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Big businesses and the cloud: How to approach three big hurdles

Thoran Rodrigues looks at three major concerns that enterprises have with moving to cloud services or infrastructure from a provider's standpoint.

The case for cloud computing is pretty compelling: by moving services and infrastructure to the cloud, it becomes possible to optimize not only costs, but also resources such as processing capacity, energy, space, and time of qualified support people. If the advantages over the traditional model are so obvious, however, why aren't all companies going to the cloud immediately, especially in these times of economic trouble?

If we look at start-ups and small business, we actually see this move happening. Small businesses are quickly adopting all kinds of cloud-based solutions, from infrastructure to software solutions, and any start-up looking for funding should avoid phrases such as "client-server model" or "purchasing servers" in its business plan. The rate of adoption drops sharply with larger companies, however. They are usually very resistant to taking the plunge into the cloud, citing several concerns as reasons to take a "wait-and-see" approach. After a couple of years offering cloud-based services to companies of all sizes, here are a few of the most common concerns that I've heard.

#1 Security

Large companies place an enormous emphasis on protecting and restricting the access to information. The several recent high profile cases of data theft have made security the number one concern when discussing cloud computing. It is important as well to understand that the concentration of data that comes with the cloud makes the main providers ever more valuable targets. If everyone stores their data at Amazon, for instance, then hacking into Amazon servers becomes a very profitable opportunity for data thieves.

At the same time, the concern of these providers is greater than that of any individual company. They depend on being trusted to survive, so they must be much more careful with their security than anyone else. Also, most access restriction technologies can be easily deployed on the cloud, and cloud-based software offers the opportunity for a much more detailed monitoring of user activities. Security, therefore, is probably the easiest concern to address.

#2 Accountability

It is an universal truth that something will, eventually, go wrong. Accountability, as it relates to the cloud, means figuring out who will take the blame when it does. When all systems are internal, managed by the company, the blame will obviously fall with the IT department (regardless of it being at fault). When things are in the cloud, however, it becomes harder to determine who is responsible for what, and who is at fault when a problem occurs.

Perhaps the hardest part of dealing with this concern is that it will rarely be voiced openly; instead, it will show up as a paragraph in a contract, to be enforced "only when something goes wrong". The best way to address this concern is to be straightforward: clearly state who will be responsible for what from the start, making sure that everyone involved is on the same page.

#3 Previous investments

This is also the "legacy systems" argument. Most large companies have spent millions of dollars developing and maintaining the systems they already have up-and-running, and it's very hard for them to justify abandoning this investment for a new thing. But then, this is mostly a financial problem, not a technical one. For traditional systems, the cost of initial development must be offset by future usage, while in the cloud there is little or no initial cost, so the expenses remain steady over time. It's the same thing as buying a server or hiring a virtual machine: it's harder to get the money to buy the server in the first place, but after it's been bought, the monthly cost is lower than what would be paid monthly for a cloud server if we disregard upgrades, technical staff, etc.

And now what?

How would you feel if you had just spent a million dollars developing something and someone shows up with a cloud-based service that does the same thing for just one thousand dollars a month? How hard would it be to explain this to company shareholders? What makes these concerns even harder to deal with is the fact that a lot of the times the discussion about moving to the cloud will involve whoever made the original investment.

The best way to deal with concerns related to previous investments or legacy systems is to talk about total cost of ownership. By moving to a cloud-based model, where most things are purchased as services based on usage metrics, it may be possible for even large companies to reduce their total cost with different solutions, thus justifying any changes from the existing systems to cloud-based ones.

In the end, dealing with any one of these concerns is a matter of communication. What changes from one to the other is only how to communicate. For security, it's important to show that the cloud can be just as secure, or even more so, than any on-premises solution. For accountability, speaking plainly and taking responsibility is fundamental. Finally, for financial concerns, showing a detailed cost-benefit analysis can make the difference between getting a large contract and ending up empty handed.

About

After working for a database company for 8 years, Thoran Rodrigues took the opportunity to open a cloud services company. For two years his company has been providing services for several of the largest e-commerce companies in Brazil, and over this t...

9 comments
RichardMtl
RichardMtl

Even for small companies, getting an entry level SBS 2011 server ($2000 or less) will save them money each month. Why should anyone commit to monthly fees per user per month? Sure it might cost more up front to setup, but in the long run, it will be much cheaper. I wrote a blog about why the cloud is a bad idea. http://compunetics.ca/Blog.php?category=2 or here (in nicer formatting) http://compunetics.wordpress.com/2011/07/11/cloud-computing-10-reasons-why-it-is-a-bad-idea/

thoran.rodrigues
thoran.rodrigues

RichardMtl, Thinking about the price over the long run is important, but the monthly fees mean a lower entry cost for small businesses. If we consider that a lot of them don't last that long, having the possibility to pay on a monthly basis and to not have a leftover server if the business goes under is very attractive. The cloud also allows for interesting economies of scale that can greatly reduce costs over time. Finally, most small businesses that don't do technology development today won't need to ever purchase a server, since most of the applications they need are already available in a software-as-a-service format on the cloud.

RichardMtl
RichardMtl

I agree that it lowers the entry cost for 1-4 users, but once you get to 5+ users, getting a dedicated small business server with SBS Standard (not the cheaper Essentials that you have to then rent Exchange and incur monthly fees) makes more sense. The cost of a nicely equipped Dell PowerEdge server with SBS 2011 can be had for $2500. Dell and the banks can finance that for business with cash flow problems. At prime (3% here) month payments would be less than 'cloud fees'. I don't buy into the 'economies of scale .. reduce costs'. I have never rented or leased anything and have always came out ahead in the longer run. I have a strong math background and whenever I run the numbers, I don't see the cloud saving money for any small business. I do see large ISP and Telco's making money on people who are bad with math. That is why I have always invested in Telco's :) p.s. SBS 2011 now has a $200 rebate so the cloud makes less sense now too

CaiusJC
CaiusJC

Dear Mr. Thoran Rodrigues. You wrote : >>> It is important as well to understand that the concentration of data that comes with the cloud makes the main providers ever more valuable targets. If everyone stores their data at Amazon, for instance, then hacking into Amazon servers becomes a very profitable opportunity for data thieves.

thoran.rodrigues
thoran.rodrigues like.author.displayName 1 Like

CaiusJC, Most service providers will either perform back-ups for you or offer some extended service plan that covers back-ups and insures against data loss. Security is more complicated, and the concentration of data makes cloud providers more atractive targets, making security failures exponentially more dangerous. If a company has an on-premises server, and someone gains access to it, only that company's information will be stolen; on the cloud, the information of several companies may be taken. It has been my experience that, when talking to people in larger companies, the first concern that comes to their mind is how to protect their data against theft. While data loss is important, people don't seem to be very worried about it. So, yes, data theft is only one of the potential security problems, but it is the major one.

tom.marsh
tom.marsh

Maybe you didn't realize, but that's per user. :)

RichardMtl
RichardMtl

That $1000 / month is today. Wait until next year when it increases by 10% or more. Add on the extra bandwidth required plus the larger monthly quotas. That is why instead of buying into the cloud, I am buying stock on ISPs :)

thoran.rodrigues
thoran.rodrigues

Indeed people often forget the cost is per user, or some other usage metric, and are surprised later. Still, it's often much smaller per month at first when compared to a traditional system.

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