New SME’s Guide to Cloud: Good You Don’t Expect
by Ethar Alali
With over half of all US businesses now using Cloud computing, it has already delivered on its potential to revolutionise the way we do digital business.
In 2015, it was predicted that global Cloud Computing was set to be worth $121 billion and by 2017 the market is set to exceed $261 billion. Services such as DropBox, G-Drive, Netflix and SkyDrive are ubiquitous and platforms such as Microsoft Office 365 and Adobe Creative Suite are Cloud variants of their successful desktop platforms.
Unlike traditional hosting, Cloud vendors use a Pay-As-You-Go model as well as the traditional ‘up-front’ payment, only charging organisations for the computing resources used and factoring in the total cost of IT, it’s proving to be a very attractive proposition for businesses of all shapes and sizes.
Computing needs are diverse and require a lot of management. Traditionally, most companies had dedicated IT roles to manage it. You committed your business to the management of your IT infrastructure, which can be extremely costly and utilise resources we take for granted, such as power and floor-space.
All these are included in Cloud’s monthly charging scheme and with a contractually binding SLA and world class engineers at Google, Amazon, RackSpace, IBM and Microsoft working behind the scenes it is easy to see the allure and in most cases, rightly so.
So here are my top-4 ways Cloud Computing can help your business grow:
1. Work Anywhere, Appreciate the Greenery, Zero Capital Outlay
Buying IT infrastructure is a costly exercise of which servers are only one part. You may have to fix it to a rack or otherwise find room; network the device; provide cooling in a room, taking up precious floor space, contributing significantly to your electricity bill and damaging the environment. Considering capital expenditure only provides a return when you make enough revenue to cover your costs, you’re stuck with capital outlay on the hardware, if you fail to make that return.
Cloud computing doesn’t require any such outlay. The capital has already been spent by the big providers, who are offering up their spare computing resources. This frees up room and floor space in your office, allowing you to move to smaller premises or take on more staff. Because it’s cloud, it will even facilitate remote work. This can bring down the rent significantly, allowing companies into prime commercial workspaces who otherwise couldn’t afford to.
Also, ecologically, Cloud providers are running their services anyway. Adding your own servers increases the overall environmental impact, even if your company uses greener hardware. Processing in the Cloud is also naturally more cost effective per CPU, as these large data centres are designed to consume as little overall power as possible, simply to save on the electricity bill.
Internally, it also means that desktop machines need not be as powerful and indeed, may not really have to be smart at all, with the advent of VDI (Virtual Desktops in the cloud) and a solid BYOD policy, would even allow personnel to use their own machines at home or on the move, allowing further reductions in capital expenditure on computing hardware.
2. Experts at Economy of Scale
Cloud providers are almost all service vendors in their own right. Google, Microsoft and Amazon use their own data-centres to host Cloud services. Hence, the staff manning the pumps are the same staff doing the job day-to-day. You also get almost all the services that the providers themselves use, including backup, redundancy and disaster recovery, potentially allowing you to have 5+ ‘nines’ availability or more, which traditionally costs many millions of pounds in infrastructure alone.
For example, Amazon Web Services has by far the most mature PCI-DSS compliant solution on the market, which is important if your company takes credit card payments in store or runs hybrid in-house and cloud solutions, and transfers payment information between them. The costs of tokenisation, Virtual Private-Cloud, dedicated lines and disk level security has traditionally been prohibitive for smaller companies, so the use of existing, compliant infrastructure is now within the reach of SMEs.
3. Low Staffing Costs
Probably a contentious point, but staffing costs are by far the biggest fixed cost any department has to commit to. The salary of an experienced infrastructure engineer significantly exceeds £35,000 pa and they will manage the architecture, specification, design and vendor provisioning of several servers or data centres.
Cloud providers’ all-in-one prices include their staffing costs. There is no extra ongoing cost to your business outside. Maintenance only requires in-house support staff and is as much as £10,000 cheaper than a highly experienced engineer per annum. Indeed, if you are IT savvy or can only commit to web development staff, they can do it. This is a proverbial ‘no-brainer’ for SMEs who need to grow their team without investing too much in IT resources.
4. Business Agility
In today’s world, competition is fierce and businesses have to continually change direction quickly. Capital expenditure is a major barrier in any business’ ability to do that. You have to recoup the costs associated with the IT spend before you can move, unless you can recycle the resources.
Cloud’s PAYG model changes that dynamic. Whereas in traditional outlays, you’re stuck with the capital expense, especially with 3 or 5 year commercial rental agreements, in the Cloud if you find your service isn’t generating the expected returns, simply shut the IT services down and move on to the next exciting IT venture. Near-zero up-front investment means no significant costs to recoup. Basically, you’re better off spending £84 spread over 6 months than fail to recoup an initial investment of £2,000 on a new server, £1,000 on a rack, £800 pa cooling it, £1,500 pa on the room and floor space housing it, the portion of IT staff time to set it up and maintain it and the disaster recovery process. whilst at the same time taking away room for more employees, a reception or the meeting room you’ve always wanted.
Cloud Computing is also very useful for short-term marketing campaigns or events that don’t require that long-term commitment. Spin up the service when it’s needed and shut it down after the event. You don’t pay any more than the computing costs for that period.
The vast majority of IT services you use in-house are included in Cloud’s PAYG computing model. The lower cost of Cloud Computing for almost all businesses, mean the savings businesses can make reduce IT operating costs, thereby increasing your net profit per month and with a near-Zero capital outlay, you’re always in the black. You can also choose to pass on these savings to your customers, improving your competitive edge. Hence, your Rate of Return is significantly higher, starting from a higher bank balance, with much lower risks.
This article originally appeared in Enterprise Nation in 2014 and has been updated to reflect changes since then.
Ethar Alali is Manchester based Chief Executive of Axelisys, specialists in lean enterprise IT. Follow them on twitter.
