Cloud Computing – What’s in it for New Zealand Business?

23 April 2012

In the final part in a series of three articles on cloud computing, David Spratt, ICT specialist at Total Utilities Management Group (TUMG) answers the question:  Does cloud computing genuinely offer benefits to New Zealand businesses or is it another example of ICT answers looking for a problem?

Cloud services (especially Software as a Service) is an ICT revolution unfolding before our eyes.  It is crucial that all businesses plan and execute change in order to take advantage of the rise of web based services if they are to continue to be competitive.

A bold statement but one which I believe is backed up by four recent reports around global online buying behaviour.  Although it may not commonly be recognised as such, online shopping is the cloud service with which we are all most familiar.

  1. A recent Pew Centre report noted that, for the first time, more consumers owned smart phones than ordinary mobiles in the USA.  This shows that even if not everyone is using their smart phones to access web services they are certainly now able to do so.
  2. Forbes noted that the last Thanksgiving sales in the USA (our equivalent of the Boxing Day madness) generated more revenue from online sales than from those at retail stores
  3. David Jones, the major department store operator in Australia, announced major, permanent reductions in the price of all its designer brand offerings because its sales were being so severely eroded by the impact of on line shopping.
  4. A major camera store operator in Melbourne now charges $50 to customers wanting to try cameras in store before buying them.  Why?  Because these customers were now trying in store and buying on line!

The most common question I am asked by executives across all industries is ‘How do I position myself for cloud services and what are the issues that I face when I do so?’  These same executives are often faced with contradictory feedback from various departments some of whom are desperate to take advantage of the latest new software offerings available in the cloud (Software as a Service) while others take a more conservative approach in the face of potential expense and complex changes to an existing system.

In my opinion, Software as a Service (SaaS) is an area that offers businesses the opportunity for major improvements.  Firstly it is important to understand that deciding whether or not to use Software as a Service is not a simple either/or choice (Either I own my own software or I get it off the net).  In fact cloud computing has three quite distinct classifications when it comes to accessing software as a service.

Private Cloud – Where your business owns and operates the application and it’s delivered over the web.  This approach is often taken by businesses whose software application is unique to their business and/or delivers strategic advantages that they don’t wish to share with other companies.

Community Cloud – Where your business or organisation shares an application with other organisations that have a similar need.  This approach often suits professional services companies, schools or sports clubs who have highly specific requirements and want to share the cost and complexity of accessing a sophisticated web based application.

One good example of a community application is the global ticketing service shared by all the major airlines worldwide. This service allows airlines to share information to enable connecting flights onto each other’s flights.

Public Cloud – Where businesses access a piece of software that is generally available to anyone.  Google Apps and Skype are good examples.

The first thing is to decide whether you want a private, community or public service.  This will be driven by a combination of technical needs and drivers from various stakeholders in and around your business.

Then businesses need to decide how and when to move to a cloud services model.  You will note that I say ‘when’ not ‘whether.’  This is because the cloud model offers such enormous advantages to consumers and businesses that I believe the decision will become unavoidable for most businesses over time.  How to implement that decision is a more complex matter.

In order to make a methodical transition to cloud services I would recommend that businesses take an approach which combines technology adaptation with a pragmatic approach ie: identifying the most useful services available to your business and prioritising them.

Most business leaders have adopted or are looking at adopting cloud services because they are sick of  paying for businesses services that no longer deliver the value or flexibility their businesses requires.  To drive technology adaptation without becoming buried in technical gobbledegook a simple but powerful instruction needs to come from the top that drives the change.

To arrive at this instruction it is necessary to look at the HOW a service will be delivered.  Cloud services require two things to operate:  A web browser and a working network connection.  Given this, a business leader can simply say to the ICT provider:

“From here on all new or existing applications must be made securely available to any device that supports a web browser and a network connection”.

This means that all business services applications must be made available to all devices whether PC’s, laptops or smart phones.  If it is not available it must either not be selected or, if it is an existing application, it must be replaced or upgraded.

But aren’t computers different from phones – even smart ones? The pat answer would be that smart phones are actually computers.  This is obviously true but the smart phone and its tablet cousins have fundamentally shifted our definition of what a computer is.

It is this shift that lies at the heart of how cloud computing drives competitive advantage. For the first time there is no distinction between phones and computers – they have converged at the browser.

Suddenly expensive proprietary operating systems don’t dictate our application decision. We can buy and use any and all applications the business needs provided they run on a browser via a network connection.

Sadly this does not mean is that we can do away with the cost and complexity of ICT by simply moving to cloud services. However, we can move away from server hardware, application licensing and upgrades.  In exchange we need to become more aware of how we allow and enable connections to our business services.

Network security, availability and access now become even more important. Protection of data, concern for confirming user identity, worries about what services people can access from where are all big questions.  They are also complex and potentially expensive questions to design for and implement.

Application selection also becomes critical.  In the past the IT department helped to choose, run and administer expensive hardware and operating systems. Now their role must shift from technology gurus to business analysts and network specialists – helping the business select and implement the right applications and making them available in the cloud – whether it’s private, community or public.

Access devices will become a vexed issue.  We already have users wanting online access via their own devices rather than using the PC, laptop or mobile phone authorised by the ICT department or business.  Instead we are moving to a “bring your own device” (BYOD) model where if you have a device that supports a browser and a network connection, you can access the application you require.

There is also the question of access costs.  Network consumption is no longer a fixed cost.  In New Zealand the cosy mobile phone company duopoly (until recent times) means that we pay far more for data downloads than we should.  In most advanced countries, mobile data plans offer fixed prices and almost unlimited consumption – not so here.

As a result of this unfortunate commercial construct, mobile data monitoring and reporting have become essential.  Roaming and downloads are an expense that can easily blow budgets if proper monitoring is not in place.  Financial controllers take note!

On the other hand, the decision by the regulator to enforce an open market in tolls and fixed data lines mean that we can substitute some of the savings we make there into mobile data costs.  This helps businesses take advantage of the efficiencies cloud services provide without busting the bank balance.


David Spratt is an ICT Associate with TUMG and can be contacted on 0275 749 141 or 09 5762107