CLOUD COMPUTING
Cloud computing is the latest hot topic on the internet marketplace. Many start-ups are using or are considering using cloud computing. Furthermore, many companies are rushing to position themselves as cloud computing companies. With this post, I discuss what I believe cloud computing means for enterprises looking to use them as well as what is means for cloud computing businesses catering to enterprises.
There is a fuzzy understanding of what is meant by cloud computing. Cloud computing commonly denotes the general usage of services that are provided over the internet, rather than hosted within organizations. If we apply this general definition, many services that have existed for years are cloud computing services. Examples include products such as salesforce.com and groupswim.com. What has happened, however, is that more infrastructure services are becoming available as services, and this is having a huge impact on software and SaaS companies.
The picture below illustrates the distinct layers within cloud computing. At the top, we have services for consumers and enterprise users; we call this the Software-as-a-Service (SaaS) layer. The component layer below includes specialized services provided as API’s or widgets used by the SaaS layer. Further down we have development platforms (sometimes denoted Platform-as-a-Service) that enable companies to develop and deploy services in the cloud. These development platforms are themselves services that require minimal or no installation of software at the site of the users. Finally, we have the infrastructure layer which provides resources to the layers above or even to installed software solutions. The most commonly known example is probably Amazon AWS, which is a service that provides storage and processing capabilities. GroupSwim uses Amazon’s file storage service S3 for certain types of information storage and EC2 for certain processing tasks.
Cloud computing will be a significant force in advancing offerings on the internet in the coming years. Cloud computing increases the efficiency and speed that companies (in particular small companies) can bring products to market. Capital and upfront expenses are significantly lower and cease to exist as barriers for new ideas and solutions. Cloud computing will enable the development of new services and solutions that have previously been viable only in theory. It will also make it possible to realize functions and features that have previously not been viable for economic or practical reasons.
OPPORTUNITIES
Many companies already use cloud computing services. If you are a start-up using large amounts of storage, it would be stupid not to use services such as Amazon S3. If you need to boost computing resources during peaks or for background processing, it is difficult to justify not using virtual servers such as those offered by Amazon’s EC2. There is a very clear drive and opportunity for new software and services companies to use cloud computing to lower costs, enable new solutions and accelerate time to market.
So, where lies the opportunity for enterprise computing? Enterprises spend a lot of money purchasing software licenses and hardware. Licenses are often purchased upfront to cover all or a large part of the staff, even if it will take significant time (months or years) before all employees will effectively use the software. Licenses tend to include all functions just to ensure all bases are covered and reduce the number of purchasing processes, which in themselves can be expensive and time consuming. Purchased software often needs additional hardware, and the cost of implementing the systems is significant. According to some analysts, the average time to deploy an application to a division within a larger enterprise is 6 months or more. Clearly, there is a huge opportunity to deploy new applications within an enterprise more efficiently and more economically.
CONCERNS
If cloud computing is so great, what are the concerns from an enterprise perspective? Security is frequently questioned. The questions surround whether cloud services can be trusted to store data, do they have backup policies, what kind of SLA do they provide and so forth. From a web perspective, many cloud computing services are just as safe as any banking solution; communication is encrypted, transactions are monitored etc. To some extent, it boils down to whether a service can be trusted to handle your data or not. From an enterprise perspective, there is also a requirement on audit trails, backups, disaster recovery etc. that may not be clearly articulated by cloud computing vendors today.
Clearly cloud computing service must provide auditing and security functions that enables customer organizations to protect themselves against malicious users. They also must provide easy-to-use and understandable permission structures to make information management efficient. I expect this to be an area where cloud computing services will improve significantly within the next year or so.
There is also a concern about losing control over business critical data. Data is stored in a data center where the customer will most likely not have physical access. Could computing services give the customer confidence that they can easily and at any time be able to retrieve all their data? At GroupSwim, we are experimenting with letting customers inject their own storage solution into a SaaS environment. Whether this is the most efficient way of making concerned customers comfortable remains to be seen. The point is that the customers need to feel that they can select the solution they are comfortable with and that they can manage their data at will.
Availability is of course a question that come up. It would be surprising if it hadn’t as we are talking about mission critical enterprise systems. Cloud services are built to be up 24/7, and one could and should assume that a reputable cloud provider can do at least as well as internal IT . I believe concern will diminish as users see that availability of these service is in fact satisfactory.
It also must have crossed the minds of enterprise buyers that they depend on the viability of the cloud computing vendor more than on a software vendor. If a software is installed in-house, the software will still work even if the company behind it fails; there will be no immediate urgency to switch to another product in many cases. With cloud-computing services, it is clearly more complicated. This emphasizes that cloud computing companies must have a viable business model, which may or may not imply that free services are riskier than those that charge. It also enforces the ability to easily get enterprise data in and out of a system in case a migration becomes necessary. In the end, the complexity of migrating is probably the same.
WILL ENTERPRISES ADOPT CLOUD COMPUTING?
We believe cloud computing will become an integral part of the infrastructure of many enterprises. In most instances, it will manifest itself as the usage of a SaaS application. But we also believe that using various infrastructure level resources on the internet will be irresistible even for enterprise customers. The economic and tactical benefits are too good to ignore. As cloud computing companies position themselves to become enterprise-grade cloud computing services, they will improve both internal and external security mechanisms to make CTO’s and CIO’s feel more comfortable with using their services. Cloud computing companies will enable customers to have greater influence on where their data is stored, and how it can be accessed. I expect cloud companies to present very clear ways of migrating data for customers to avoid lock-in and in the unlikely event of a cloud company shutdown. As these aspects of cloud computing services develop, I strongly believe cloud computing will become an integral part of enterprise systems in the future.
As you can imagine, we think about return-on-investment (ROI) all the time when talking about or selling our 
