What is Cloud Computing?

According to Gartner’s technology trend forecasts, cloud computing will be mainstream within 2 to 5 years, but at the moment many people are still unclear about what it is and what it can do for them and their business.  One of the big problems is that because it’s so new and is moving and developing so fast, it’s difficult to actually pin it down with a definition.  On a very basic level:

‘Cloud Computing involves vendors supplying computing services to lots of customers over the internet’

It brings together lots of internet technologies and developments under one umbrella and essentially offers a new way of delivering IT services.

And the good news is that if you can cut through all the hype and expectation, there are numerous benefits for small business allowing them to cut costs, cut IT requirements, offer flexible working, trade internationally, and improve business continuity and disaster recovery policies. In effect, it levels the playing field in terms of access to technology and software – it’s no longer prohibitively expensive and time-consuming to source, buy, and implement (think accessibility, flexibility, ease-of-use, and power of social media applied to business processes).

Background

Going back to the beginning then, it’s important to understand why cloud computing has emerged and what makes it different from other technological developments, and why we’re seeing an explosion of everything and anything you can think of – just web-based.

Traditionally new technology is created to satisfy a demand or to solve a problem for a particular consumer or market.  Cloud computing however has emerged because the developments in broadband, hardware, and web technologies have come into alignment creating huge new potential which has in turn fired the imaginations of developers and programmers.  In simple terms – we now have widespread high speed internet access, plus cheap powerful processing power, and new web-based programming tools and platforms which means that the internet can now be used for much more than just browsing and shopping.  This is why we’ve seen an explosion in social media, iphone apps and all those annoying farms and games on Facebook as techies and geeks around the world explore and play with all this potential and new ways of doing things, just because they can!  The ultimate example of this is probably Twitter which was created without any clear purpose or even any way of making money, but in spite of that it has caught on virally and become a tool used by millions of people every day.

The upside of all this experimentation is that cloud has arrived fully-formed and in a much more advanced state than new technological developments usually do, which is great news for business users as it’s less of a risk and there aren’t going to be years of beta testing, tweaks and refinements to get it right (which explains Gartner’s predictions of how quickly it’s going to be mainstream).

The other consequence of this is that cloud is a true disruptive technology (defined as innovation that improves a product or service in ways that the market does not expect, typically by being lower priced or designed for a different set of consumers’) which will eventually replace our existing desk-top ways of doing things in the same way that trains came along and replaced canals in the 19th Century.  Until then, canals had been the  dominant mode of transport, but trains brought time and money-savings and greater efficiency that very quickly rendered them obsolete.  And ironically the arguments put forth by the pro-canal, anti-change lobbyists are exactly the same as those being put forward by the anti-cloud people today, 200 years later! – ‘It’s too limited!’ ‘It doesn’t work the same!’ ‘I don’t understand it!’ ‘It’s not safe!’

The fact is though, that we’re not just talking about a minority activity here, and it’s not just about geeks creating Facebook games and iphone apps in their bedrooms.  The main players in cloud computing who are really driving it forward are Google, Microsoft, Yahoo, Amazon, and Oracle and the new big name cloud companies like Salesforce, and NetSuite, and big business is sitting up and taking notice – Coca Cola have recently created their own internal cloud and migrated 100,000 employees onto it in just 2 weeks (which is incredible in itself and highlights one of the main benefits of cloud, as traditionally implementing such a major technological change would have taken anything up to a year).

Cloud Computing and You

So what does all this mean to small businesses?  It means that there’s a whole new way that IT services can be accessed and delivered that can enhance how your business functions and improve sales and profitability.

The 3 areas of cloud that you need to be aware of are SaaS (Software as a Service), IaaS (Infrastructure as a Service), and PaaS (Platform as a Service).  All these area are ‘as a Service’ because you don’t buy anything but subscribe (normally monthly) and pay for what you need, as you go.  Generally you can therefore, change or cancel your subscription whenever you like.

PaaS is basically the tools that are available for developers to create cloud applications.  Many of the bigger companies are now creating their own cloud platforms, such as Microsoft’s Azure and Google’s App Engine, that allow you to create your own cloud software that integrates with their software.  So, for example, you could create a new product that integrates with Google and sell it via Google’s App Store, opening up new markets for you with the added brand and selling power of Google to help you launch it.  Alternatively, you may need some software for your business that integrates with Word or Outlook, and you could use Azure to write something or look around for someone who has already created what you need on Azure.

IaaS is the infrastructure or hardware that developers and techies use to build, access and store your cloud.  The big news here is that cloud allows small companies to share the sort of resources that were previously only available to big companies, at affordable prices, and allows them to scale up or scale down their resources as needed.  Essentially, by storing your information in a professionally-managed data centre you’re getting access to the best, most powerful, continually-serviced servers by sharing them with other companies.  And you have the peace of mind of knowing that they won’t fail, they’ll be automatically backed-up and that you can up or downgrade instantly whenever you need. (It’s essentially like the big main-frame computers that only the biggest companies could afford, when computers first arrived on the scene, but now shared by lots of companies.)

SaaS, however, is the most important development for small businesses.  Essentially, it is software delivered over the internet and subscribed to on a pay as you go basis.  The big advantage here is that it’s not dependent on what sort of computer you’ve got, which model and which operating system, and you don’t need any IT expertise to ‘install’ or use it.  As long as you’ve got access to the internet it should work (and generally makes use of IaaS for securely storing and backing up all your information).

You will already have come across or may even be using SaaS (without perhaps even knowing it).  The most common examples are the blogging platforms that are now being used to build flexible and interactive websites, and business and social media sites liked LinkedIn, and ‘Office-style’ products like Google Calendars, Google Docs, Gmail or Hotmail, and Google Maps.

The most established and evolved SaaS business software you’ll find will be CRM (customer relationship management) systems and online accounting software, as these areas have been leading SaaS development.  We, for example, have been working in SaaS for 10 years, and as Liquid Accounts (one of the UK pioneers of cloud accounting software) for 5.  This is because SaaS makes it easier to share data and information and businesses need to be able to share both their customer details (between a sales team or sales, marketing and customer service for example) and their accounting information (between whoever does the billing, payments, credit control, management as well as their accountant and bookkeeper) with a range of people who may be in different locations or may be on the road.  SaaS allows you to do all this with the guarantee that the information you’re getting is ‘real-time’ and up-to-date, secure and can be tailored to your needs and budget.  It also means that small companies can have access to more advanced automated accounting functionality like multi-currency and stock control that can allow them to trade internationally or over the internet and compete with in bigger markets with much larger companies.

Liquid Accounts Case Studies

StarSupply Renewables, a biofuels broker, chose to move to online accounting just over a year ago in order to solve several problems for them.  It allowed them to invoice and receive payments in multiple currencies and share accounting information between several offices around the world, and even work with an accountant in another European country.  It also meant they could save money on buying new servers, and paying for outsourced IT expertise, and ultimately could commission other software to integrate with their accounts.

‘If we didn’t have Liquid we’d be using Excel spreadsheets to keep track of everything but that’s unacceptable for a company with 15 employees – you can’t run a business like that!’

The Organic Smokehouse is a small specialist organic food company based in Shropshire.  They sell their products via distributors and the internet in 17 countries.  Traditionally this would have been an accounting nightmare for a small company and a traditional desk-top accounting package that covered multi-currency and multi-VAT would have been prohibitively expensive.

‘As a business that operates internationally, we receive payments in a range of different currencies. Liquid’s multi-currency function allows us to process transactions in different currencies without any hassle.’

In conclusion then, cloud computing isn’t the future, it’s now.  And it offers opportunities and choice to help small businesses grow and succeed.

Matt Holmes is the MD of UK-based online accounting pioneer, Liquid Accounts Ltd, and Chair of the Cloud Computing Special Interest Group for BASDA (the Business Application Software Developers’â„¢ Association) and as such is at the forefront of creating industry standards and guidelines for the newly-emerging field of cloud computing and SaaS.