Small Business and the Cloud

There’s been a lot of talk lately about “the cloud” and how it affects businesses. First, what is the cloud? The cloud has often been synonymous with the whole internet, so what we’re talking about here is cloud computing. It’s been more commonly called Software as a Service (SaaS) and refers to software applications hosted on the Internet like Salesforce.com and Google Apps.

Technically, in addition to SaaS there is also Platform as a Service and Infrastructure as a Service. For example, Salesforce.com also has Force.com which acts as a PaaS, allowing developers to add on to the basic Salesforce.com software. Amazon Web Services acts as an IaaS for storing data, streaming video and other options in the cloud.

Cloud computing can be public, private or virtual private (you get a private section of a public provider). It’s really like using a mainframe computer in the 60’s – all the outlying parties use one main computer. It’s just that now that computer is on the web, not in the basement.

So what’s the big deal, you ask? You may be a small business owner with only a few computers. But, here’s the rub. What if you grow? How do you scale your business?

In web hosting you normally start off with a shared host, upgrade to a Virtual Private Server, then a Dedicated Server as the demands on your web site increase.

In the business world, you start with a computer or two. As the number of your employees grows you may add a small server to act as a file server or add an email server. Then you have to look at backing up your data on a Network Attached Storage (NAS) or a Storage Area Network (SAN). As your server needs grow you need the hardware, software and technicians (IT) to run it all. It all adds up to money and headaches.

Doing all this in the cloud has been tried for years with limited success. But, recently, the cost of data centers and bandwidth has come down so much that it can be profitable to run services from the web.

In the late 80’s H&R Block had computers that sat mostly idle for 9 months out of the year, so they started CompuServe, an online service used during off-business hours, to make extra money. In the same vein Amazon.com has tons of servers and storage capability, so they started leasing it out.

Okay, so now you know what cloud computing is. The question is, do you jump in? Here are the advantages and disadvantages:

Cloud Computing Advantages

  • Cost. You pay only for what you use. That avoids having to pay for hardware and bandwidth to match your peak demand, or to meet projected future needs. Also, if you need less service, you can scale down or even delete services without having a fire sale on used servers afterword.
  • Scalability. Working in the cloud is like working in a bubble. If you need more space the bubble grows, it you need less it shrinks. It’s dynamic, not static.
  • IT Services. Hardware upgrades, software upgrades and patches, data backup and storage, security, they’re all part of the service and the cloud providers can afford to hire the best whereas you, as a small business owner, would have to deal with IT crew turnover as the good ones move on to bigger and better opportunities.
  • Software Licensing. As your company grows, you’ll run into something called a “software audit” from a software vendor. “Well, this license is per CPU and you are using Quad-core processors, so you owe us four times as much.” Not a problem with cloud computing.

Cloud Computing Disadvantages

  • It’s new. Cloud computing is growing rapidly and there’s bound to be some shake-out in the future. You don’t want to get stuck with one that folds up shop, taking your data with them.
  • It’s new. There is also going to be a  ‘platform war’ over the interface used for the software. Many providers will be using proprietary software, making transfer to another provider difficult.
  • Where’s your data? You don’t have control over your company’s data. It’s in the cloud. Like when T-Mobile and Microsoft’s subsidiary Danger lost all of the data from Sidekick smartphones.
  • Security. You may be a small company, not a very big target for hackers. But the cloud vendor is a big target and you are depending on them to provide security for your data.
  • Interoperability. One vendor provides CMS. Another provides accounting. Can they talk to each other?
  • Customization. Or rather, the lack thereof. It’s mostly a one-size-fits-all and it may not fit your business.
  • Downtime. Normally, if a backhoe operator cuts a cable, your employees can still get some work done. Not with cloud computing. If their servers go down or if you lose your Internet connection, you’re twiddling your thumbs until someone else fixes it.

Cloud computing is growing rapidly, one survey showing a 320% increase from Jan. – Sep. 2009. If you do decide to jump in, here are some things to look for.

Cloud platform standards. Amazon is the largest cloud computing provider and its API is becoming a standard for many other providers. At the present rate of growth its going to be hard for standards to keep up, so also try to use one of the major providers that others look to for guidance.

Ease of migration. This applies both for moving your data into the cloud (like inexpensive migration software or a provider interface rather than a team of IT specialists) and for moving your data from one provider to another. Also look for ease of downloading your data if you need to.

Developer tools. To avoid that one-size-fits-all problem, look for a company that welcomes developers and provides tools to customize their application to fit your business needs.

Track record. Cloud computing providers should be posting real-time status and reliability stats. Amazon and Google App’s are doing this now. There’s not much information out there on performance data as of yet, though, so it’s hard to find out how well the application will perform in real time until you sign on the dotted line.

In the future you should see more data like this, plus probably some type of third-party audits verifying the safety and security of the provider.

If you are a small business owner all this is something to keep in the back of your mind as your business continues to grow. I recommend doing careful research and perhaps moving into the cloud a step at a time.

But, after years of hopeful promise, it looks like cloud computing is almost ready for prime time.

Further Reading:

How to know when to send your email to the cloud

L.A. votes to “Go Google”; pressure shifts to Google and the cloud

Cloud computing and the return of the platform wars

Cloud cuts everyone’s cost of ownership