Impact of Cloud Computing on Businesses
Inspired by the low entry costs for cloud services, technically savvy consumers are now using cloud-based tools to develop their businesses. The expectation is that software should be nearly free of charge and that users should pay only for additional services or some extra capacity. Consumers can host a website to attract customers, use eBay or Craigslist to sell and market individual items, use virtual marketing to spread the word, place ads with search engine providers, engage with online banks to manage funds, supervise online accountancy services to manage finances, and use office assistants to book trips and arrange appointments. All of this computing power can reside in the cloud.
Start-ups When a business owner starts up a new business, he wants to set up operation in a scalable, flexible fashion. Building an IT department is a low priority compared to marketing the product, investing in research and development, or securing the next round of funding. In the past, a mature IT infrastructure was a sign that a start-up company was ready for an initial public offering (IPO). A company would demonstrate scalability by implementing a robust enterprise resource planning (ERP) solution and hosting it on the premises. Currently, a more common approach is to outsource the majority of IT and maintain a lean IT shop.
The challenge now becomes getting locked into provider contracts and the levels of service that the CSP will face. Critical success factors are the ability to scale the infrastructure as volume increases, and rapidly modify the service for new product lines, channels, markets, or business models. One potential model is a mixed model based on the classic definition of core and context, with control for context maintained internally. The evolution depends on the interoperability across platforms that are internal or are in the cloud. Start-ups have fewer legacy data and fewer processes and applications than established companies, and they pioneer some of the cloud computing services for an integrated business.
Small and Medium-Size Businesses (SMBs)
There may be as many definitions of SMB as there are definitions of cloud computing. Often, the SMB category is defined by revenue, but when discussing technology requirements, it is equally important to think about the number of products, number of channels, countries of operation, and integration of the supply chain with third parties. In short, saying something is a “small business” is a measure of the business’s complexity. Many small businesses grow through acquisition or are born as a spin-off from a more extensive business. The SMB age is a critical component in understanding the maturity and entrenchment of legacy processes and data. The requirements for data security and privacy are no less onerous than for a more substantial enterprise. One generalisation about SMBs is that their IT departments are smaller, and are therefore less diverse in skills and knowledge, than those of larger enterprise businesses.
Significant IT projects can become difficult to justify, and investment in IT can decline, IT infrastructure becomes outdated, and the IT group can have difficulty responding to business needs promptly. Decision making in an SMB is often concentrated among fewer individuals than in a larger enterprise. Depending on the specific scenario, the SMB environment has some essential characteristics that can accelerate growth in the broad use of cloud computing. We may see complex SMBs as the vanguard of cloud computing with no in-house infrastructure and IT services delivered from a combination of CSPs.
Mature enterprise businesses are broadening their use of cloud-enabled computing. At a minimum, this could mean allowing users to access services beyond the corporate firewall. Broader usage of cloud services includes using knowledge tools to support personal productivity, such as online research or travel services. Companies may use corporate applications, such as employee work surveys that use the company’s directory to populate broad characteristics but that don’t include personally identifiable information. Mature businesses adopting cloud computing may also use cloud applications in business-critical departments and functions, such as Salesforce.com applications, document management, purchasing, and logistics. In these cases, the users access applications and store in the cloud data that includes personal and sensitive information.
In evaluating an application run in-house or a cloud-based service, security and privacy concerns could trump costs. An important consideration is the redundancy of data between the CSP and the traditional enterprise applications. Vendor lock-in to a proprietary architecture or solution would kill the cost, flexibility, and extensibility arguments. The compelling argument for a cloud solution is time to market, where a cloud application is the only feasible alternative, given cost and time constraints.