History provides a great analogy that will help explain the cloud definition. If you look at photos of 1890s factories, they all seem to have water wheels or windmills. That’s because water or wind was the source of energy. Every single factory had to invest in people and infrastructure to harness this power. This was a steep barrier.
Then centralized municipal power plants came online. This allowed factories to get out of the business of power generation. They transformed the cost of energy from a steep capital investment into a simple cost-per-unit charge, and reinvested their capital into growing more competitive.
Fast forward 120 years, and that’s what’s happening in IT. In the recent past, organizations were forced to invest in on-premise servers and expertise. But the public cloud allows them to outsource their IT and transform a capital investment into a cost-per user or monthly charge.
This is as transformational as centralized power plants. And it allows businesses to scale dramatically by leveraging cloud infrastructure services that were otherwise entirely out of reach to all but the biggest companies.
Incidentally, it also allows the public cloud provider to innovate on behalf of millions of customers. Over the decades, utilities built far better tools for energy generation and transmission than individual companies ever could, while IT providers such as Intermedia innovate on a massive scale that individual IT teams could never achieve.
A variety of different types of cloud services have been shown to reduce cost while simultaneously improving efficiency, explains CIO. This works to the benefit of Small to Medium Businesses (SMBs), and enables them to streamline their business model.
"The findings were pretty telling in terms of the adoption of cloud computing and the benefits of cloud computing," explains John Engates, CTO of Rackspace Hosting, in an interview with CIO. "The bottom line is cloud saves companies money and increases their profits."
As shown in Figure 1, the top reasons companies move the cloud include increased business agility, lowered overall costs, accelerated application deployment and the faster delivery of new features and functions, or a DevOps approach. In addition, the simplified management of the cloud allows IT and business pros alike to focus more on business transformation and less on day-to-day management.
This is because cloud computing services are managed online, and serve to offer a centralized, hosted location to encrypt and store cloud data. This enables SMBs to immediately reduce costs, because the use of cloud infrastructure eradicates the need to purchase expensive hardware such as: Hard drives, memory upgrades and backup devices. Furthermore, public cloud services reduce the reliance on physical on-premise hardware, as well as eliminate the responsibility of maintenance, repairs and other technological investments for individual companies. A cloud computing service can also rid business operations of complexities with automation, while increasing productivity and agility.
As mentioned earlier, cloud computing provides SMBs the opportunity to innovate. Many small businesses operate without an IT department, and may outsource their storage and data. The cloud enables midsize companies to add or test new applications or processes without having to take on the costs of hosting an in-house IT infrastructure. In addition, cloud computing adapts to a business’ growth model. SMBs can utilize it to create more accessible workspaces that their staff, clients and suppliers can access remotely from connected devices. Doing so leverages the skills of any back office team. Since SMBs can acquire cloud computing services through third-party providers at a low and often predictable cost, it makes good sense for their bottom line. As shown in Figure 2, the need for Capital Expenses (CapEx) decreases with the cloud, which is typically paid for monthly out of Operating Expenses (OpEx).
Cloud market spending for SMBs is predicted to increase by around 50% globally from 2015-2018 according to Figure 3. This is because public clouds are more convenient for a small business model, namely because they are hosted, managed and maintained by a third-party service.
Since a private cloud allows for the sharing of resources within a more trusted environment, it benefits SMBs to have internal IT resources because it helps better secure their sensitive data. This type of private cloud service requires a high-level of expertise because it is deployed on the company’s network by the internal IT staff. Therefore, it is more expensive than public cloud in the short-term to integrate.
Private cloud services, which can act as an extension of an on-premise data center, are generally used by larger companies, but vendors are recognizing the demand for this platform among SMBs. Some vendors that are already offering solutions include: Amazon Web Services, Rackspace and VMware. According to the IDC, two out of ten midsize firms plan to add midsize cloud solutions this year to meet growing demand.
SMBs can also take advantage of hybrid cloud services. These provide a flexible solution for SMBs because they combine private and public cloud platforms. SMBs benefit from the cost-effectiveness of the public cloud and bypass security issues with the private cloud. An increasing number of SMBs are calling for cloud customization, which means more cloud service providers are likely to offer a hybrid cloud solutions in the near future. Current vendors include: McAfee and Websense.
SMBs concerned about security should look for third-party providers who are committed to their security measures. A good example is Microsoft’s Office 365, which has the “Trust Center.” Integration and interoperability has challenged some SMBs. Therefore, it’s important to find vendors who offer additional training and support.
As cloud reliance expands, expect to see these services become more widely used in the future. With a variety of cloud services companies striving to meet business demand, newer solutions are being introduced each quarter.