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Article:

Consider the Cloud

03 November 2014

The New Zealand Institute of Economic Research states that business optimism is at a 20 year high with firms planning higher investment in their operations. One of the key areas of investment is in business processes and IT which includes the use of cloud computing.

What is cloud computing?

In recent history, business applications were generally very complicated, expensive and hosted on-site. They required hardware and software purchases, updates and experienced staff to install, configure, test, run, secure, and update them.

Considering the number of applications across an entire organisation, it’s easy to see why only the largest companies can afford to effectively utilise IT. Small and mid-sized businesses were at a disadvantage, yet this is an area that can really propel them.

With cloud computing, all applications are hosted over the internet, thereby eliminating the headaches of managing hardware and software. The term “cloud” being used as a metaphor for “the internet”. In this business model, users only pay for what is needed — upgrades are automatic, scaling up or down is easy, and there is no need for a large upfront investment in hardware and software. In effect, it means renting the applications and servers.

Why is it suitable?

Upfront costs: First and foremost, it allows businesses to use very sophisticated ERP, business intelligence and CRM systems without the traditionally large upfront investment, giving them the same technology efficiency as larger companies. Businesses are under constant pressure to increase accuracy, make processing speed improvements, and capitalise on their internal intelligence and knowledge and therefore access to new cloud applications can help immensely.

Charges: Charges for cloud services are generally applied on a per usage basis (such as number of concurrent users or a certain number of resources). Therefore a business only pays what they consume and is not constrained by large overhead costs.

Security: While this has been a concern with cloud-based computing, the security today is generally much greater than any small and

mid-sized business would have in-house. The security safeguards and specialist personnel these providers offer, make it much more difficult to have breaches.

Quicker rollouts: Many New Zealand businesses are currently acquiring other companies to create larger businesses to compete effectively. For these acquisitions, cloud-based systems and new applications are quicker to rollout and upgrade since the infrastructure at the hosting provider is already in place.

Always on: Most cloud applications provide a guarantee exceeding 99 per cent uptime availability, which is higher than on-premise solutions can provide. Without cloud computing, this type of failover facility would be very expensive.

Collaboration: Because the system is always available, collaboration between departments, suppliers, and customers is much easier to create and maintain. As an example, applications that deliver real-time order entry and status are easier to collaborate within a cloud- based environment. Also, greater collaboration earlier in the design cycles assists in reducing time-to-market.

Business intelligence: Businesses that rely on build-to-order, configure-to-order and engineer-to-order strategies as a core part of their business models are increasingly using cloud-based platforms to capture knowledge and manage rules. The cloud also provides a single source making consolidated dashboards, efficient production planning, and KPIs across multiple entities easier.

Marketing campaigns: Marketing costs are constantly under pressure as new, less expensive forms of marketing (like social media) take hold. A consolidated campaign across all associated companies in the cloud provides a better chance to deliver results, align internal content and execute effectively.

CRM: Cloud-based CRM is a highly efficient management tool, consolidating all information about a customer/s into a single source which can be accessed and shared by key personnel across an organisation.

HR: One of the most common HR issues is the lack of labour talent, especially certain skilled labour and senior management positions. A cloud-based HR system can manage all employees across the entire organisation to identify, manage and re-purpose talent pools within a large organisation.

Bottom line

New cloud applications are continually being developed and there are now sufficient applications to support all business functions. Very shortly the cloud will be the predominant way businesses run their infrastructure because of the obvious benefits. It allows companies to take IT spending and direct it towards product or service innovation and meet the needs of

the business in a timely manner, rather than depleting resources on support and maintenance.

For more information regarding cloud computing, please contact your local BDO advisor.