What’s right for your business?
As your business grows, you may find that your network servers strain to keep up. This is a good problem to have! It represents an opportunity to refine your business and IT systems, and to improve your operating efficiency and profit margin.
From a simplistic point of view, you might ask ‘Should we get a new server or move to the cloud?’. In reality, the problem is too complex to solve by answering this simple question. Perhaps the more relevant issue to consider is what type of data management services best suits your business. Rest assured, you can find effective and cost efficient solutions if you approach the problem with good understanding of the key issues that affect the decision.
The objective of this article is to provide background information that will help you develop a solid plan to investigate relevant options for data management services. Secondarily, we will briefly touch on hosted applications. But before we forge ahead discussing these issues, let’s first clarify the meaning of ‘cloud computing’.
Basic Description of Cloud Computing
Cloud computing, in broad terms, includes two distinct modes of hosted services, ‘Hosted Applications’ and ‘Hosted Infrastructure’ or ‘Data Management Services’. Each of these serve different objectives and bear different types of risks. Understanding these issues provides the basis for determining which elements of cloud service best fit your company’s needs and business risk tolerance.
With hosted applications, the software for specific applications resides on cloud based computing platform. Users access the applications through internet connections. Cloud service providers typically market hosted applications via subscription, sometimes referred to as SaaS (Software as a Service). A user has access as long as the subscription fee is paid. When subscription payments run late, the user typically loses access to the application.
Similarly, with hosted infrastructure, a cloud service provider offers data storage and management services on a cloud based platform, and accessible to the client by internet connection. Data storage and management services can range from backup of data normally residing on a NOC to running a company’s entire network on a cloud based system. The ability of a customer to access data stored via hosted infrastructure can vary according to the contractual arrangement between the cloud provide and the client. Cloud computing companies generally offer these services for a periodic fee.
When shopping for a cloud computing company, whether hosted applications, hosted infrastructure, or both, a business should carefully consider the quality of security protection service available. Cloud based security protection services vary depending on the service provider, the hosted infrastructure architecture, the security software, and contract terms.
Now, let’s reconsider the original question ‘Should we get a new server or move to the cloud?’. This article addresses concerns with hosted infrastructure and hosted applications, and a range of other factors that affect optimization of an IT system upgrade.
Factors Affecting Selection of Optimum Computing Solutions
Several factors, both environmental and those related to company structure, weigh in on a company’s decisions about procurement of hosted services. Below we list several of these important factors to consider when selecting an optimum computing network to run your business.
Some companies’ entire staff works from a single site. Why do these companies need hosted apps or hosted infrastructure? Can they manage their business economically with local applications and 100% onsite infrastructure? Do they need complete or partial hosted services? No single answer exists for all companies. The best solution depends on several factors, some of which we briefly discuss below.
A very small company may not have the resources to build and maintain the entire computing infrastructure needed to support their operations and business functions. In this case, solutions exist for 100% offsite (hosted) IT infrastructure and applications. Conversely, a local NOC (Network Operations Center) may provide the best solution for very large company that has adequate resources to effectively manage all aspects of network computing. Even very large companies often utilize offsite data management services to retain independent backup systems. Most companies fall somewhere between these two extremes. Many of them optimize with a hybrid of local NOC and hosted services.
Server Installation Cost vs. Data Storage Cost
Increasing onsite storage capacity requires purchase of new servers or upgrading the servers in place. Cloud data storage solutions avoid this capital investment cost. However, monthly data storage fees typically offset installation cost savings. Over an extended time, the storage fee typically exceeds onsite server installation costs.
Businesses use both onsite and offsite (hosted) disaster recovery services. Cloud based DR services can provide greater redundancy than local solutions in terms of independent data storage and critical software that support business continuity when your primary systems go down. Such redundant DR services provide quick and complete recovery from data theft or data loss. However, this redundancy benefit bears costs of increased capital expenditure for local solutions, or increased services fees for hosted DR services. Whether the benefit is worth the cost depends on your company’s business risk tolerance (see next section). You should consider the enhanced redundancy as insurance against the cost of downtime.
Business Risk Profile
Typically, local infrastructure and software solutions require relatively large capital investment for purchase and relatively low monthly operating expense. Conversely, use of hosted data management services and hosted applications reduces initial capital outlay, but increases monthly operating expense, compared to locally owned and operated systems. Which of these systems best fits your company’s needs and will return the greatest ROI depends partly on your company’s business risk profile. For example, your business may enjoy steady demand, resulting in relatively steady operations and cash flow. In this circumstance, IT investment for a purchased system is easy to determine. However, if your demand fluctuates, the ROI calculation is more difficult to perform with certainty. In this circumstance, a hosted system may prove a less risky solution, as hosted services are scalable. You pay for what you use and avoid the potential for over investment for uncertain use of infrastructure necessary to handle peak demand loads.
Cost of downtime also contributes to your company’s business risk profile. Some businesses rely on steady state operations to satisfy customer demand and control costs. In this case, cost of redundancy as provided by hosted DR services may prove a worthy investment (see Disaster Recovery discussion above).
Complexity of Computing Needs
If your company utilizes a very narrow range of applications, the cost of purchase may be relatively small. In this situation, your best option could be to purchase software and operate these applications from a local NOC. Conversely, if your business utilizes a wide range of software, the cost of purchase may be relatively high. In this circumstance, use of hosted applications may prove the lower cost solution, due to economies of scale. For example, if your business needs to use an application infrequently, the best option could be to purchase hosted applications on demand.
Some software and applications require local installation in order to function properly as they are not ‘cloud friendly’. Attempting to operate such software remotely can cause them to malfunction or operated at significantly reduced efficiency. This situation can prove disastrous for considered business critical software and applications.
Define Business Risk Tolerance
Above we briefly touched on the topic of a company’s business risk profile. In this section we provide more detailed discussion on this important topic. When considering a system upgrade, and whether or how to utilize hosted services, a company needs to clearly understand their tolerance to certain business risk factors.
The relative importance of Business Continuity depends on the nature of your working relationship with your customers and supply base, and level of difficulty re-starting operations after a shut-down. Can your business maintain continuity if you temporarily lose access to critical functions? What is the cost of downtime, in terms of lost productivity? How does system downtime affect your customer relations? For some businesses, these issues may not present serious consequences. For others, these issues can cause major problems.
If IT interruptions significantly adversely affect your business continuity, you may justify the added expense of providing redundancy as described in the Disaster Recovery discussion above.
Loss of Access to Critical Applications
Some companies’ workflow relies on uninterrupted access to critical applications. System shutdowns severely constrain their business workflow. If this situation applies to your business, you should consider that unpaid fees to cloud service providers can have the same impact as system shutdowns.
Loss of Access to Critical Data
Will loss of critical data cause problems for your customer base? Does your company’s workflow depend on access to critical data? The answers to these questions provide clues to the value of efficient backup and disaster recovery solutions, as well as highlighting the need for good cyber security.
How sensitive is your data and information? Would unauthorized release of sensitive data harm your business flow, business reputation, or ability to compete? Cloud based services can add access points compared to local NOCs. However, some cloud computing companies provide cybersecurity service at levels hard to achieve on a local NOC at a reasonable cost.
Defining the optimum system, in terms of local vs hosted computing, requires balancing many of the different aspects discussed in this article. There is no single best answer for all companies. The best solution for your company will be customized specific to your needs. The solution(s) should help you meet your business objectives, while balancing cost vs. benefits of the different options available.
A professional IT MSP can provide an assessment of your systems and help you determine the best configurations for your business.