The Impact of Cloud Computing on SME’s

Why You Need to Put Your Head in the Cloud

Robert Lavery Principal

Robert Lavery & Associates

A Cloud has something in it but you can’t see it!People in different locations see the same thing.

Evolution of Hosted Systems• Everything old is new again – Why?• Time share/service bureau of 60’s (Utility model)• ASP’s of early 21st century• 60’s high cost of mainframes• Early 21st century – high cost of people to

implement and manage software.• GOAL: Cost effective business systems

Trends Affecting Software• More sophisticated systems• More flexible and feature rich apps• Easy to use tools for customization• Shorter cycles between upgrades• Better communications infrastructure

Evolution of Hosted Software• Hosted systems can reduce Total Cost of

Ownership• Solve scarce resource problem• Convergence of software and

communications network• Software is the network• Software becomes a service

Big Business Small Business

SalesOrdersInventoryExpenses CRM

Needs

Resources

Equal Needs - Unequal Resources

Influence of “GEN Y” (15 TO 25)• Sense of entitlement – “Want it now!”• Expect “FREE” access to info & products• Value shared “Experience” - “Community”• GEN Y desire freedom and decision making • Motivated by idealism and shared intelligence• Boomers and GEN X - Aspire to Acquire• Cars (AutoShare), Music (MP3BEE)

Some Stats To Ponder• IDC – By 2012 85% of new software delivered

as a service rather than a physical product.• McAfee and Carnegie Mellon University (May

2010 survey) – 49% of respondents claim to be “very” or “extremely” reliant on mobile devices. 1 year later – 70% (35% email addicts)

• IDC - 96% of Employees under 45 have a smart phone. 63% use business devices for personal

Creative Use of Technology

New Knowledge Required• Understanding of key technologies• Assess benefits, risks, threats and

opportunities associated with the online economy

3 Levels of Cloud Based Delivery Methods

• SaaS: offers a contractual service to deploy, host, manage and rent access to an application from a centrally managed facility. They are responsible for … managing a software application or a set of applications. Example would be Google’s Gmail.

• PaaS: Platform as a service provides applications, frameworks and tools running on hardware managed by a Vendor. MS Windows Azure platform is an example. “Your stuff is hosted.”

3 Levels of Cloud Based Delivery Methods

• IaaS: Infrastructure as a service allows users to manage their own applications, data and operating systems leaving servers, storage and networking to a vendor. Focuses on management of the network and servers. “Other’s stuff hosted”

Which option is right for your business depends on how much control you want over your company’s software and computing resources.

Public Versus Private Cloud• You can host your own cloud infrastructure• OR you can outsource the infrastructure.• Public Cloud places data control (Security and

uptime) outside the company’s 4 walls.• Privacy concerns slowing adoption of Saas in

HR and Finance.

Outsourcing Trends• Cloud poll: Which applications require the largest %

of your outsourcing budget?– Accounting/ERP - 26%– E-Commerce – 17%– Data Warehousing – 17%– CRM – 13%– Web Hosting – 13%– Messaging – 9%– Storage – 4%

IT Skills Are Still in Demand

Managed Apps Versus Outsourcing

• Managed Applications: Manage purchased software as well as the network and servers

• Outsourcing: the management of business processes on a much larger scale that encompasses an entire business process such as the finance function

Hosted Apps Infrastructure

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The Perceived “Cloud” Benefits Are:1.) Economies of scale and knowledge (cheaper and better) 2.) Lower barrier to entry (software, hardware, development) 3.) Reduced costs (maintenance, upgrades, enhancements)

Lower TCO 1) Lower barrier to entry and rapid time to implement 2) Lower costs of maintaining applications, IT skills and staff (economies of scale)

Source: Aberdeen Group, June 2010

Is The Cloud Really Cheaper?

1) TCO argument falls apart when adding in software, services, hardware and on-going maintenance – Exit and switching costs.2) Showing accumulated costs over time (above) shows 3-4 year breakeven where SaaS becomes more expensive

Why is Hosting So Popular?• Communication network in place• Inexpensive bandwidth available• Intelligent & powerful applications• Can add users as needed• Keep pace with technology• Address shortage of IT skills• Integrate business processes• Promote specialization

Web Site/StoreAccounting

Warehouse

End-To-End Integration

SMART Phone

CRM

Browser

Supply Chain

SaaS Revenue on the Rise• Gartner Study – Saas Revenue set to hit $12.1

Billion in 2011 – an increase of $2 Billion from last year.

• Largest segment of the SaaS industry is CRM - $3.8 Billion.

• CCC (Content, communications and collaboration) is close behind at $3.1 B.

Importance of Software• Automates processes• Creates knowledge workers• Analytical tools to spot trends• Improves decision making/collaboration• Requires:

– Fast implementation – increase efficiency– Seamless integration – increase productivity– Scalability – reduce IT complexity

Target Customer Profile• Any company struggling to keep up with the

changes in technology

Target Customer Profile• Multiple/branch office scenario• Little or no IT expertise/infrastructure• Windows users looking to upgrade to web• Interested in E-Commerce – Supply Chain• Start Up business (time to market) • Large company reorganizing• Fast growing company• Competitive industry

Benefits of Hosted Model• More accountability• Manage cash flow• Quick implementation• Current technology• Enable B2B Marketplaces• Utilize Internet appliances

When Should You Host?• Companies with no IT infrastructure• Quick time to market is important• Use common/standard applications• IT people not available• Competitive pressure• Provider understands your business

Opportunities or Risks?• Cloud services provide opportunities• New Companies – Wikipedia, eBay• New Corporate Structures

– Infrastructure without hierarchy• New Business Models - Google• EVEN New Industries

– Collective/Social Intelligence (InnoCentive)• “Risk is the mirror image of opportunity.”

Where Can The Cloud Take You?18 Possible Destinations:

1) Collaboration – shared access to documents & schedules.2) Content Management – update internal/external websites.3) Customer Relationship Management (CRM).4) Document Management – storage, release and revisions.5) Email – malware protection, integration requirements.6) Employee Performance Management – HR need?7) Employee Self Service – timesheets, vacation requests.8) Enterprise Resource Planning – integrated bus. processes.9) Expense Management – Employee or company.

Where Can The Cloud Take You?18 Possible Destinations :

10) Financial Accounting – auto tax updates, storage, backup.11) Marketing Automation – analytics, lead generation (CRM).12) Project Management – access to track progress.13) Sales Automation – qualify leads, pricing, integration mkt.14) Supply Chain Planning & Mgmt. – production, shipping.15) Talent Management – hiring, compensation.16) Transportation Management – logistics, route optimizer.17) Warehouse Management – picking, packing.18) Web Conferencing – remote presentations/meetings.

Fundamental Considerations When Moving to the Cloud

• Replace or Add Functionality – Effectiveness?• Changes to User Interface & Functionality• Planning Matters – Support & Updates• License Costs – Over Time versus Up Front• ROI – Based on increased productivity• Data Migration – Integration to new service• Comparing Providers – SLA’s, redundancy.• Trouble Shooting & Training – Good Level 1.

What to Look For in a Provider• Understands your business & industry• Provides on-site services when necessary• One point of contact for issues• Low cost high bandwidth connection• Broad range of services (Co-location)• Customization• Strong financial backing

What’s Next?

Is The Cloud In Your Future?Do you require:

1) Access and Mobility?

2) Security? (Disaster Recovery)

3) Improved Business Processes/Reporting?

(Location based services.) Punch In Punch Out

Top 10 Pitfalls of SaaS ERP 10. Miss a payment, your ERP turns off .9. My data lives with other data (sounds illegitimate and

immoral). 8. Very limited custom reporting capabilities (but who needs

reports from your ERP anyway?) .7. Very limited customization capabilities (because everyone

knows that ERP out of the box works for everyone) .6. You still can’t get rid of that pesky IT guy. 5. The “hidden” costs can blind you (and make you poor, refer

back to #10).

www.ilovemyerp.com

Top 10 Pitfalls of SaaS ERP 4. What if I want to use another application specific for my industry

and interface it? Sorry! 3. What if my internet goes down…then you can take the rest of the

day off .2. What if the cloud internet goes down like the Amazon cloud did

recently….then you can take the rest of the day off 1. It utilizes the “cock-roach-hotel” model; you can check in but you

can’t check out. You have years of critical corporate data in the rental cloud which lives with other data. When you want to change ERP like most people do every 5-7 years, you don’t get your data…maybe a little but not all of it.

www.ilovemyerp.com

Don’t Leap Blindly Into The Cloud

Questions?(Got Your Head in the Cloud)