July 6, 2012
With the economic recession somewhat behind us, markets are poised for growth yet again. As fast-growing companies achieve greater market penetration and gain more customers, they face the challenge and opportunity of expanding to new locations and efficiently growing their business. They must be able to effectively manage their sales teams and channels and improve back-office efficiency, while ensuring high levels of service for customers.
To take advantage of these opportunities, companies need to assess whether their existing business applications footprint for accounting, sales, service and other functions will effectively support the growth of the business. Many businesses that started out with ad hoc, standalone applications will determine they need to upgrade to a more flexible platform to support continued growth.
Cloud computing is a compelling option for many small and mid-sized businesses (SMBs), as well as larger enterprises, as it offers low cost of entry and ownership and faster time to market compared to traditional on-premise business software and servers. According to IDC, software-as-a-service (SaaS) solutions are set to grow six times faster than all software, and they’re expected to show compound annual growth (CAGR) of around 26 percent through to 20141.
Organizations that opt for a cloud strategy face an additional consideration – whether to use individual cloud systems for key processes such as finance, customer relationship management (CRM), and e-commerce, or use an integrated suite that covers those functions and more. It’s important to recognize that while the cloud model resolves many problems of on-premise software, cloud applications as standalone silos can introduce inefficiencies, integration challenges, and IT and administrative overhead of their own.
The Risk of Fragmentation with Cloud Silos
Without integration among cloud applications, business users may still be forced to navigate multiple applications and data repositories of data for their everyday activities – slowing down processes and reducing the agility the company needs to grow. Consider the following implications of siloed cloud applications:
• If multiple cloud applications are implemented, data fragmentation still exists. Overlapping databases must be consolidated and reconciled to create a comprehensive and consistent view. In effect, the on-premise software hairball has simply been transferred to the cloud.
• Each application has its own style of configuration. User efforts to adapt the software to their needs can be hampered as they try to keep track of multiple methods of configuration.
• Getting a comprehensive picture of how people are using the software is difficult because multiple applications must be monitored.
• End-to-end processes are difficult to manage because they must be integrated across multiple applications and databases.
Advantages of Integrated Cloud Applications
To avoid these limitations, it is essential to have a collection of cloud applications that are integrated around a single codebase and database, and which contain an integrated business process perspective. Characteristics of such a system include:
• Enterprise Resource Planning (ERP), CRM, human resources, e-commerce, warehouse management, project management, and customer service applications function atop a shared application stack and database.
• Business processes easily flow from one application and department to another – from sales quote to order, or from procurement to final vendor payment.
• A single repository for real-time reporting enables everyone to see a shared view of the business – no need for an expensive data warehouse.
• Self-service analytics and reports can easily be customized and extended.
The underlying platform can be easily customized to the needs of the business and its industry, and enables the application to evolve as the business changes. An integrated cloud business suite also improves IT productivity compared to siloed cloud solutions:
• Expanded awareness: Ease of information access means that everyone can get the information they need without continually making IT requests.
• Process efficiency: Process automation flows from department to department across applications built to work together, eliminating the need for expensive and error-prone application integration work.
• Accelerated innovation: Because information and process changes can be implemented quickly, often by users themselves, line of business organizations are able to innovate themselves rather than depend wholly on IT.
• Business and IT alignment: Data and process automation can be easily delivered when and where it is needed, unfettered by technical limitations.
Best Practices for Running Your Business in the Cloud
What is lost in many discussions of cloud computing is the notion of how fixing the problems with the on-premise deployment model does nothing to address the challenges of integration, improving process automation, and providing unified, consistent information.
To gain the maximum benefits of cloud business management, companies in the SMB space need a single cloud system that integrates ERP functionality with CRM, HR, and e-commerce. Such a system should support business user customization and promote process efficiencies and the alignment of IT with business needs. It should also supply real-time reporting and analytics for expanded awareness, and a world-class data center featuring strong disaster recovery and data security capabilities. Let’s examine each of these areas.
User-Driven Innovation and Customization: The power to customize should not only be in the hands of the IT department. A cloud solution that empowers everyday business users to tailor applications to their needs allows users to apply their business function expertise. Meanwhile, IT staff is liberated to focus on innovation and strategic initiatives that can add value to the bottom line.
Business Application Development Platform: With a single cloud customization platform, IT departments can quickly build innovative, end-to-end business applications. Customers should also have available a vendor-sponsored network of complementary third-party applications to enrich and extend cloud applications.
Importantly, the cloud vendor should be able to carry forward any customer-made customizations as it rolls out upgrades to its suite, with no re-engineering or manual effort required.
Process Efficiency: Empowering users leads to efficiency as well as innovation. When users can change the way they work directly, without having to wait in line for IT to do everything for them, business processes run faster and smarter. Studies show that customers migrating from unintegrated legacy and custom accounting systems and moving to one central accounting system can expect to accelerate financial close times by 20%-50%.
Automating processes enables companies to eliminate or redeploy staff and avoid new hires. For example, one company required a full-time person who did nothing but print out labels for merchandise as salespeople entered orders. Integration between CRM and inventory management applications eliminated the need for the position, saving the company $25,000 a year. Another company used a cloud inventory management application to increase inventory turns by 50%. This also freed up cash that was tied up in non-performing inventory.
Aligning IT with Business Needs: In most companies, the line to get help from IT to change business applications is so long that people give up trying. Only the biggest ideas with the biggest payoffs make it worth enduring the wait and expense. But as the lean manufacturing principle of kaizen has shown, huge gains can be made from making many small improvements.
In the best cloud models, IT staff can devote their time to improving the business, rather than trying to solve integration and other headaches. IT shifts from being an interchangeable commodity to a differentiator.
Reporting and Analytics for Expanded Awareness: Real-time business intelligence is important in making informed decisions. You can instantly look at metrics from many sources – the number of hits to your website, the number of orders placed, or the current bank balance. This information can be accessed instantly from almost anywhere, with no extraction cycle. The result: expanded awareness of important information. When staff is better informed, they make better decisions.
In traditional ERP systems, getting a single view of a customer is a major undertaking that might involve several databases and a business analyst, consultant, or a special software product. Many companies invest in elaborate systems to collect data from applications nightly or weekly to create a single data warehouse for reporting and analysis – almost always an extremely costly and complex undertaking.
The better, more efficient option is to have a unified and consistent database. This allows employees to do a single search on a customer and see what they are buying, how much they paid, and their order status. This information should be available to the front-line staffers who need this information in real time.
The Benefit of a World-Class Data Center
One of the biggest benefits of using a cloud vendor is its ability to provide customers with a world-class data center that meets the highest standards of reliability but also are so secure that companies can confidently present a broader face to the Internet and include partners and customers as users of business applications.
Clients are understandably concerned about data security. Knowing that their business success depends on this, the best cloud providers have processes and procedures in place to ensure secure client data. Before selecting a cloud solution, ensure the vendor has undergone independent reviews to validate its processes.
Key certifications to look for include:
• SAS 70 Type II. Make sure your vendor fully complies with SAS 70 Type II standards. This indicates that the American Institute of Certified Public Accountants or its designees have conducted an in-depth audit of the vendor’s controls and safeguards. When cloud customers are audited, they can provide a SAS 70 Type II Service Auditor’s Report to the auditor as a substitute for auditing your cloud vendor’s controls and procedures. Without SAS 70 Type II compliance, companies are likely to incur additional costs because they must send auditors to the cloud vendor to analyze controls and procedures.
• EU-Safe Harbor compliant. U.S.-EU Safe Harbor is a key process for U.S. companies operating in Europe. It certifies that companies comply with the EU Directive 95/46/EC on the protection of personal data. The seven Safe Harbor Principles are designed to prevent accidental information disclosure or loss of consumer data. Cloud providers should also adhere to the Safe Harbor Privacy Principles published by U.S. Department of Commerce with respect to personal data about individuals in the EEA that the vendor receives from our subsidiaries, customers and other business partners.
• PCI Data Security Standard. PCI Data Security Standards for consumer data govern security management, policies, procedures, network architecture, software design and more. Established by firms such as Visa and American Express, these standards are continually refined and strengthened, and companies can lose PCI certification if they fail to meet requirements. Some cloud vendors provide 3D Secure credit card authentication, also known as Verified by Visa and MasterCard SecureCode.
These standards are beyond the reach of most on-premise providers, but the best cloud providers have PCI certification. Auditing and certifying these levels of compliance is simply too onerous for most companies that operate in-house ERP systems.
Disaster Recovery and Business Continuity
Cloud computing vendors should understand that they cannot simply ask their customers for trust. It is important to plan for the worst-case scenario. Such planning is the domain of disaster recovery and vendors should provide a variety of options to prevent disasters and to provide business continuity if disaster strikes.
• Infrastructure: The best cloud systems are architected with multiple layers of redundancy to ensure service continuity even if one or more elements fail. All data is stored immediately in multiple locations, with daily hot backups to ensure quick data restoration in case of emergency. In addition, all customer data is backed up on tape media daily and stored in a safe facility. Data centers are equipped with backup power batteries and generators, seismic bracings, and an Internet connection of up to three 1 Gbps pipes. This redundancy ensures round the clock connectivity with no bottlenecks; in fact, with this design, two pipes could fail with no impact on users.
• Application security: Any cloud system should be designed to be safe from Internet attacks. All servers should be protected by a firewall that allows access only via specific protocols and methods. It should be securely designed with segregated networks, load balancers, denial of service countermeasures and application-layer filters. All transactions should be protected by 128-bit SSL, the same strong encryption used by large banks and e-commerce companies.
• Physical security: Access to the facility.
• Advanced disaster recovery: In rare cases, customers may require exceptional safeguards outside the scope of the cloud vendor’s data integrity models, such as dedicated redundant hardware or replication of data to a client’s remote data center. Cloud vendors should arrange to provide such safeguards for such companies.
For rapidly growing and mid-sized businesses, the resources required to maintain and grow an IT infrastructure to support the needs of the business can be enormous. Cloud computing is often seen as a cost-effective and quick-fix solution, but businesses must be careful not to repeat the same mistakes of the past and end up with another applications hairball, albeit one running in the cloud.
With the growth of cloud computing, businesses must take a strategic long-term view of their application footprint – understand how applications and business processes cross departments and lines of business, and optimize their applications architecture around collaboration and process. By combining an integration applications strategy with cloud delivery, businesses can position themselves for efficient and cost-effective growth, and improved competitiveness.
Yes - or No?
If you are technologically inclined, you surely have heard of cloud computing as it becoming rampant in the market today. Many business owners find it cost effective and that is why those who are into it are growing in numbers. In case you are not yet aware, cloud computing is the use of online-based services to support various business processes. However, before you finally decide to use cloud computing, it would be nice to first be aware of its pros and cons.
The different types of Cloud Computing
Before we proceed on to the pros and cons of cloud computing, let us first familiarize the different types of it. Cloud computing comes in three different categories, which include the following:
• Infrastructure-as-a-service – this service is offered to users so they can have Remote Control Software on their computers without the need to purchase servers, software, data center space, and network equipment.
• Platform-as-a-service – this is the type where vendors provide and manage the operating system, database and all that are needed to run a particular platform.
• Software-as-a-service – with this type, users need not to purchase software licenses because the vendor will provide it.
Cloud Computing Pros
Cloud computing has various benefits that users will definitely love. A few of these benefits include:
• Cost Reduction – cloud computing can reduce the paperwork, transaction cost, hardware cost, and IT staff.
• Scalable – like electricity, water and pay-as-you go phones, some cloud computing services are billed based on the amount of usage. Therefore, you only pay for what you really use and can easily upgrade your service without having to make costly additions to hardware or software.
• Right level for the right size of business – cloud-computing services are available in small and mid-sizes. This will reduce cost on software licenses like remote control software as well as server cost.
• Easier to collaborate – with cloud computing PC Remote Access is also possible. Meaning, users can access anywhere, anytime, thus can be collaborated with remote employees.
Cloud Computing Cons
Despite the numerous advantages, there also some disadvantages for cloud computing. A few of them are:
• Availability – cloud service can be down at times, which could affect users a lot more as programs run on the server rather than on each individual workstation.
• Data mobility and ownership – once decided to cut the serviceHealth Fitness Articles, users are not sure if they will get their data back.
• Privacy – users are unaware how the collected data will be used.
— By Phillip Presley
NetSuite is the world’s leading provider of cloud-based business management software. NetSuite helps companies manage core business processes with a single, fully integrated system covering ERP/financials, CRM, e-commerce, inventory and more. www.NetSuite.com © Copyright NetSuite 2011. All rights reserved. Find out more, contact NetSuite, Inc. at 1-877 NETSUITE.