Cloud Technology and Your Business

By Charles Groce, Head Engineer/Developer

Every business owner out there understands that these days IT resources are critical to an efficiently run company. Without computer storage, we’d still be filing stacks of manila envelopes in our storage closet, and meticulously managing our own paper archive of quotes, invoices, and order tickets. Without MIS systems, we’d be still be calculating by hand how much to charge customers on complex jobs to ensure we’re actually making money. Without file exchange servers, customers would still have to mail their files or send them via courier. And without an IT specialist to put it all together, none of it would work right, and we’d be left behind in the business Stone Ages – going from IT crisis to IT crisis.

IT is here to stay. And there’s no question it will always be worth a hefty investment of company resources. Or is there?

As in all industries, even in information technology eventually a more efficient way of doing things emerges from solutions providers, and the market becomes saturated with too much of a particular commodity. Then comes the inevitable collapse in prices and weeding out of behind-the-times service providers. In the case of IT hardware and software, this means eventually the more cost efficient solutions will win out and the more inefficient solutions will fade away into the past.

This is where “the cloud” comes in. The cloud is, in short, a series of very large networks of very powerful server systems supported by some of the smartest IT pros out there. Not only does it offer computing power, it also offers a wide range of applications, programming kits, database software, and more. All of the building blocks of IT based services are available in a pay-as-you-go model with no up front costs.

Google, Amazon, Microsoft, all of these companies are benefiting from their usage of the cloud to deliver services to their customers, and these three companies together enjoyed $90 billion in increased market cap last quarter.

In reporting on this phenomenal growth, Bloomberg News reported last month “[the] trio shares a reliance on technology that comes from powerful machines lashed together in bunkers the size of football fields. These data centers are capable of providing a broad range of services at a low cost, be it Microsoft’s personal and business software, Amazon’s e-commerce and computing power, or Google’s Web search and advertising algorithms.” Contrast the performance of these three companies offering cutting-edge cloud-based software services with companies like HP, Oracle, and IBM, companies who are still locked into the old license-based hardware and software models, and you’ve got a picture of companies enjoying success in 2015 versus companies deep in existential crisis.

Which brings us to your IT closet. How can manufacturing, print, or even any industry businesses benefit from the cloud if the machinery of is located on site? Doesn’t the very nature of print and manufacturing in general mean IT software should be located on site as well? Not at all. Internet speeds are improving all the time, and companies in most industries are benefitting from it not only in IT but also in their utilization of remotely located personnel in virtual offices. Although internet infrastructure in the United States is still playing catch up with most of the rest of the developed economies, it is improving all the time, with companies like Google who see their future in cloud-based solutions leading the way.

Definitely one thing slowing down the usage of cloud-based services by many industries has been the slow adoption by traditional software vendors of the cloud model relative to other software industries. For example, in the Print industry – If you’ve ever been pitched a print specific software system for MIS, ERP, or even prepress file exchange solutions you know the proposals often come with not only expensive software licensing costs but also hardware requirements and expensive support contracts. All of that hardware depreciates in value over time, and of course you’re not allowed to resell the software you purchase should you decide to move on.

The cloud-based model includes none of that. Outside of having a network setup to satisfy the needs of staff workstations, companies simply tap into resources of the cloud, buying only what they need, when they need it. Should a company’s needs increase because of an increase in web traffic, they can simply upgrade their subscription. If needs go the other way, companies can buy less server power from the cloud and save money. Scaling in the cloud is one of the great advantages of adopting this model. Some cloud service providers, like Amazon, even provide tools to do this automatically.

Take email hosting. It is very common for companies to host their own email servers in their IT closet. Usually this means in terms of cost at least one server running Microsoft Exchange and an Exchange expert (whether contractor or IT staffer) to manage it and deal with emergencies. This means at least email hosting costs well into the ten thousands over the life of the server. How does the cloud handle this? Website hosting in the cloud can start at as little as $5.95 a month, and this often includes email. How are web hosting providers able to offer these services at such little cost? Because they are using the cloud themselves to save money instead of having their own huge data centers, and this means they’re able to scale up or down as needed in terms of their own subscription costs.

Why can’t, say, the MIS/ERP software market be cloud-based and come with a pay-as-you-go model with no up front costs? It is and absolutely will be. Big changes are coming down the pipe in print MIS software in particular, with new players entering the market offering highly flexible cloud-based models. For now, owners interested in cloud-run businesses should keep an eye out for what happens to Oracle, HP, and IBM over the next few years. These companies are likely to survive, in my opinion, but they’ll be playing second fiddle to Google, Amazon, and Microsoft who recognized the power of the cloud early.