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Do You Really Need Cloud to Run Your Business?

By Rakesh Raman

Rakesh Raman

Rakesh Raman

More often than not, hype without substance can be destructive. Case in point: Cloud computing. Tech vendors around the world are going ballyhoo to promote their cloud solutions among businesses. But cloud refuses to pick up steam.

As cloud awareness is almost missing, user outfits are more confused than enthused about this tech offering that is projected to herald a paradigm shift in the way businesses operate.

While haze and fog have engulfed cloud, there’s hardly any serious attempt from the vendors to demist cloud for tech users through organized education programs, though rampant rhetoric persists.

There may be some progress in the enterprise cloud market, as it’s simpler for large enterprises to buy cloud because their chief information officers (CIOs) are mostly influenced by vendors’ aggressive sales campaigns and other promotional incentives for them.

Most such CIOs just act as dumb purchase officers and buy tech gear without actually evaluating the cost benefit for their organizations. The chief financial officers (CFOs) and chief marketing officers (CMOs), who understand financial and commercial aspects of any investment, don’t understand technology.

As a result, CIOs are having a ball and freely squandering their companies’ money. Thus, cloud may be attracting some attention and bucks from large enterprises.

But what about smaller businesses? How do they know and decide about cloud? To help them understand the basic nuances of cloud computing, here we make an attempt as part of our education program Tech-Wise Knowledge Center for small and medium business (SMBs).

Simply put, cloud computing is a technology distribution model using Internet as the service delivery channel. Since Internet, which is a colossal network of computers, is denoted with a cloud diagram, delivery of computing resources over the Internet is now called cloud computing.

Tech vendors can sell hardware as well as software using cloud or for that matter Internet. Since Internet can’t carry physical products, even tech products are sold as a service. There are different cloud-based service models to deliver software, storage, platform, infrastructure, and so on.

However, smaller businesses should initially explore only the software options – termed as Software-as-a-Service (SaaS). As others are high-end service models, they come with complex usage and pricing options. Ignore them for the time being.

So, let’s discuss cloud-based software. In the traditional business models, you buy software as a product packaged in CDs or you pay and download a software package on your computer’s storage disk.

In the cloud model, however, you need not have software in your local computer. You can connect to the Internet, go to cloud service provider’s website and after entering your login details start using the software. Your usage is metered and you’re billed by the service provider based on the amount of resources you use.

It’s like you use water or electricity in your home and pay the utility provider for the service you consume. You just need a simple water tap or an electric bulb at your place to consume the services that are delivered to you by the service providers using their infrastructure. Therefore, cloud computing is also sometimes referred to as utility computing or on-tap computing.

As in the case of water and electricity, in cloud you pay only for the software usage and don’t make any capital investment on buying software product. In other words, your software cost is directly proportional to the service you use unlike in the traditional model where you pay for the entire software package while you may be using only a fraction of its features.

For example, you’ve to pay for the entire Microsoft Office (comprising Word, Excel, PowerPoint, etc.), which is an expensive software package, though you may not be using most of its features. On the other hand, Google Drive with Google Docs is a similar cloud-based service that allows you to use Office-like features without having any software package in your computer’s hard disk. You use this service on Google’s site.

Although Google is offering this service free of charge, it can charge the users based on a cloud pricing model. Realizing the benefits of cloud service, now even Microsoft has introduced its Microsoft Office software in the cloud. Its Office 365 is being offered through subscription services for different types of users.

Likewise, Hotmail, Yahoo! Mail, and Gmail are the examples of cloud services, though these are available for free. Similarly, social networking services like Facebook, Google+, LinkedIn, Twitter are delivered through cloud. For websites, you get cloud-based Content Management Systems (CMSs) like WordPress and Joomla. You don’t have to pay for using most of these services.

However, an important software application for SMBs is Enterprise Resource Planning (ERP). It’s an integrated software solution that helps companies computerize their business processes such as financial accounting, sales, inventory management, human resource management, and so on.

Today, there are some cloud-based ERP solutions available in the market. But SMBs should opt for these solutions only if they need them. While introducing ERP, they should begin with standalone modules –separately for financial accounting or, say, inventory management.

And instead of buying a packaged ERP product, they should buy bespoke solution from a local software developer who could give them proper after-sales support. Big companies run away after selling their software products, which are also very expensive. Once you’re comfortable with standalone software modules, you should integrate them – again as a customized solution.

And before you zero in on cloud-based ERP, you should carry out a thorough cost benefit analysis – comparing your customized ERP with packaged software and cloud-based solution. Although cloud technologies are supposed to save capital costs for your company, some cloud software vendors will try to fleece you and you’ll find that it’s better to buy packaged solution instead of cloud-based service.

Moreover, today there’s a fundamental flaw in the cloud computing offerings. The basic principle behind cloud is that the cloud service providers should provide all computing resources to cloud service consumers. By this rule, you don’t need to buy a bulky and expensive PC or a laptop. You should have a very thin, light-weight and cheap machine to use cloud services. It should not cost more than $100 or so.

But top cloud vendors like IBM, HP, and Microsoft are reluctant to make and offer cheap machines (also called thin clients) because they’re heavily dependent on lucrative PC business. If they start offering cheap frontend machines to cloud users, cloud business will cannibalize their PC business. Obviously, the vendors are as confused about cloud as the users.

So, what’s the lesson for SMBs? Avoid any commercialized cloud service; start using that which is available for free like office productivity software options and CMS solutions, as described above.

Cloud is not yet ready for smaller businesses, as they operate on shoestring budgets. Let the big, deep-pocketed companies experiment with cloud. As small users, you can wait till the cloud ecosystem is stable. That’s what I suggest.

By Rakesh Raman, the managing editor of RMN Digital.

This article is a part of our initiative: Tech-Wise Knowledge Center for SMBs.

You can also read: More Articles by the RMN Editor, Rakesh Raman

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