Early in the 20th century, manufacturers began to rely on electricity as a means of powering their machinery. They therefore needed to build and maintain power plants filled with complex machinery. The need to run 24 hours a day meant expensive three-shift rotas for staff and complex maintenance routines to minimise downtime and disruption. Whenever innovation or production targets dictated, more power was installed involving lengthy, expensive and risky upgrade plans.
Fast forward to the beginning of the 21st century and we know that ‘electricity as a service’ is the norm. Manufacturers no longer need their own power plants – they use utility companies that specialise in power production and supply.
Computing power is now vital, not just for manufacturing but for every type of company whether they deal with physical products, services or information. Luckily we haven’t had to wait a century for this critical component to be available as a large-scale utility. Originally every company bought and maintained its own computing power but within a few decades we have seen the arrival of large-scale utility computing suppliers – otherwise known as cloud computing.
Cloud computing is the provision of flexible, reliable infrastructure on demand and applications for rent. It has arrived, and it is safe and affordable. Many housing providers still burden themselves with the cost of providing in-house data centres and hosting complex and critical applications within them, as well as all the staff and costs associated with this strategy; you have to ask yourself, why?.
Cloud computing defined
First, let’s clear up some terminology. The analyst company Forrester defines cloud computing as, “a standardised IT capability (services, software, or infrastructure) delivered via internet technologies in a pay-per-use, self-service way”. Within this definition Forrester goes on to indentify three classes of cloud services:
- Infrastructure as a service (IaaS) – infrastructure services and platforms that are used as places to deploy software applications.
- Platform as a service (PaaS) – platforms and middleware components that enable developers to build real cloud applications.
- Software as a service (SaaS) – software you can rent with a performance and service guarantee.
Not only is there a clear cost benefit from using IaaS, but also when you compare the performance of in-house infrastructure against the performance of IaaS suppliers, there’s no contest. The companies providing this type of service are specialists with world-class, secure, high-bandwidth and geographically-diverse locations. This doesn’t mean that cloud providers are perfect, but it does mean that your company probably couldn’t afford the equivalent IT infrastructure and technical support team.
Don’t do it yourself
Len Peters, CIO of Yale University, recently completed an MSc thesis on the application of cloud computing, and he says, “The thesis proved irrefutably that the public cloud is a better economic model than doing it yourself, particularly if you look at IaaS as the unit cost of cloud computing is lower than dedicated, owned capacity. Additionally for those of you like me, we have used too much capital investments on infrastructure and can now move to pure operating expense.”
When you consider PaaS, things start to get more, well, ‘cloudy’. This type of service has typically been used to satisfy short burst (e.g. peak demand) or short term (e.g. application development) requirements. For example, a company wants to develop a SharePoint application and needs to get on with developing the application before or during the actual implementation of the operating software, middleware and connectivity to support the application.
Application as a service
It would probably be more accurate to think of SaaS as ‘application as a service’ as it refers to the rental of a fully-standardised, ready-to-run application which is itself hosted by the software supplier or by an IaaS supplier; Salesforce.com is a well-known example of this.
The beauty of SaaS is that all three cloud-computing categories are taken care of. The in-house capital, IT resources and management time associated with infrastructure, platform and application software are all converted into a single rental charge. This charge is easy to identify in the business P&L, is easy to control over one or more financial accounting periods and the service performance for all three categories is wrapped up in one SLA with the SaaS supplier.
An added bonus is that the cloud-based application will be updated and improved over time at little or no cost, for example, to keep pace with changing legislative and compliance requirements, for example.
Choosing the right cloud supplier
So, when looking at potential SaaS suppliers, consider the following:
- Do the suppliers offer service and performance guarantees and if so, how realistic and how appropriate are they?
- How good is the connectivity and network path between your business users to the SaaS hosting sites (i.e. right from the desktops to the data centre), and can the suppliers help you improve that if necessary?
- Can SaaS suppliers offer access to the application from all your business sites as well as to staff working from home and to field-based workers?
- How focused are the SaaS suppliers on the housing sector, or are they trying to standardise their application services across many industry sectors?
- Do the suppliers have a track record of service as well as price competitiveness?
- What are the suppliers’ commercial terms, and what will be the net impact on your bottom line?
- Make sure that you understand the exit penalties (if any) for the early termination of contracts.
We certainly live in interesting times and interesting times require innovative and far-sighted strategies for success – just repeating the old ways of doing things will not be enough!
Pete Mylett is CEO of BluTek.