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Cloud vs. Office?

The answer is not as clear-cut as you might think.

If the cloud versus office storage were a prizefight, oddsmakers would install the cloud as a heavy favorite. And why not? In the minds of many, having your software, equipment, network, databases, data, help desk, and other operations stored and managed by a third party at a remote location is the wave of the future, while having it managed on internal office servers is horse-and-buggy thinking.

Or is it? Not always, according to a panel of experts. While the cloud is enticing because of its low-cost features, it’s not for every company or every business system. 

Cloud computing refers to outsourcing information technology processes via the Internet to third parties in remote locations (data centers) that were previously managed internally. A prominent example is Salesforce.com, which operates a Web-based customer relationship management service through which businesses run their sales operations. This type of cloud computing is commonly called “software as a service,” but other emerging cloud models include “infrastructure-as-a service” and “platform-as-a-service.”

Businesses of all sizes are intrigued by cloud computing because it requires comparatively little investment in software, staff, and equipment. Those who migrate to the cloud typically pay monthly or annual service fees to a vendor who assumes responsibility for maintaining the service and usually provides more robust service levels than can be found internally.

Intangible computing

Mike Salviski, director of EarthLink’s IT Technical Consultants, defines cloud as anything you can’t see or touch from a computing resource. “The cloud is great because it’s easy to get to – you can set up servers rapidly – but when you’re looking at secure documents and secure data, you really have to vet the solution and make sure it’s designed for what you are really trying to achieve,” he stated.

A lot of companies are migrating to the cloud in piecemeal fashion, based on how closely they want to hold various applications. The first applications most businesses place on the cloud are email, followed by document storage and customer relationship management. But when it comes to billing anything that holds credit card information or Social Security numbers, or medical information, the migration has mostly stopped.

Salviski is amazed when attorneys and wealth managers send him documents via Gmail or another public email service. “For secure documents, financial data, or any type of medical data, you’ve got to make sure the solution is certified to hold that type of information,” he noted. “We’ll get someone trying to build a solution, and they will say, ‘Hey, we’ve got all this medical data and we want the cheapest storage possible. We want to put it in the cloud and save money, and store this data and make sure it’s backed up.’ In reality, they have to be asking the right questions if they want to store data securely, make sure it’s encrypted, make sure we have firewalls in front of that data.

“Even if it’s a small business, I know there are additional costs, but you’ve really got to make sure you’ve got secure email, and make sure you have email archiving. So even if you’re a small financial advisor, you’ve got to have that audit that says four years ago, I told you to sell the stock and you wouldn’t do it. So you really have to keep that audit history of emails for accountability reasons.”

In Salviski’s view, it’s a design consideration. The cloud isn’t always cost effective, especially for a company that probably owns its own large data center infrastructure, or has so much data that it makes sense to buy some of the infrastructure. While companies of all sizes are migrating to the cloud, its pluses can also be demerits. 

“One of the really positive things about the cloud is that you can set up servers very quickly and go there quickly, and one of the worst things about the cloud is that you can set up servers really quickly and go there quickly,” Salviski said. “You just have to make sure the solution is designed for what you are trying to do.”

Thanks for your support

Many companies are moving to the cloud because it is fully supported, and they can easily add new employees and have a remote workforce. When factoring costs of moving to the cloud, desktop or laptop, the biggest cost driver will be information technology support. The computing device has to be backed up, and someone will have to come to the rescue if critical software applications fail. 

While Salviski puts the cost of cloud migration in the $85 to $125 per employee, per month range, with an average cost of $100 per employee, per month, that does not include the cost of support. “With the local IT guy – it could be an on-staff person, or a temporary or hourly IT person – it could be in the $2,000 range,” he said, “but if it’s a full-time staff employee, it could be a $5,000-per-month employee, or even higher.”

Todd Streicher, president and CEO of 5Nines, agrees that support is the biggest cost – support of the computing device and the user, email, data storage, security, line-of-business applications, financial and accounting packages, and productivity applications. 

Streicher pegs that at between $40 to $75 per computer, per month, depending on the level of complexity involved. Supporting a personal computer or laptop, which do a significant amount of processing, costs more than supporting a thin client device, for example.

“The big move we’re seeing is when companies allow their people to use their own devices for business purposes, and give them a secure window into the cloud,” Streicher said.

Typically, it costs even more to use internal servers, but some businesses have no choice. Design firms, graphic artists, and architectural firms with CAD systems have applications that don’t work well in the cloud – at least not yet, Streicher said.

Nevertheless, businesses are gradually embracing the cloud model because the centralized management, not unlike the original mainframes, is easier and more efficient. While the advent of the PC drove the explosion in application development, which caused its own set of management problems, Streicher said the cloud represents a back-to-the-future element of centralized management.

“The applications have to evolve to be available and function in the cloud, and not all of them are there,” he stated.

Taking it case-by-case

Clint Harder, vice president of product strategy for TDS Hosted and Managed Services, said the decision to move systems to the cloud should be made on a case-by-case basis. One hindrance to full-scale cloud adoption is having to move everything to the cloud at once.

“There are pros and cons to it, and a lot depends on how the company is organized around IT,” Harder stated. “If you already have some investment in an IT staff, department, or operation, the ROI going to a hosted offering, that first one might not be as compelling as for someone who had to make a hire to support an application, and that hire, or that skill set, may not be necessary if they can go to a cloud model.”

“One of the big things about it, especially with smaller companies, is it becomes a capital versus operating cost question,” Harder added. “The one thing they can’t do, that the cloud can do, is delay or replace large capital expenditures and monthly operating expenditures. That’s a pretty compelling thing for a lot of business owners.”

According to Harder, the type of businesses where the cloud makes the most economic sense are those where IT is not a direct revenue or productivity hit to the company. “Everybody could say that, but the more IT is down and the more a company is down, the more important some of the cloud aspects become and the more persuasive the case for the cloud becomes because, on average, it’s more available than anyone can architect on their own.”

Vetting the vendor

Different cloud providers have different positions in the market. One could argue the most courageous ones operate in heavy compliance environments, but the better ones have some things in common. They allow people to migrate to the cloud on their own strategic time frame, in a gradual and measured way. They also walk the customer through the cloud, allowing them to see the data center they’ll be sharing. They also have taken steps to build security into their platforms. 

A key part of the vetting process is protecting your company in the areas of privacy, security, intellectual property, and disaster recovery. Attorney Andrew Schlidt, a shareholder in the law firm Whyte Hirschboeck Dudek and the leader of its technology law team, said when companies, particularly small companies, hear of the benefits of cloud computing, they have a tendency to not think things through.

Schlidt advises firms to conduct an internal risk assessment and other due diligence prior to transferring operations to the cloud to help plan for migration and identify areas of legal exposure. In his view, they must negotiate appropriate contractual protections in the service agreement and review their insurance programs to evaluate coverage.

Ideally, cloud computing is supposed to deliver increased server capacity and scalability, control the cost of hardware and software upgrades, and provide 24/7 technical support, but it’s best to get that in writing. The required due diligence sounds overwhelming, but really isn’t. 

“It boils down to one simple principle, and that is to follow the data,” Schlidt advised. “You should be able to answer the questions: where is my data? Who has access to it? How can I get it back if I need access to it? And is it in a secure location?”

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