Covid-19 has placed many organisations under immense pressure to adjust their business model in a manner that enables them to not just initially survive the pandemic but to find a way to adapt and grow to a new, organically changing and at times, unpredictable operating environment. Managing an organisations cost-base has come under ever-increasing scrutiny with people, facilities and technology investment topping the list of expenses for most organisations.
The pandemic has meant that many are trying to achieve more with less whilst balancing the need to evolve the business model to changing customer and consumer demands making the ability to forecast and plan ever more difficult. The recent furlough solution enabled organisations to manage the people-factor whilst some landlords and mortgage providers offered solutions to help but technology, one of an organisations larger costs, remains somewhat inflexible and has seen reductions in investments, reduced headcount, and cancelled project spend as its primary means of adapting. It’s far from ideal when you consider that remote working placed increased demand on what was for many an already creaking technology infrastructure.
Luckily with a little planning and fore thought it’s possible to deliver a more flexible, cost-effective, scalable and resilient service with minimal if any investment. That’s a bold statement to make and we should look at what the applicable costs are behind running an IT service.
For the moment we will park the people element behind the delivery of any Information Technology solution as this happens as a result of the infrastructure design and we will take a simplified infrastructure perspective as not all SME’s undertaken inhouse development instead choosing Commercial of the Shelf (COTS) solutions such as Microsoft Office, Salesforce, Oracle, and so on.
We can break the existing spend for the typical inhouse IT solution and stack it as illustrated below,
Our IT system starts with the applications that our users interact with and then step down to include information management, the operating system, storage, servers and the communications infrastructure underpinning the needed connectivity.
Each of those elements requires investment and maintenance which collectively define the manpower and costs associated with maintaining such a service. Tasks underway behind the scenes that drive up the IT spend include basic maintenance and software upgrades, data backups, resilience and business continuity, licence management, hardware maintenance, facilities such as server rooms, and replacements, and then we have to consider depreciation, growth planning, the loss driven by underutilised hardware and then finally we can then start to think about the skillset and people needed to deliver the service.
What we have seen at play during the Covid-19 crisis the use of both furlough and work-from-home solutions where system availability has been a key challenge. The physical tie to IT infrastructure has indeed forced many businesses into difficult decisions where furlough is the only option due to safety and social distancing limitations or limited productivity due to the need to keep employees away from the workplace as much as possible. What’s needed is a virtual office approach where location becomes irrelevant and working in the office, at home, or even by the beach enable the same access and productivity gains. Cloud computing offers the needed flexibility and virtualisation.
The net result of such complexity for Small to Medium sized Entities is that compromises are made regarding coverage or that IT costs are a significant overhead that impinges upon flexibility and growth. The more common IT infrastructure is still based upon a traditional or legacy model where everything was kept inhouse and is based around a physical presence whilst we are now able to leverage more cost-effective, flexible solutions based again upon cloud computing.
So, when we talk about ‘cloud computing’ what do we mean? Cloud computing represents a set of IT solutions that are hosted by specialist providers that utilise the internet/ WIFI services that we use everyday to virtualise the existing infrastructure. The service provider supplies and manages a solution for you removing hardware, maintenance, upgrade, backup, security, and manpower that most small organisations currently maintain. It’s not a one size fits all solution, rather its a range of options that enable organisations to virtualise their IT needs based upon how their organisation works, what it wishes to invest and how it wishes to manage the service.
The illustration below summarises the four key options from the current, legacy inhouse design shown on the left through to the entirely cloud based on the right. Examples of SaaS include Hotmail/ Gmail, Slack, Office 365, Salesforce and Dropbox where everything can be delivered via an internet web browser.
If we look at the above illustration it seems like the SaaS option is the best for most organisations and providing that the software/ applications that you wish to use are available as SaaS service, it is. For the more complex organisations it may not be ideal as there may be a need for specialised software to be utilised that limits the options. The next best option is therefore a platform where all is provided and managed bar those applications which is where a SaaS and/ or PaaS service may provide the more appropriate solution. Finally, if you’re a software development house, research, or manufacturing facility, your needs may be highly specialised and neither SaaS or PaaS works as you need a specialised Operating System or you want a highly configurable service where you manage the details and configuration on a routine basis, then IaaS may indeed fit your needs best.
So, what benefits does Cloud Computing offer us? The benefits to any organisation as you’ve observed lie across multiple touch points rather than in one specific area. The illustration below touches on a few of those key operational areas,
Its worth remembering that the traditional/ legacy model is based upon a pay-for-it, use it, model with little options for immediate change, optimisation or scalability and often with little to no virtualisation/ remote access functionality. We’ve seen through the need for organisations to adapt and turn in response to Covid-19 that at the core of out IT strategy is the real demand for agility. That agility is touches on all aspects of an organisation’s IT infrastructure and strategy which when considering the legacy model, has little room to adapt. Cloud computing on the other hand offers financial flexibility through demand or consumption-based pricing.
Demand or consumption-based pricing is based upon a simple concept, pay for what you use. If things are busy, volume is high then you pay only for what you use. If, however you’re undergoing a slow down and volume is lower, then the billing adapts accordingly. The demand-based pricing model can and often does include automatic scaling where if more processing or disk space is required, it’s provided automatically. If it’s not needed, it scales back. This is unlike the legacy model where you are expected to forecast for what you think you might need; you buy it and you hope that you use it as planned. If you’ve over-estimated, then capacity lies redundant and investment is wasted. Under-estimate and the performance of the systems will suffer whilst the ability to resolve issues make take significant investment and/or time to implement. This points to the advantages of a cloud-based solution when attempting to adapt to the challenges of operating in an uncertain, dynamic environment such as that created by the need to respond to Covid-19 impacts.
There is a lot of confusion over cloud computing and there are certainly some concerns voiced over its use and it would be inappropriate to not include some of those concerns within this paper. The most common concerns include,
- Security – There is a concern that data stored in the cloud is not secure and can be accessed by others. The reality is that customer data is stored in secure datacentres which have inbuilt fire protection, access control, data resilience and failover as standard. There are two recent standards, ISO/IEC 27017 and ISO/IEC 27018, which provide detailed guidance as well as the broader ISO/IEC 38500 and X.509 IT security standards. It is advisable to ensure that any cloud proposal meets these standards.
- Internet speed and performance – As your data and/ or your applications may be hosted in the cloud it is important to ensure that you do not see any performance issues as a result of limited internet access. Using the UK as an example, in May of 2020 the telecoms regulator Ofcom found that the average Internet Speed in UK is 64 megabits per second (Mbps), more than adequate for the majority of connections however it is worth using speedtest.net or similar service to check what your internet speed is and you should validate what is required and offered by the cloud service provider.
- Service supplier dependency – Ultimately your IT system will be dependent upon the performance and stability of the chosen service provider. It’s therefore important to understand their long-term viability and financial security before selecting a provider. If this is a concern then the likes of Microsoft Azure, Amazon AWS, or Google Cloud offer the security and stability you might be looking for.
- Knowledge management – Cloud computing is still a relatively new approach to IT architecture and the idea of migrating to the cloud can be daunting in the face of limited knowledge. This can best be managed by either engaging with a consulting firm who will help you to chose the most appropriate, cost effective solution or select one of the bigger providers who will help you to plan and implement the right cloud solution for you.
- Cost management – The idea of demand based pricing is appealing in that you only pay for what you use however for the accountants amongst us this can be a challenge as future spend can be more unpredictable and annual forecasting can be more challenging. Seasonal activity trends can make this particularly confusing. If you’ve recently purchased hardware and you’re currently depreciating the capital expenditure, then the financial benefits may be reduced unless it is possible to recover that cost through an appropriate disposal/ reseller solution. A good consultant or service provider will help you to manage this effectively.
The recent Covid-19 pandemic has created several unforeseen challenges of both small and large organisations where the ability to adapt the business model and service provision has been a challenge. The ongoing nature of the pandemic and the need to maintain social distancing are creating ongoing concerns before we start to consider the potential impact of a second or third wave. Smart planning, agility, and effective cost management will be in part what separates the survivors from those that fall during the crisis. Cloud computing can help manage the need for flexibility and cost management but it’s not for everyone.
Choosing the right solution is crucial if any organisation is going to adapt but the benefits are certainly there if that selection is undertaken in a controlled and timely manner. Moving to the cloud can bring with it hidden benefits such as the option to reduce office spend allowing personnel to work from home but the short-term objective of managing any need to maintain safe social-distancing is a different driver from that of changing long-term working practices as this ultimately will impact upon organisational culture.
Given the complexities behind choosing SaaS, IaaS, PaaS or even leaving as-is is a specialist task that requires both specialist IT knowledge and financial/ operational team involvement. Choosing the right potential vendor(s) is a key part of the process and don’t rush into an agreement without understanding the pros and cons. What is clear from the recent pandemic however is that change is essential and cloud computing may help you to adapt successfully and survive.