What the cloud really is

Many people still don’t know what the term “cloud” means or how to use the technology for business. Here’s a primer — and a short reader survey. Please respond by January 30, 2016.

Joe, a dentist from Iowa, went on a tour to Morocco last year. One day, he was so busy viewing ruins that he managed to lose his iPhone. He was distraught because all his contact info was in the phone, not to mention his tourist photos.  But when he called his service provider, he was told not to worry. “No problem,” said the customer rep. “When you’re home, you can get a new phone and we’ll retrieve the contacts. They’re in the cloud.”

Joe didn’t have any idea what being “in the cloud” meant (he still doesn’t). He was just happy to know he could get his information back. As it turned out, his new phone not only had his contacts preloaded, but his photos and text messages as well. “Boom, they were just there,” he says. “I was shocked.”

Like Joe, there are still plenty of people who might benefit from cloud technology but don’t really know how to use it — especially for business. As singer Joni Mitchell put it in Both Sides Now, “I really don’t know clouds at all.” Of course, she was talking about life’s illusions rather than technology, but her words still apply here. 

That’s why we decided to try to bring some clarity to the issue.  Below you’ll find a short primer on the cloud and how to decide if the technology is right for your business needs. We’ve also designed a short survey to see how many of you are using the cloud in business — and if so, how.

WHAT IS THE CLOUD?

Where does the term “cloud” come from? As webopedia puts it, it’s just a metaphor for the Internet. In cloud computing, you access applications and services via the Web rather than your hard drive. In other words, you use a network of remote servers accessible through the Internet (the cloud) to store, manage, and process data, rather than a local server or a personal computer.

In cloud computing, the cloud provider maintains all the servers and other infrastructure, and you typically pay “rent” for whatever service or storage space you are using. With an application, for example, you will need to store the programs and data, such as general ledger transactions and account balances. Even though you are sharing the program, the data is specific to your company.

Most of us use cloud computing in one form or another. When you store data over the Internet using Microsoft OneDrive or Google Drive, you’re in the clouds. When you run programs such as Facebook or LinkedIn on the Internet, you’re also in the clouds. In Joe’s case, his photos and contacts were most likely saved because the sync mode was switched on in his iPhone options.

When you use consumer-oriented programs such as Facebook, you don’t pay rent for the service as you would for a business application. That’s because the provider’s revenue is derived from other sources, such as advertising.  

TYPES OF CLOUDS

There are different kinds of clouds, including:

• Software as a Service (SaaS): here, a vendor or third party hosts a software application. Examples include Microsoft Office 365, Google Apps, NetSuite and Salesforce. SaaS is usually less expensive than licensed applications because you typically pay a monthly or annual fee — often calculated according to the number of users. In the long run, however, it can end up being more expensive. SaaS has become extremely popular; according to Forbes, the global SaaS market is projected to grow to US$67B in 2018 from US$49B in 2015.

• Platform as a Service (PaaS): a vendor or third party hosts a platform for customers to develop their own applications or add to the existing one. For example, Salesforce and NetSuite provide tools for developers to create add-on programs that will extend their base product for unique requirements not met out of the box. 

• Infrastructure as a Service (IaaS): a provider such as Amazon EC2, Windows Azure, Rackspace or Google Compute Engine hosts servers, storage and networking that could be used for any purpose. Your company doesn't need to have rooms full of expensive equipment with technical people to care for it. IaaS is expected to reach US$16.5B this year, an increase of 32.8% from 2014, Forbes says.

PUBLIC AND PRIVATE CLOUDS

SaaS, PaaS and IaaS can also be public or private.

Public: the platform or application is shared by many organizations. Examples include NetSuite and Salesforce. You can tell you have a public cloud when your software is updated automatically by the vendor.

Private: the platform or application is dedicated to a single organization. This gives the company more control over enterprise and customer data. For example, many ERP systems don’t offer a public cloud approach; they are on a private cloud.

Typically, public clouds cost less to maintain, while private clouds provide more control and flexibility. You can also use a hybrid approach, where some data is deployed on a private cloud or even on the premises (local server), with the rest on a public cloud.

IS THE CLOUD RIGHT FOR YOU?

Popular as it is, cloud computing has its limitations. Companies might decide not to use it for many reasons, such as:

• The company’s data could be hosted in another country where the laws do not provide sufficient security and confidentiality.

• The company might not want to have its data/crown jewels stored off site.

• Not all systems are cloud-ready, so there might be fewer options to choose from.

• Cloud solutions depend on the availability of the Internet, which can be a problem in some locations.

• It might not be possible to customize the software inside the source code if other organizations are using the same system.

• Costs can sometimes accumulate over time to the point where they exceed a licence-based/on-premises approach.

OUR CLOUD SURVEY

Do you already use cloud computing? We’d like to know. Please visit our survey here

If you are already a cloud user, we’d like to know how happy you are. 

In the survey, we have focused mainly on enterprise resource planning (ERP), time & billing and customer relationship management (CRM), but you can also tell us what other applications or services you use.  The survey will take only a couple of minutes to complete and does not include any confidential questions. We will share our results in one of the next editions of CPA Magazine.

Please respond by January 30, 2016. We look forward to your input!

About the Authors

Michael Burns


Michael Burns, MBA, CPA, CA, is president of 180 Systems (180systems.com), which provides independent consulting services, including business process review, system selection, business case development and project management.

Margaret Craig-Bourdin


Margaret Craig-Bourdin, MA, DEA, DESS, is editor, online edition, at CPA Magazine.

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