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 What Small-Business Owners Need to Know About Cloud Computing - WSJ.com
02-10-2010
EBRUARY 8, 2010 Managing Technology'Cloud Computing':
What Exactly Is It, Anyway?Everybody's talking about it. Here's what you need to know.
For
a lot of small-business owners, "cloud computing" is the latest IT
buzzword to leave them scratching their heads. To demystify things,
here's a primer for companies looking to wade into cloud services for
the first time.
What are cloud services?
Broadly speaking, any service or program sent over an Internet
connection can be considered a cloud service. An outside vendor runs
the servers and software, so the buyer doesn't have to worry about the
technical issues in-house—and can focus on its own business.
The services come in a number of forms. Many businesses are already
familiar with one aspect of cloud computing: software delivered over
the Web. Along with email services like Google Inc.'s Gmail, there are programs that help salespeople keep track of customer information, such as Salesforce.com Inc.'s software, and backup data-storage services from providers such as Amazon.com Inc.
Some businesses don't just use software services, they buy computing
power from vendors such as Verizon Communications Inc.—much like buying
power from a utility. Let's say a retailer expects lots of additional
business during the holidays, and its in-house servers can't handle the
load of customer orders. The company might pay a vendor for the use of
its servers, to shoulder part of the computing work as the need arises.
Other companies, meanwhile, might buy computing power on a regular
basis. They might drop one or more in-house servers entirely—or not buy
the hardware in the first place—and let a vendor run their vital
programs on its machines. Once again, the buyer would pay a fee based
on how much computing power it used.
How much will they cost?
Unlike traditional applications, which require hardware such as
servers and IT staff for maintenance, cloud services don't carry many
upfront costs.
Consider software. Salesforce.com's offering for businesses costs
between $5 and $25 per user each month. Google offers a host of
programs including email, a word processor, video and a hosted Web site
for an annual fee of $50 per user. For small businesses that have
more-extensive computing needs, such as drug laboratories with
extensive software, cloud services could cost more than $1,000 a month.
As for buying computing power, some providers charge for a certain amount of memory and computing configuration. Terremark Worldwide Inc., for example, charges six cents an hour for one gigabyte of RAM and the equivalent of one processor.
One caveat that might bump up costs a bit: If
you're going to rely on the Internet for your services, you will need a
solid connection. While some believe a business-class DSL connection is
sufficient, many industry observers and consultants recommend getting a
faster line, such as a T1.
How much will this save me?
The primary savings come from the lack of capital expenditure to buy
a program or equipment. Servers, for instance, run between $2,000 and
$6,000, and companies might need to add multiple machines as demands on
their IT system grow. There are other benefits, as well. "The real cost
savings doesn't start and end at the physical server," says Mark White,
chief technology officer for consulting firm Deloitte. "You're saving
on systems administrators."
Two years ago, HotSchedules Inc., of Austin, Texas, a privately held
provider of online work-force-management software for restaurants,
moved to sales-force software provided over the Internet by NetSuiteInc. President Ray Pawlikowski estimated that it would reduce costs by
roughly 20% over the next five years after factoring in software,
hardware, personnel and training expenses. The result was steady costs
despite the company tripling its business, according to Mr.
Pawlikowski. "For a small business where every penny counts, you have
to look at this seriously," he says.
Are these services reliable?
Yes. "The performance in the cloud is better than a solution found
in a small or medium business," says Steve Hilton, an analyst at
U.K.-based research firm Analysys Mason Ltd. "There's no arguing it."
This is a big sticking point for many businesses. Many managers are
reluctant to let their valuable data flow outside of their internal
firewalls. And big-name vendors make more attractive targets for
hackers. For instance, wide-scale denial-of-service attacks hit
AT&T Inc.'s and Google's Web sites last year.
Yet big vendors usually also have expansive IT staffs to handle
problems and more resources to invest in backup measures and security.
While the problems at, say, Google often get a lot of attention, they
occur less frequently than glitches at a small company, analysts say.
What should I be looking out for?
While cloud computing is gaining popularity, there remains some
psychological resistance. Companies need to carefully consider the
ramifications of outsourcing their IT.
For instance: Even if a business is comfortable letting a third
party handle its data, are its customers? Or, if the business is in the
health field, do the services conform to government rules dealing with
personal medical information?
What's more, in some cases buying equipment may turn out to be
cheaper than paying a monthly fee. IT managers compare the difference
to leasing a car versus buying one. "Do your diligence," says Mr.
Pawlikowski. "Make sure you know what you're getting into in terms of
overall costs."
Managers should also realize they have options for boosting
computing performance even if they want to keep their IT services
in-house. Consider virtualization. Within a typical IT setup, companies
have servers that are dedicated to one specific task, whether that is
email or customer-service software, and run at only 10% of capacity.
Virtualization allows companies to run their equipment more efficiently
by using that excess resource to handle multiple tasks, reducing the
need for more costly servers. There are a number of companies that
offer services to help make the switch to virtual machines, including
VMware Inc. (One caveat, though: Older servers usually aren't
compatible with virtualization software.)
Finally, companies should know that they can kick the tires before
they sign on for cloud services. Most providers, such as
Salesforce.com, offer their service free on a trial basis.
From the Wall Street Journal
Original article can be found here
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