What is Cloud Computing? (And Why Should I Care?)

Did you know that we are in the midst of a huge transformation? This transformation is comparable to when electricity was made available to the common American household. It has been coming for years, and you need to know about it - and how it affects your company if you’re going to stay competitive. Have you heard the term “Cloud Computing”? If you haven’t, and you own a business, then it should be on your radar.

According to Wikipedia, Cloud computing is “Internet-based computing, whereby shared resources, software and information are provided to computers and other devices on-demand, like a public utility.” How does this affect you? Read on!

How Did We Get Here?

Before there was electricity, many businesses ran their machines off of water, wind or even human power. If you manufactured something, you might have had a building next to a stream. That building might have had a water wheel that caught the water and turned gears that might power a machine (or several machines) inside the building. Back then you had to provide your own power to run your equipment.

Then came the discovery of electricity. Soon after, tools arrived that would run off the electricity, however, most companies had to produce their OWN electrical power if they wanted to run these tools. This was not cheap and usually meant that only larger companies had the means to build the infrastructure needed to create their own power. Electricity was unreliable and these tiny “power generation plants” needed their own staff to run and keep everything maintained. Companies found themselves not only in the business of producing their products, but producing electricity as well. One relied on the other in order to happen.

By the early years of the 20th century, manufacturers didn’t have to be in the power generation business anymore. They could run their tools from power produced in power plants that were usually far away. The electricity was delivered to them on a grid or network of supply cables. Remarkably, the power companies took over the generation of electricity very quickly. Soon, the tiny power stations that companies were maintaining became obsolete.

By supplying electricity to so many people at a time, the power companies achieved an economy of scale that no private company could match. It became a competitive necessity to hook their factories up to the power grid to stay in business. Soon it was possible even for households to afford to hook up to this power grid.

New Frontiers but a Similar Path

Today we are in the midst of another transformation, and it’s following a similar path. What happened so many years ago to the generation of power is now happening to the processing of information.

In the early years of this revolution, we had mainframes. Big companies were the only ones who had the means to staff a data center and to purchase computing power. Users would bring punch cards to the mainframe and were charged for processing time.

Later generations saw personal computers enter into business. However, not everyone got a personal computer (PC) - maybe only the number crunchers or accounting department had them. Soon enough, more people had them and we found out that we could share things and be much more efficient if we connected the PCs together.

We saw businesses install their own computer networks and servers so that all the PCs could have a central data repository. As these networks and systems grew, it became necessary to manage these systems. Companies hired internal technology staff to maintain the systems. Today, most businesses are not just in the business of producing their products. Surprisingly, they are also in the technology business as well. They have email servers, accounting systems, and all manner of systems to keep the business running smoothly. Does this sound a bit like the companies that had to be in the power business in order to be in the manufacturing business?

Enter the internet - “The Cloud”. First there was dial-up. It was slow and painful and it made the internet almost a novelty at first. But, just like electricity, economies of scale kicked in along with Moore’s Law(1), and internet speeds have gotten faster and faster as the years have passed. This has resulted in costs coming down so that bandwidth has become more and more available, for less and less money. Now most households in the USA have access to relatively inexpensive broadband (high-speed) internet. It has almost become a utility.

Do You Really Care How Technology Works?

When you really think about it, these days most people don’t care about how technology works - they just care that it actually DOES work. Do you care what brand of cabling Florida Power & Light uses? Do you care if the servers at your telephone provider are Dell, HP, or IBM? Do you care how much hard drive space the servers at Google.com have, or if they run Windows, Mac, or UNIX? Of course not! You only care that when you plug your lamp in, check your voicemail, or type your words in Google’s search box, IT WORKS. Right?

We are entering an age where computing is becoming as much a utility as Florida Power & Light. Sooner rather later, much like the companies at the turn of the century, you too will need to take advantage of the economies of scale that “Cloud Based” computing companies offer in order for you to stay competitive.

You May Already Be Using Cloud Computing

One of the best examples of Cloud Computing most use every day is email. How many of us have an email account for personal (or business) use that ends with gmail.com, yahoo.com, aol.com, or hotmail.com? For years companies like Yahoo, AOL, Google, and Microsoft have given away email accounts for free. This has allowed them to serve advertising to users in exchange for these free accounts. These companies have learned how to provide email on a scale not seen by ANY of even the largest enterprises. Economies of scale are truly being realized. These companies are serving millions of mailboxes, and they have become very adept at it. When was the last time your Yahoo, Hotmail, or Gmail account was not available? It’s usually just there, right?

This is where you ask yourself as a business owner; “Why would I have my own email server when Google and Microsoft do it so much better, and for so much cheaper?” Both of them now offer business class cloud based email systems using your company’s domain name instead of Yahoo.com, aol.com, or gmail.com. Currently, cloud based email solutions come in at around $5-$15 a month per mailbox depending on which one you choose. There are several well known studies that say it costs the average business about $20-$25 or more a month per mailbox for an internal email system.

If you have a 20 user network and you are hosting your own email, using the numbers above, it could be costing you $5000 a year to host that internal system. Does $5000 sound impossible? Consider this: How much did you pay for the server hardware? How much for the software? What about SPAM filtering? How about the system you use to back it all up each night? How much electricity does it use? How much did you spend on the consultant you use to maintain that server? How much do you spend on that same consultant when you have a problem and need tech support? What about the money you spend paying your employees when there is a problem? Now consider that every few years you have to rip it all out and upgrade to the next new version, and start it all over again.

Now let’s consider that same 20 user office? Except instead of running their own internal email system, they are running Google’s cloud based E-mail system. That same company is spending about $1500 per year for that service including consulting time. They are NOT buying software, hardware, or upgrades every three years. They are not paying for any maintenance on the servers, or security updates. They are not paying for nearly as much consulting time either, because Google’s cloud based email has a 99.999% uptime rating which translates to less than 10 minutes of downtime each YEAR. In other words, if you re-boot your servers ONE TIME over the course of a year, you are not at 99.999% uptime.

If you do the math, you will quickly see that if you are not willing to consider a cloud based solution, you are going to be spending a lot more than your competitor might be if he does. If your competitor across town is using cloud computing they will have less overhead, and might be able to charge less for their services.

Not Just E-mail

But cloud computing is not just for email. There are cloud based applications for almost every aspect or service that one might have on an internal corporate network. There are accounting applications, customer relationship management systems (CRM), payroll, human resources management, file storage and backup. The list goes on and on.

Cloud computing, however, is not panacea. It’s not for everyone or every situation. There are some things that may not EVER be in the cloud. The decision to move in that direction should not be taken lightly. There are quite a few considerations to take into account before making the leap.