and transition one application at a time – the cloud transition isn’t going to happen overnight.