1. Could Computing — what is it? “Cloud computing” — the provision of software as a service — has been hailed by many to be the future of the provision of software. In the unlikely event that you are not familiar with it, it is a relatively simple concept. Instead of purchasing (or leasing) software systems and IT infrastructure, you simply “rent” the software service as an entire package, with no need for on premise hardware or applications. The package will generally include initial training, back-up support, ongoing training and advice, upgrades, and applicable security.
“Traditional” software methods (referred throughout this paper as “on premise” solutions) require the customer to purchase (or lease), install and maintain both the applicable software and the necessary infrastructure. In addition, the customer will generally need to bear the cost of hiring an IT consultant or using the services of anIT help-desk to assist with day-to-day issues, as well as installing appropriate security measures and upgrades as necessary.
As a result, on premise IT costs for companies can account for a large proportion of their start-up costs, and as such are often prohibitively expensive.
With the advent of cloud computing, however, the provider bears the responsibility, and thus, the cost, of what would otherwise amount to substantial start-up — and ongoing maintenance and support — costs. As the provider is offering web-based access to applications to the customer, who subscribes to a package according to their needs, there is no in-house infrastructure needed, no cost of purchasing or installing software, and no on-site experts to manage, install, upgrade or secure it. In addition, no internal back-up systems are necessary. In effect, cloud computing enables a company to outsource all of its hard and soft-ware requirements, for a periodical “rent”. This fee is made affordable by the fact that the provider has a scaled operation; all of its customers benefit from one instance of the infrastructure, and so the infrastructure costs are spread amongst all of them.
The benefits of cloud computing are many and varied, and — as highlighted by a recent in-depth study — can include significantly reduced costs, given the economies-of-scale advantages of in-house systems are not usually applicable.
Before we look at these costs however, it is worth looking at the other, knock-on, effects associated with the on premise IT options, which can have considerable impacts — financial and otherwise — on businesses.
2. Traditional IT Options Prior to the growth in, and accessibility of, cloud computing, the options available to companies with regard totheir IT infrastructure were simple: (a) invest in a sophisticated on premise system, which would enable you toproperly compete with your rivals; (b) get what you could afford; or (c) do without.
Obviously, (c) can be immediately discounted as an option, leaving (a) — the optimal choice — and (b). Formost businesses, however, the (often prohibitive) capital costs of acquiring on premise systems leave themwith no option but to get what they can afford — usually a miss-mash of different programmes (particularlysimple accounting and payroll packages, and Excel spreadsheets). While this is an obvious and often easysolution, it comes with a variety of detrimental business consequences, particularly the difficulties withconsolidating information, storing and retrieving data, and adhering to demanding compliance and regulatoryrequirements.
In addition, both of the above options also necessitate the availability of an IT specialist to support the usersand systems — thus placing further financial strain on small business. In the event that the business grows, the complexities and demands on both the systems and the specialist increase also, often leaving the specialist with little resources to do more than maintain and support the existing systems; updating and deploying new solutions often gets left behind in the bid to maintain the status quo.
Nor are the costs and effects merely internal ones; the knock-on effect of being unable to perform adequately in an increasingly global environment impinges upon a business’s ultimate survival. As the market-place becomes more IT-driven, and customers demand better and speedier services, organisations which are supported by sophisticated fully integrated software applications will obviously out-perform those whose systems are cheaper, older, less cohesive or slower. Furthermore, the relative ease for business based in regions with access to cheaper products and services to bid for customers globally, has resulted in a vastly increased marketplace, with more competitors than ever. The net effect of this is that customers are demanding more, and have a greater pool of providers to demand from. Any business which is unable to respond quickly, competitively, and provide a better, cheaper service, will suffer.
The net effect of all of this is that traditional IT options put businesses in an unenviable business and financial position: either they invest in sophisticated, fully integrated systems — with all of the costs involved — and retain good business and marketplace practices; or they “make do” with a variety of non-cohesive programmes, and risk suffering the knock-on effects outlined above.
So, what are the benefits of using cloud computing?
3. International Standards 3.1 General Benefits Cloud computing has a wide range of benefits for all business, and the cost implications for using cloud computing, as opposed to on premise systems, is significant.
Costs aside, cloud computing is distinguished by the following advantages:
· Straightforward demonstration of services available
· No internal IT resources required
· Wholly flexible accessibility of services for all users (Web-based)
· No maintenance or upgrades required
· Infrastructure maintenance and support is provider’s responsibility
· Service can be configured and personalised
· Service can be amended — expanded or restricted — as users’ business-needs change
· Immediate guidance, support and advice available to users
And then there are the financial benefits.
3.2 Financial Benefits A report published in 20131 highlighted the staggering differentials in the cost between cloud computing software services, and traditional on premise systems.
The study on which the report was based looked at the total cost of ownership — TCO — of a system over four years — which represents the costs of buying, or buying in to, and operating / maintaining an IT solution over its useful life. (This was chosen as the preferred comparative measure, above Return on Investment, which the authors determined was too subjective in nature, as it is a quantitative measure which tends to include business benefits, which are more difficult to accurately compare than pure costs. TCO, it was concluded, is a more accurate measurement if you start from the position that the services being compared provide more or less the same benefits, costs aside.)
In appraising the costs, the authors included the following elements:
· Planning and Selection of Systems
· IT Infrastructure Hardware, Software and Support (applied almost exclusively to On-Premise solutions)
· Application Subscription or Application Licence costs
· Application implementation, customization, integration, end-user support and administration
· Initial and Ongoing Training Costs
·
and looked at the comparative TCO of ERP and CRM solutions — both cloud-based and “traditional”.
“It found that overall, the TCO for cloud ERP and CRM solutions was as much as 45% less than for similar on premise solutions, over 4 years.”
When looking solely at the first year of costs, those of the on premise solution greatly exceeded those of the cloud solutions — as would be expected, given the initial capital outlay required by the former. However the higher costs continued in subsequent years, due primarily to the costs of IT resources needed to manage and update the IT systems and infrastructure.
Overall, in almost every category studied, the TCO of cloud solutions was substantially less than that of on premise solutions. The only area where on premise systems proved more cost effective at any time was for application software costs alone. However, this was significantly balanced out by the reduced costs of all other areas, including evaluation & selection, user training, and application implementation & support.
4. Is Clouding Computing Always Better The solutions offered by cloud computing merit it thorough consideration. It enables companies of all sizes access to sophisticated IT expertise, infrastructure, programmes and support, without the up-front capital costs of the traditional on premise options.
However, there are issues other than cost to consider, particularly:
· How flexible is the service? Is it possible to expand / reduce your service without incurring additional costs?
· What security features does the provider offer?
· How / where is your data stored, and who has access to it?
· How flexible is the package — can it be personalised in any way, to address your specific needs?
All of these matters necessitate considered research and evaluation by the customer of the vendor; a well-regarded, reliable vendor will be able to address all of your specific needs and provide flexible solutions for optimal management and productivity.
5. Conclusion The increased popularity and accessibility of cloud computing has resulted in comprehensive sophisticated IT systems being available to businesses which might otherwise not have the financial capacity to invest in them. As such, cloud computing is an obvious and attractive option for companies looking for affordable IT solutions, without compromising on quality or delivery. In addition to cost benefits — which can be substantial, as highlighted in a recent report — cloud computing offers customers a wide range of advantages over on premise options, including flexible accessibility, improved data storage, easy access to information, and access to the most recent systems. While there are aspects of cloud computing which would not make it suitable for all businesses — those with specific and particularly heightened security issues, for example — overall, cloud computing is indeed the technology of the future.
CMO-Software is a market leader in the provision of HSE management software solutions across a wide range of sectors, including Energy, Mining, Oil & Gas, Transport & Logistics and Manufacturing. We recognise that the future of software solutions lies in cloud based technology, and to this end our services are available both in public and private cloud editions. In this way we are confident that we can provide the most comprehensive and flexible solution to all clients, irrespective of their size, specific requirements or current IT infrastructure. For more information about CMO and to discuss your firm’s specific needs, please contact us.
“Traditional” software methods (referred throughout this paper as “on premise” solutions) require the customer to purchase (or lease), install and maintain both the applicable software and the necessary infrastructure. In addition, the customer will generally need to bear the cost of hiring an IT consultant or using the services of anIT help-desk to assist with day-to-day issues, as well as installing appropriate security measures and upgrades as necessary.
As a result, on premise IT costs for companies can account for a large proportion of their start-up costs, and as such are often prohibitively expensive.
With the advent of cloud computing, however, the provider bears the responsibility, and thus, the cost, of what would otherwise amount to substantial start-up — and ongoing maintenance and support — costs. As the provider is offering web-based access to applications to the customer, who subscribes to a package according to their needs, there is no in-house infrastructure needed, no cost of purchasing or installing software, and no on-site experts to manage, install, upgrade or secure it. In addition, no internal back-up systems are necessary. In effect, cloud computing enables a company to outsource all of its hard and soft-ware requirements, for a periodical “rent”. This fee is made affordable by the fact that the provider has a scaled operation; all of its customers benefit from one instance of the infrastructure, and so the infrastructure costs are spread amongst all of them.
The benefits of cloud computing are many and varied, and — as highlighted by a recent in-depth study — can include significantly reduced costs, given the economies-of-scale advantages of in-house systems are not usually applicable.
Before we look at these costs however, it is worth looking at the other, knock-on, effects associated with the on premise IT options, which can have considerable impacts — financial and otherwise — on businesses.
2. Traditional IT Options Prior to the growth in, and accessibility of, cloud computing, the options available to companies with regard totheir IT infrastructure were simple: (a) invest in a sophisticated on premise system, which would enable you toproperly compete with your rivals; (b) get what you could afford; or (c) do without.
Obviously, (c) can be immediately discounted as an option, leaving (a) — the optimal choice — and (b). Formost businesses, however, the (often prohibitive) capital costs of acquiring on premise systems leave themwith no option but to get what they can afford — usually a miss-mash of different programmes (particularlysimple accounting and payroll packages, and Excel spreadsheets). While this is an obvious and often easysolution, it comes with a variety of detrimental business consequences, particularly the difficulties withconsolidating information, storing and retrieving data, and adhering to demanding compliance and regulatoryrequirements.
In addition, both of the above options also necessitate the availability of an IT specialist to support the usersand systems — thus placing further financial strain on small business. In the event that the business grows, the complexities and demands on both the systems and the specialist increase also, often leaving the specialist with little resources to do more than maintain and support the existing systems; updating and deploying new solutions often gets left behind in the bid to maintain the status quo.
Nor are the costs and effects merely internal ones; the knock-on effect of being unable to perform adequately in an increasingly global environment impinges upon a business’s ultimate survival. As the market-place becomes more IT-driven, and customers demand better and speedier services, organisations which are supported by sophisticated fully integrated software applications will obviously out-perform those whose systems are cheaper, older, less cohesive or slower. Furthermore, the relative ease for business based in regions with access to cheaper products and services to bid for customers globally, has resulted in a vastly increased marketplace, with more competitors than ever. The net effect of this is that customers are demanding more, and have a greater pool of providers to demand from. Any business which is unable to respond quickly, competitively, and provide a better, cheaper service, will suffer.
The net effect of all of this is that traditional IT options put businesses in an unenviable business and financial position: either they invest in sophisticated, fully integrated systems — with all of the costs involved — and retain good business and marketplace practices; or they “make do” with a variety of non-cohesive programmes, and risk suffering the knock-on effects outlined above.
So, what are the benefits of using cloud computing?
3. International Standards 3.1 General Benefits Cloud computing has a wide range of benefits for all business, and the cost implications for using cloud computing, as opposed to on premise systems, is significant.
Costs aside, cloud computing is distinguished by the following advantages:
· Straightforward demonstration of services available
· No internal IT resources required
· Wholly flexible accessibility of services for all users (Web-based)
· No maintenance or upgrades required
· Infrastructure maintenance and support is provider’s responsibility
· Service can be configured and personalised
· Service can be amended — expanded or restricted — as users’ business-needs change
· Immediate guidance, support and advice available to users
And then there are the financial benefits.
3.2 Financial Benefits A report published in 20131 highlighted the staggering differentials in the cost between cloud computing software services, and traditional on premise systems.
The study on which the report was based looked at the total cost of ownership — TCO — of a system over four years — which represents the costs of buying, or buying in to, and operating / maintaining an IT solution over its useful life. (This was chosen as the preferred comparative measure, above Return on Investment, which the authors determined was too subjective in nature, as it is a quantitative measure which tends to include business benefits, which are more difficult to accurately compare than pure costs. TCO, it was concluded, is a more accurate measurement if you start from the position that the services being compared provide more or less the same benefits, costs aside.)
In appraising the costs, the authors included the following elements:
· Planning and Selection of Systems
· IT Infrastructure Hardware, Software and Support (applied almost exclusively to On-Premise solutions)
· Application Subscription or Application Licence costs
· Application implementation, customization, integration, end-user support and administration
· Initial and Ongoing Training Costs
·
and looked at the comparative TCO of ERP and CRM solutions — both cloud-based and “traditional”.
“It found that overall, the TCO for cloud ERP and CRM solutions was as much as 45% less than for similar on premise solutions, over 4 years.”
When looking solely at the first year of costs, those of the on premise solution greatly exceeded those of the cloud solutions — as would be expected, given the initial capital outlay required by the former. However the higher costs continued in subsequent years, due primarily to the costs of IT resources needed to manage and update the IT systems and infrastructure.
Overall, in almost every category studied, the TCO of cloud solutions was substantially less than that of on premise solutions. The only area where on premise systems proved more cost effective at any time was for application software costs alone. However, this was significantly balanced out by the reduced costs of all other areas, including evaluation & selection, user training, and application implementation & support.
4. Is Clouding Computing Always Better The solutions offered by cloud computing merit it thorough consideration. It enables companies of all sizes access to sophisticated IT expertise, infrastructure, programmes and support, without the up-front capital costs of the traditional on premise options.
However, there are issues other than cost to consider, particularly:
· How flexible is the service? Is it possible to expand / reduce your service without incurring additional costs?
· What security features does the provider offer?
· How / where is your data stored, and who has access to it?
· How flexible is the package — can it be personalised in any way, to address your specific needs?
All of these matters necessitate considered research and evaluation by the customer of the vendor; a well-regarded, reliable vendor will be able to address all of your specific needs and provide flexible solutions for optimal management and productivity.
5. Conclusion The increased popularity and accessibility of cloud computing has resulted in comprehensive sophisticated IT systems being available to businesses which might otherwise not have the financial capacity to invest in them. As such, cloud computing is an obvious and attractive option for companies looking for affordable IT solutions, without compromising on quality or delivery. In addition to cost benefits — which can be substantial, as highlighted in a recent report — cloud computing offers customers a wide range of advantages over on premise options, including flexible accessibility, improved data storage, easy access to information, and access to the most recent systems. While there are aspects of cloud computing which would not make it suitable for all businesses — those with specific and particularly heightened security issues, for example — overall, cloud computing is indeed the technology of the future.
CMO-Software is a market leader in the provision of HSE management software solutions across a wide range of sectors, including Energy, Mining, Oil & Gas, Transport & Logistics and Manufacturing. We recognise that the future of software solutions lies in cloud based technology, and to this end our services are available both in public and private cloud editions. In this way we are confident that we can provide the most comprehensive and flexible solution to all clients, irrespective of their size, specific requirements or current IT infrastructure. For more information about CMO and to discuss your firm’s specific needs, please contact us.