Cloud Computing: What It Is and Why Your Business Should Be Using It

What is Cloud Computing?

You may have seen a lot of buzz in the business press recently about cloud computing. But what exactly does this mean? Even computer industry people differ on how to define it. Basically cloud computing is a way of outsourcing your software applications and computing infrastructure to a third-party vendor. The term "cloud" comes from computer network diagrams, where the network itself is depicted as a cloud.

With cloud computing, all the software you use lives on a remote computer that you access over the web. So instead of opening up your Microsoft applications (or whatever you use) on your local computer, you go to a website to access them. Everything looks exactly the same as it would on your own computer, but putting your applications in the cloud provides several advantages.

What Are The Advantages of Cloud Computing?

Cloud computing affords many advantages. Since someone else is maintaining your servers and other computing infrastructure, you never need to update your software or install patches. You don't need to worry about viruses or hackers, because someone else is performing intrusion detection and cleaning your system of viruses automatically – keeping your system totally secure. All of your data and applications are automatically backed up for you, so you never have to worry about data loss.

Also, if there is a disaster in your workplace, you can continue to run your business from any location that has Internet access. If you're really paranoid about security, you can set up a VPN (virtual private network) for increased privacy in connecting to the Internet. Some cloud computing vendors will even sell you a T1 Internet connection at cost.

What this means is that the only hardware you have to maintain are the laptops and workstations you use to access the Internet. Most businesses have to replace all of their workstations and laptops every time Microsoft comes out with a new operating system, because each new version requires much more computing capacity than the prior version. With cloud computing you never need to worry about this, because all of the software lives on a remote computer with all the capacity you need. You can always have access to "best-of-breed" software regardless of how powerful your local computer is. This enables you to increase the life of your hardware, because you will only need to replace your computers when they break, not when your software requires more memory and processing speed.

There are tax advantages as well. When you buy hardware and license software, these expenses are carried on your books as assets, which must be depreciated over time. Cloud computing is a service that you can expense, which means you get a tax deduction for these costs. Furthermore, with cloud computing you can lock in your monthly price, sometimes for a few years. This allows you to predict your business expenses more reliably than if you maintain your own computing infrastructure. In addition, cloud computing helps you “green” your business, because you can greatly reduce your electricity costs since you no longer have to operate your own servers.

Software As A Service

You may have heard the term "software as a service." With cloud computing, the vendor is licensed to provide you with the software you need when you need it, instead of you having to maintain costly licenses that may exceed the costs of your actual computing needs. For example, some businesses only use an application such as Microsoft Project on a quarterly basis, so why should they pay for a costly perpetual or term license?

Also, the number of employees who need to use this application may change, because businesses are dynamic. So why should you buy 10 licenses when a year into the license you may only have 7 users for this product? Furthermore, Microsoft Project is an application that many businesses only use on an occasional basis, so why should they pay for year-round use? Some cloud computing vendors let you pay for the applications on a "pay for what you eat" basis. In other words, if you only need to use an application a few months out of the year, you only pay for that application for those months in which it was used and for the number of users that deployed it.

On-boarding and Off-boarding

In-house IT departments often have difficulty adding and subtracting users from their systems quickly. I once worked for a corporation where it took as long as two weeks for the IT department to grant employees access to the software applications they needed to do their job. With cloud computing, new users can be on-boarded quickly (sometimes in as little as 60 seconds) and removed just as quickly when they leave. This is important not only to the productivity of your business, but also to the security of your data. You don't want terminated employees to have access to your systems after they leave, as this could pose a serious security risk.

But How Secure Is It Really?

There have been some industry pundits and bloggers decrying the cloud computing model as insecure. I interviewed some IT professionals to pin them down on their specific concerns. They replied that you don't know who is in the cloud computing vendor's data center and how carefully they have been background checked, so you don't know who has access to your data and whether they will keep it confidential.
So does this mean that cloud computing is insecure?

The answer is, it depends on the cloud computing vendor. Therefore you need to perform due diligence on your cloud computing vendor just as you would for any other vendor you outsource business functions to. If the vendor is large, then there is more of a concern about who is in their data center. This is especially true if the vendor has a large data center off-shore, where the laws are different and the employee qualification process may be less stringent.

The security of your data should be a primary concern for you. To address this issue in the context of cloud computing, you should ask the following questions of any prospective cloud computing vendor:

1. Will the vendor’s data center employees sign a non-disclosure agreement (NDA)? If the answer is yes, then this should give you an additional level of comfort because it shows the vendor realizes that confidentiality of client data is critical to their business. If the vendor violates the NDA, not only would they be financially liable to their client, but the harm to their business reputation would be irreparable.

2. Where is the vendor’s data center located? If the data center is off-shore, it might not matter if the data center employees sign an NDA, because enforcing such an agreement on another continent is expensive, time-consuming and difficult.

3. How physically secure are the vendor’s data center facilities? Does the vendor have their own data center in the middle of nowhere, or are they co-located in the data center of a large ISP or a major technology provider? Large companies generally have better security than small ones, so a smaller vendor co-located within a larger company's facilities should give you a better comfort level with respect to physical security. Ask about standard security protocols such as limitations on access to the data center, sign-in logs to the data center, electronic card keys, etc.

4. Does the vendor offer data encryption? Encrypting your data gives you an extra level of confidentiality.

5. How long has the vendor been in business? Obviously you are going to feel more comfortable with a highly-experienced vendor than with a vendor that is new to cloud computing. In addition, more mature vendors are more likely to have more efficient applications and more experience in administering cloud systems, which means you can run your business more effectively.

I hope this article has provided you with a reasonably comprehensive overview of cloud computing. If you have questions or comments, please contact the author at marcy.gordon@proxios.com.

Copyright 2009 Marcy J. Gordon