Technology tutorial: What is cloud computing and why should I care?
From the September 2009 issue of Ceridian Connection.
by Harwell Thrasher © MakingITclear, Inc.
To the nontechnical among us, "cloud computing" may sound like something vague and amorphous. After all, it's a cloud, so that means it's something that's insubstantial, floating in the sky, right?
If you imagine clouds as the Internet, then you can imagine cloud computing as using computers over the Internet. That explains the origin of the phrase, but it doesn't tell you very much about what cloud computing is -- or why you should care.
An evolutionary step
The concept of cloud computing is simple. It's another step in the evolution of technology. When business first adopted technology for business processes, everything ran "in-house" on company-owned equipment. Gradually, business realized that it's not very efficient to devote specialized IT resources and computers to basic business processes such as accounting and payroll. It makes more sense for a company to spend its money creating value for its customers. This is a perfect argument for outsourcing some of the technical aspects of basic business processes.
Step 1: Outsourcing
Outsourcing is great for processes that are standardized and repetitious. Payroll is the classic example. But there are other day-to-day processes that require managers and employees to interact with data. In those cases, classic outsourcing -- sending the whole process out the door for someone else to do it -- isn't very conducive to significant employee interaction.
Companies are caught in the middle. They have a desire to outsource a process but they also want to allow employee interaction with the process. What to do?
Step 2: Outsourced hosting
Until recently, the only solution was to outsource the "hosting" of the process. In hosting, the company hires an outside vendor to set up one or more computers, install the desired software, and then manage the "back-office" technical activities. The company's employees use the software by connecting remotely to the hosted computers. In the early days of hosting, employees would connect using a phone line and a modem. Today, companies connect to outside systems using the Internet, usually through an encrypted connection via Secure HTTP (HTTPS) for security.
Outsourced hosting has advantages, but companies still have to buy a fixed amount of computer capacity and run dedicated computers and software. It's a lot like in-house computing except for the location of the equipment. If the company needs more capacity, they must purchase it. If the company needs less capacity due to a decrease in demand, it's not very economical to cut back, since the computers have already been purchased.
Step 3: Software as a Service (SaaS)
Enter Software as a Service (SaaS). SaaS lets companies share hosted computing resources with other companies -- and each company's data is secured separately. It's as though each company is logging in to the same (virtual) computer but using a secure ID that keeps its data separate. For example, each of Amazon.com's customers is able to see the orders they've placed, but they can't see the orders of other customers. That's like SaaS.
A company using an SaaS vendor isn't purchasing dedicated hosted computers. The company is essentially sharing computer capacity with other SaaS customers. The company gets nearly all of the security of owning computers, without buying a fixed amount of computer capacity. It's similar to the way mobile phone service works. Consider a business that provides cell phones to their traveling sales force. The business doesn't have to buy their own cell towers -- they just share the towers that exist, taking advantage of the buying power of all of the other businesses who share their resource. Businesses that make a lot of calls pay more. Those who make fewer calls pay less. Businesses can sign up for different types of contracts based on their planned usage, and the price varies based on their contract and their usage.
There is a small compromise in security levels for businesses using SaaS, since there is slightly more risk in sharing computers. But a reputable SaaS provider builds a software wall between its customers. In practical terms the business's data is very, very safe.
Step 4: Cloud computing
How is cloud computing different from SaaS? The difference is in the back room where the computers reside. Cloud computing distributes the computer capacity across multiple computers that may be in multiple locations. It's like setting up your checking account with an overdraft option. If you accidentally write a check for more money than you have in your checking account, the overdraft option will automatically move money from your savings account to make up the difference.
Similarly, cloud computing allows processes to run on one set of computers, but automatically "farms out" work to other computers when there's an unusually high need for computer resources. This helps alleviate the response-time issues that come with peaks in demand. In automotive terms, it's like a turbocharger -- kicking in when you need it, but sitting quietly in the background when you don't.
Conclusion
Software as a Service (SaaS) allows a company to outsource a process but still interact with the outsourced systems. SaaS provides a great deal of flexibility and variable pricing. Cloud computing turbocharges SaaS. Thus cloud computing gives businesses the power of SaaS with the flexibility to support periodic peaks in demand. Both SaaS and cloud computing allow access to data over the Internet, and both keep data secure. Most importantly, both approaches allow you to pay for the results you need -- not for the cost of the technology it requires.
Harwell Thrasher is the author of Boiling the IT Frog: How to Make Your Business Information Technology Wildly Successful Without Having to Learn Anything Technical. Learn more at www.makingITclear.com.
by Harwell Thrasher © MakingITclear, Inc.
To the nontechnical among us, "cloud computing" may sound like something vague and amorphous. After all, it's a cloud, so that means it's something that's insubstantial, floating in the sky, right?
If you imagine clouds as the Internet, then you can imagine cloud computing as using computers over the Internet. That explains the origin of the phrase, but it doesn't tell you very much about what cloud computing is -- or why you should care.
An evolutionary step
The concept of cloud computing is simple. It's another step in the evolution of technology. When business first adopted technology for business processes, everything ran "in-house" on company-owned equipment. Gradually, business realized that it's not very efficient to devote specialized IT resources and computers to basic business processes such as accounting and payroll. It makes more sense for a company to spend its money creating value for its customers. This is a perfect argument for outsourcing some of the technical aspects of basic business processes.
Step 1: Outsourcing
Outsourcing is great for processes that are standardized and repetitious. Payroll is the classic example. But there are other day-to-day processes that require managers and employees to interact with data. In those cases, classic outsourcing -- sending the whole process out the door for someone else to do it -- isn't very conducive to significant employee interaction.
Companies are caught in the middle. They have a desire to outsource a process but they also want to allow employee interaction with the process. What to do?
Step 2: Outsourced hosting
Until recently, the only solution was to outsource the "hosting" of the process. In hosting, the company hires an outside vendor to set up one or more computers, install the desired software, and then manage the "back-office" technical activities. The company's employees use the software by connecting remotely to the hosted computers. In the early days of hosting, employees would connect using a phone line and a modem. Today, companies connect to outside systems using the Internet, usually through an encrypted connection via Secure HTTP (HTTPS) for security.
Outsourced hosting has advantages, but companies still have to buy a fixed amount of computer capacity and run dedicated computers and software. It's a lot like in-house computing except for the location of the equipment. If the company needs more capacity, they must purchase it. If the company needs less capacity due to a decrease in demand, it's not very economical to cut back, since the computers have already been purchased.
Step 3: Software as a Service (SaaS)
Enter Software as a Service (SaaS). SaaS lets companies share hosted computing resources with other companies -- and each company's data is secured separately. It's as though each company is logging in to the same (virtual) computer but using a secure ID that keeps its data separate. For example, each of Amazon.com's customers is able to see the orders they've placed, but they can't see the orders of other customers. That's like SaaS.
A company using an SaaS vendor isn't purchasing dedicated hosted computers. The company is essentially sharing computer capacity with other SaaS customers. The company gets nearly all of the security of owning computers, without buying a fixed amount of computer capacity. It's similar to the way mobile phone service works. Consider a business that provides cell phones to their traveling sales force. The business doesn't have to buy their own cell towers -- they just share the towers that exist, taking advantage of the buying power of all of the other businesses who share their resource. Businesses that make a lot of calls pay more. Those who make fewer calls pay less. Businesses can sign up for different types of contracts based on their planned usage, and the price varies based on their contract and their usage.
There is a small compromise in security levels for businesses using SaaS, since there is slightly more risk in sharing computers. But a reputable SaaS provider builds a software wall between its customers. In practical terms the business's data is very, very safe.
Step 4: Cloud computing
How is cloud computing different from SaaS? The difference is in the back room where the computers reside. Cloud computing distributes the computer capacity across multiple computers that may be in multiple locations. It's like setting up your checking account with an overdraft option. If you accidentally write a check for more money than you have in your checking account, the overdraft option will automatically move money from your savings account to make up the difference.
Similarly, cloud computing allows processes to run on one set of computers, but automatically "farms out" work to other computers when there's an unusually high need for computer resources. This helps alleviate the response-time issues that come with peaks in demand. In automotive terms, it's like a turbocharger -- kicking in when you need it, but sitting quietly in the background when you don't.
Conclusion
Software as a Service (SaaS) allows a company to outsource a process but still interact with the outsourced systems. SaaS provides a great deal of flexibility and variable pricing. Cloud computing turbocharges SaaS. Thus cloud computing gives businesses the power of SaaS with the flexibility to support periodic peaks in demand. Both SaaS and cloud computing allow access to data over the Internet, and both keep data secure. Most importantly, both approaches allow you to pay for the results you need -- not for the cost of the technology it requires.
Harwell Thrasher is the author of Boiling the IT Frog: How to Make Your Business Information Technology Wildly Successful Without Having to Learn Anything Technical. Learn more at www.makingITclear.com.
