What business leaders need to know about cloud technology

You’ve probably heard a lot about consumer cloud services these days, as Apple, Amazon, Google, and others battle for preeminence in online services for your smartphone or personal computer. But what about businesses? Should executives and IT directors be “transitioning to the cloud”? If so, what does that really mean?

For most businesses, especially small and mid-sized organizations, here’s the bottom line. Cloud-based services can be as revolutionary for you in the 2010s as email was in the 1990s. Previously, up to 89% of corporate IT dollars were spent just to maintain existing infrastructure and applications, according to a Microsoft study. Only 11% of corporate IT dollars were spent on new application development — the area where IT personnel can best help a business move forward.

Now cloud services allow companies to slash the “maintenance” dollars and spend their IT budgets to boost business productivity. The economics of the IT industry are fundamentally changing. Businesses are throwing off the old model of writing big checks for software applications — and then writing the same check a year or two later for required upgrades. The new model is pay-as-you go. That means you can redirect current cash flow from supporting your IT systems to purposes that can grow your top line, such as developing new products or services.

Cloud services are fundamentally about how IT departments deliver services. However, cloud migration projects often raise questions about “what IT services” and “why.” We’ve seen IT departments become more focused on the ultimate services they provide to their organizations, since costs and business value become more transparent in a cloud model. Sometimes the entire IT structure is reimagined around efficient service delivery and a culture of continuous improvement.

Here’s what you need to know as you explore business-class cloud services. There are three main categories of business services: applications-as-a-service (AaaS), platform-as-a-service (Paas), and infrastructure-as-a-service (Iaas).

Applications-as-a-service: Vendors have long offered many line-of-business applications via Web services, usually on a subscription model. But until recently, these applications have usually been less resource-intensive than the full-bodied day-to-day applications at the center of most business activities.

For example, a small business might already be running QuickBooks Online — without desktop software installed. But now, as cloud services have matured, that same company can run the entire Microsoft Office 365 suite with or without installing software locally. Besides lower licensing costs, this shift removes a significant burden from IT staffs, who no longer have to manually manage upgrades to individual workstations. Over time, expect essentially every feature available in desktop programs to be available through cloud services, and to run seamlessly.

Platform-as-a-service: Platform services generally concern IT managers and strategists more than end users. These cloud offerings allow companies to design and deploy their own software on a computing platform hosted offsite. Your IT team can continue to develop custom solutions and manage design, development, and deployment. But you no longer need to purchase and manage the server hardware, software, storage, security, or networks that used to be required to deliver the solution.

A common example is building your own website and having someone else host it. When a third party has already invested in the infrastructure, and you can access it cheaply, why spend the additional money yourself … and face future upgrades of hardware you don’t need onsite?

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Infrastructure-as-a-service: This area is the new power play in cloud services. Recently, Microsoft joined Amazon, Rackspace, and others in offering businesses low-cost use of computer servers owned and operated by these third parties. Under the IaaS model, businesses can push just about any of their applications services to the cloud and pay for only the computer resources they need and use — rather than buying much more physical server capacity than necessary in an onsite approach.

This is analogous to buying electricity from a power company rather than having your own power plant in the parking lot of your office building. Businesses can now take advantage of the economies of scale previously impossible for small and mid-sized companies to achieve.

Of course, with new benefits come new concerns. A Gartner, Inc. survey of corporate chief information officers reports their leading concern about cloud-based services is security and privacy, followed by performance and technological immaturity. However, for most medium and small companies, the level of data security in the cloud is likely to match or exceed internal-only systems, outages are likely to be lower than with onsite servers, and computational performance can potentially be improved. In the case of large companies with highly custom needs, a current trend is toward “private clouds,” in which servers in the cloud are 100% dedicated to that company’s needs and may allow for additional levels of custom solutions.

A significant effect of this growing shift to cloud services is the reduction in the number of IT staff needed locally. There are simply a lot fewer fires to put out when third parties like Microsoft or Amazon are handling network maintenance and upgrades — and a lot fewer cumbersome tasks. Ten years from now, we predict most businesses will employ a significantly lower number of IT workers than today. However, the employees in IT roles going forward will focus more on what matters most — getting beyond being a “cost center” to make technology contributions toward a business’s bottom line.

Nathan Lasnoski is infrastructure and platform practice director/architect at Concurrency, Inc., a Midwest-based consulting firm focused on the Microsoft platform.

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