Cloud Computing Software: Value Propositions & Issues

6 08 2010

There is a lot of discussion about software applications that run as a service in the cloud (SaaS) and a lot of effort being put into defining clear value propositions that will motivate customers to move some or all of their internal IT software services to the cloud.  Some example of cloud software service providers include NetSuite,, Intuit, and SugarCRM.

First, here are some of the compelling business reasons to adopt software services that run in the cloud:

  • No Software (as says).  Literally, there is no software to install, upgrade or maintain.  It’s all in the cloud, managed by the vendor, and customers access it through a browser.
  • Time savings. Less time spent on IT means more time doing what is core to your business; generating revenue and creating satisfied customers.
  • Anywhere Access.  Most SaaS software these days runs in a browser.  This means that your applications can be accessed anywhere you have a browser, including on your smartphone or at a customer site.
  • Software Updates Don’t Break Your Applications. The vendor has the responsibility to see that the software evolves in a way that does not disrupt business activity.  A nice change.
  • Less Data Integration. Most cloud applications have a common data repository at least within a vendor’s offerings. That means that multiple applications can use the same shared data, breaking up the silos of productivity normally found in backoffice applications.  Of course, the problems remain when doing business or data integration across different vendor’s offerings.
  • Opex, Not Capex. Cloud services are typically billed as a monthly charge that is very predictable for budgeting purposes and can be written off as a business expense.  Purchasing software, installing it on a server and operating it results in significant capital expenses that must be managed and depreciated over time.
  • Lower Up-Front Cost. Typically, cloud applications are offered on a pay for use basis.  With packaged software you pay up front and may go through a substantial development and deployment cycle before you are able to use the application.
  • Predictability. Cloud services are offered for a monthly or per-user charge that is easy to budget for.  There is much less chance of a surprise.

All of these are very compelling business benefits and are generating a lot of interest in the cloud model.  There are also some issues and concerns that need to be considered when moving to the cloud.  The more successful cloud computing vendors will have strong, documented answers to these issues.

Cloud Computing Software Application Issues

  • Data Security.  With cloud computing your data is in the cloud and managed by your cloud vendor.  The question is: Do you trust this vendor with the literal lifeblood of your business? What safeguards and backup procedures do they have to protect your business data?
  • Access Security.  One of the advantages of cloud computing is that you can access your applications anywhere.  The issue is: How secure is the access to your applications and data?  What security measures (Authentication, Access Control, Intrusion Detection) does your vendor offer?
  • Quality of Service: What is the uptime, response time, and latency of the application running on your vendor’s platform?  How well can this service scale as you add users?  What guarantees does your vendor offer?
  • Business Integration.  How easy is it to integrate your existing applications running behind the firewall at your business with the new applications running in the cloud?  There are a number of business and data integration companies out there who are specifically seeking to address this issue.  See
  • Migration to the Cloud.  Most people will be moving applications from in-house to the cloud rather than starting from scratch.  How easy is it to do the migration?  Can you move your data over? Are there tools to assist in the migration? Can you run the two applications in parallel for a period as you get comfortable with the new application?
  • Application Customization. Most cloud applications offer minimal ability to customize the application functionality to your business need.  Serious consideration of cloud computing services is often a trade-off between the compelling economics of cloud computing versus the lack of ability to customize the application. You should look into how much customization is possible with you prospective vendor and if that meets your business objectives.  Obviously, if an application represents core market differentiation for your business, it is probably not a good candidate for moving to the cloud.

There are strong pros and cons to considering cloud software application services.  Some applications are better candidates for moving to the cloud than others.  Also, the value of cloud applications and approach to the issues will vary based on the size of the business, the types of applications, and what industry the company is in.

For Small To Medium Sized Businesses

The economic benefits and freeing up time from IT tasks are significant.  The major barrier with SMB is often the perceived issue of data security.  Vendors should address this concern by:

  • Deliver facts about how often SMBs lose data by managing it themselves.
  • Document the business cost of these losses.
  • Deliver facts about the quality of their service and data protection guarantees.

For Enterprise Customers

The economic, budgetary and access benefits are compelling.  The greater issue here is that most enterprises have dozens to hundreds of in-house enterprise software applications that they run their businesses on.  The major issues with this class of customers will be:

    • Maintaining security levels inside and outside the enterprise firewall.  Approaches for cloud vendors to address these concerns include:
        • Carefully documenting your security capabilities.
        • Carefully documenting your security track record.
        • Providing for some security integration between cloud applications and enterprise applications such that there is single sign-on and consistency of policy between the two environments.
        • Look into security solutions that span applications running in the cloud and in the enterprise.  Example:
    • The ability to integrate applications that exist behind the enterprise firewall with applications running in the cloud.
        • Offer consulting services to help with business integration of the applications.
        • Partner with VARs and System Integrators to offer consulting services in this area.
        • Look into startups that are offering solutions aimed specifically at this problem.  An example is which build connectors and data filters as reusable and sharable services.



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