‘It is a service, not a technology’

‘It is a service, not a technology’
By Charles Batchelor

Published: March 15 2011 16:22 | Last updated: March 15 2011 16:22

Chief executives and finance directors are understandably cautious when the IT industry waxes enthusiastic about the next “breakthrough”.

What are they to make of cloud computing, the latest big technology idea to come to mainstream business attention?

Simply put, cloud computing is the use of off-site servers, routers and databases that are not “owned” by the business, to handle all, or large parts, of a company’s computing needs.

Instead of managing requirements in-house, with all the costs and hassle involved, a company will outsource operations such as e-mails, enterprise resource planning and data storage.

Factories used to generate their own power on-site, but now routinely buy in electricity and gas.

Cloud enthusiasts believe that, in future, companies will buy computer capacity in the same way.

Executives may be unfamiliar with the cloud but many will have been using it for years without realising it.

E-mail providers such as Google, social networking sites including Facebook, and Flickr, an online photo and video-sharing service, are all run from global data centres, many of which are owned by companies such as Amazon and Microsoft.

The e-mails or photographs that appear to be stored on your desk- or laptop are actually held remotely.

The term “cloud” comes from the technical diagrams used to represent telecommunications and computer systems, which traditionally enclosed networks within cloud shapes.

Cloud computing represents a development of previous arrangements such as “managed services”, where a company handed the operation of its IT network to an outside supplier.

It also piggybacks on “virtualisation” technology, which allows users to get more out of their network by squeezing several applications on to a single server.

“Research has shown that [in-house] data centres do not use more than 20 per cent of their capacity,” says Michael Kogeler, director of cloud strategy at Microsoft International.

It was the idea of putting all that unused capacity to work and the growth of the internet that led to the birth of cloud computing.

“The cloud is a service, not a technology,” explains Rupert Chapman, a cloud specialist at PA Consulting. “You only pay for what you use” and access the computer power over the internet.

Cloud computing is sometimes seen as of particular benefit to small and medium-sized businesses that lack the resources to set up their own IT departments but it is also used by large companies.

It allows businesses of all sizes to acquire computer capacity to launch products and services quickly.

There is little or no capital expenditure involved and costs are based on transactions completed or volume of data stored and should be lower than if managed in-house.

Because the capacity of the cloud is, in theory, unlimited, companies can store far more data and handle far more transactions than might be possible on their in-house system.

They can also back up data on a remote site for security. Because data are not kept in house, they can be accessed from anywhere with an internet connection, so are available to executives on the move.

Going to the cloud for capacity also means the IT department is not constantly updating servers and software to keep up with technology.

A large cloud provider can also devote more resources to maintaining the security of the network.

“From customers’ perspective there are three ways to use the cloud,” says Mr Chapman.

“They can use it to dip their toe in the water to test an application. If it meets their needs, they can bring it in-house and run it on their own machines. The test environment has traditionally been expensive but one client achieved an 80 per cent cost saving.

“Alternatively, customers can use the cloud on a selective basis for particular services. A market information organisation used a customer relationship management system to suck in just the customer information they needed.”

Finally, companies can take a “transformational” approach, opting to use the cloud for most of their applications, retaining direct control only of those that make a real difference to their organisation. Relatively few companies do this as yet, says Mr Chapman, because they often have a big investment in their legacy systems or are tied into managed service contracts.

Problems companies should watch out for include legal ownership of data, security and the risk of getting locked in to a service provider.

An appropriate contract should resolve ownership issues. Security should be better at a dedicated cloud provider, but hackers have attacked networks and sensitive data should be encrypted in transit and storage. The contract should also allow a customer to change providers easily.

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