Cloud Computing – Benefits vs Pitfalls

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Cloud computing has been around for 10 years at least, under the guise of ASP (Application Service Provision) and SaaS (Software As A Service).

In some areas, such as CRM (customer relationship management) it has taken off big time. Infrastructure and services in the cloud such as eMail are becoming increasingly popular. In other areas, such as financial software, take-up is less common. Why?

The key is the balance of benefits to the pitfalls and risks. That assessment will differ by application. Is it core and/or business-critical? It is also dependent on users’ attitude towards identifying and accepting those pitfalls. Or whether users are prepared to wait for in-house systems (be they packaged or bespoke) when cloud applications are immediately available. Perhaps sales directors are inherently more prepared (and driven) to use cloud applications than finance directors!

So what are the key benefits and pitfalls to consider?

Key Benefits

Cloud applications provide several key benefits, which include:

1. Functionality can be shared from any location with an internet connection. This allows remote access from multiple sites, by mobile workers, and collaboration with third parties (including customers and suppliers)
2. Functionality is available that would be completely unaffordable if it had to be run in-house.
3. Otherwise functionality can be available at a lower cost
4. There is no need for the cost (and headcount) of specialist internal resources to maintain the systems, other than basic end-user administration
5. Users only need a compatible web browser on their PC or mobile device
   
6. Services can be up and running in hours or days, not months, by short-cutting the procurement approval and acquisition process
7. The cloud is scalable. A sudden, temporary or ongoing increase in activity can usually be quickly accommodated.
8. Regular upgrades provide new functionality more quickly, without the hassle of installing them
9. Backup and disaster recovery is handled automatically
   
10. Cash flow advantage. Payment is usually made periodically, rather than all up front

Key Pitfalls

On-premise software is not without risks, and these need to be managed. Indeed good cloud systems can address some of those risks.

However there are new pitfalls and risks with cloud computing. These need to be mitigated to an acceptable level if cloud computing is to be a viable option for a specific application. Let’s look at the cloud situation, and compare it to on-premise, to see what to consider when assessing cloud applications and specific offerings:

1. Cloud applications as packaged software
2. Providing internet access to the data
3. Cloud computing as an outsourcing arrangement

Cloud applications as packaged software

The software running in cloud applications is packaged software i.e. standard functions used by a number of different user groups. However using a package in the cloud is different from running one in-house:

• Upgrades: Usually applications are on a “multi-tenant” shared basis, with no option to opt-out of a new release (With on-premise, users often wait to hear if there are any issues with a new release). How often are upgrades planned? Released at sensible times? Will you get a heads-up on changes, such as may affect user procedures? Is there an opportunity to assess and pre-test a new release with a copy of your own configuration and data (and feedback any problems before release)?
• Integration: Integration with other cloud or in-house applications may be more difficult – is this needed and available?
• Configuration: Packaged software usually has a number of configuration options. Will the rush to implement in the cloud bypass the usual help from a specialist, and not produce available benefits? Or raise the risk of a high-speed mess?
• Customisation: If you expect to customise the software now or later, then this is not usually possible with cloud applications, though worth asking
  

Providing internet access to the system

Many organizations allow internet access to their own on-premise systems. Allowing internet access to cloud systems is in principle not much different, but.

• Availability: Internet access is not universally available around the world, or even around the UK. The cloud is only practical if access speed is adequate for everyone that needs it.
• Loss of availability: Internet access can be cut (in some cases literally!). Contingency plans are essential, using 3G services and/or alternative premises
• Access: With on-premise systems there tends to be two-level control – access onto the network and access to specific applications. Internet banking software always has multi-level access control, using additional passwords and physical devices. Is a simple user id and password enough for your application?
• Leavers and transferors: For on-premise software, many users will not have remote access. With a cloud they all do. Are your procedures tight enough?

Cloud computing is an outsourcing arrangement

Outsourcing the IT systems has been common in the corporate world for some time. The use of cloud computing is very similar. Here are some of the issues:

• Trust: Is the cloud provider inherently trust-worthy? Do they promote security, performance and availability as part of their sales process?
• Data visibility: Data is held by the outsourced provider. Does it need to be encrypted, so no-one there can see it? (and potentially be more secure than holding it in-house).
• Access to data: Is it logged and auditable? Is this needed?
  
• Physical security: Are the data centres sufficiently secure?
• Location: Is the data only stored in Europe? If not, are the arrangements acceptable from a Data Protection and compliance perspective (such as the US Patriot Act)?
• Recovery: Are the backup and recovery arrangements adequate? Can they be trusted, at least as much as you could trust internal systems?
• Short of cash?: What if your business goes under, or struggles to pay the fees?
• Loss of service: Lower costs and deferred payment puts more pressure on the cloud supplier. What would happen if the provider went out of business? Or decided to drop the service, perhaps after acquisition? Do they offer a contingency plan?
• Data porting: Can you get your own copy of the data, in a form that could be imported into another application?
• Contingency plan: What other contingency plans can you make yourself?

IN CONCLUSION

It is clear that cloud computing can provide significant practical and cost benefits over on-premise. Cloud systems can reduce some of the risks of on-premise systems. But there are new pitfalls with the cloud which need to be mitigated to acceptable levels for a specific application.

Where that is possible, cloud computing can be a great way to operate. Otherwise, on-premise may be the only acceptable approach.

There are a number of other considerations and solutions, which there isn't chance to include in this article. Do contact me if you would like to discuss the issues, specific situations, or would like to review your approach to cloud computing.