Cloud computing is wispy and mysterious, one of the latest hot ideas for business about which many top executives are dubious. In Harvard Business Review, Andrew McAfee, principal research scientist at MIT's Center for Digital Business, shares these points for senior execs to consider when weighing whether to move more information technology online to servers hosted by other organizations:
The budget quandary
Theoretically, anything the cloud provides can be matched by on-premise approaches. But IT budgets are invariably stretched, with only 11 per cent of money spent on developing new applications, according to Microsoft. The rest of the spending goes to maintenance and infrastructure. Moreover, much of that 11 per cent is spent on big strategic efforts such as purchasing and establishing a core enterprise system. "That leaves few resources for, say, ensuring that employees have access to all the documents they need no matter where they are, what devices they are using, and whom they are working with," Dr. McAfee notes.
Some of cloud computing's greatest successes have come from allowing groups to work together in ways not previously possible. For example, after Virginia-based consulting firm CSC turned to Jive, a maker of cloud-based collaboration software, more than 25,000 people registered, creating 2,100 groups. CSC's president called the results "stunning" and added, "It's the de facto standard for how we collaborate. It's the language of the company."
Mining data for insights
Analytics are another key benefit of the cloud, helping to understand, predict and influence customer behaviour. But Georgia-based Radiant Systems, which supplies the Aloha point-of-sale system to thousands of restaurants, also used the cloud-gathered data to get a better handle on employee theft, analyzing it for suspicious patterns such as a volume of tips far above the average on a Friday night, suggesting the bartender was not charging for drinks in return for a high gratuity.
Developing and hosting applications
Before the cloud, software developers needed to buy, configure and maintain their own servers, which was a distraction from the core activity of writing good code. When Minnesota-based 3M Co. turned to the Windows Azure cloud platform when making its Visual Attention Service software tools available to graphic designers, 3M gained the opportunity to add capacity quickly and easily, with no capital. The cloud allows companies to increase the scale and power of their IT and the speed at which it can be accessed and deployed, with limited headaches.
Moving to the cloud forces tough decisions about consolidation and standardization, since the company's hodgepodge of legacy systems must be untangled and simplified before bring transferred.
Findings about costs – whether moving to the cloud saves or adds money – have been contradictory. But Dr. McAfee argues that over time, economics of building and maintaining a technology infrastructure will favour the cloud because of the advantages of scale, as costs go down.
It's big news when Google or Amazon goes down. But in fact the Radicati Group, a technology market research firm in Palo Alta, Calif., estimates that Google's Gmail is 32 times more reliable than the average corporate e-mail system.
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager for The Globe and Mail's T.G.I.M. page, management book reviews on Wednesdays and an online work-life balance column on Fridays.