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The Boomer Bulletin - 2010
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Cloud Computing: Is it Good Business?

Posted By Randy Johnston, Monday, June 7, 2010
Randy Johnston

The world of computing is moving to a "new” model – Cloud Computing. We have all seen talking heads describe how "the Cloud” is going to make everything we do faster, better, and less expensive. Applications where all of the data and applications are hosted online are called Software as a Service (SaaS). An alternate approach, hosting, is where applications that are designed to work with Windows servers and desktops are installed in virtual servers and moved to secure data centers.

While web-based applications are new, the cloud computing model is actually very similar to the mainframe time-sharing model of the 1980’s (DynaTax, CompuServe, The Source), except the power of the single, huge mainframe of the last generation has been replaced by thousands or even millions of individual computers in data centers spread across the planet. The communications network has been upgraded from 300 baud dial up modems to a multi-megabit WAN-based internet connection.

We also have the ability to easily access our cloud-based applications and data everywhere over the web with modern mobile computing and communications platforms. As a result, cloud-enabled applications whether hosted or SaaS, can let you share information with a team of professionals across the globe in real time. Cloud computing also provides any organization access to world-class security professionals using state of the art data centers which are designed to provide both application availability and data security.

The leaders in the space include major players such as, Intacct, NetSuite, Intuit’s ProLine, CCH’s ProSystem fx, and ThomsonReuters’ CS/ES product lines, but also include specialized SaaS providers such as Braintree-based XCM Solutions, Andover-based Copanion, AccountantsWorld, and Capital Confirmation. Hosting vendors for CPA firms include CPAASP (InSynq), Real Time Data Services (RTDS), Real Time Bookkeeping, and Network Management Group, Inc. (NMGI). NMGI offers Boomer Circle members affiliate pricing, and can host all CPA Firm applications. Hosting vendors for specific applications, such as Right Networks for QuickBooks hosting are popular as well.

A simple transition model to the cloud is to use hosting in a data center. Consider the impact on your organization if you could eliminate your data center or server room. How much do you care where the servers are located? If your servers are down the hall, is that a problem? What if they are on another floor in your building? What if they are in another building owned by your firm? What if they are in another city in another location owned by your firm? In all of these scenarios, your reaction is probably: 1) so what?, 2) is the speed the same?, 3) are the costs the same?, 4) do communications lines make the computers less reliable?, and so on. However, you may perceive that you don’t have much security risk because all of these locations for your servers your business owns. But how much access to unauthorized personnel such as guests, outsiders, cleaning crews, IT contractors or hackers have to your system?

Consider placing these servers in a highly secured data center that has a full-time security staff. Does the hosting center have more or less sophisticated security, firewall, database administration and IT management personnel than your own firm? What are the risks to the firm? What are the costs? If communications didn’t work, would the firm be "down”? What is the performance like? How much communication capacity can your firm afford? How much redundancy do you have? How much capacity and redundancy do you think a sophisticated data center has compared to your firm? In the last ten years, most of the issues that made cloud computing more expensive or not feasible have become less of an issue.

One of the biggest issues historically for IT has been cost of ownership. Factors include: initial purchase, extended warranties, installation, maintenance, upgrades. Servers would need to be replaced every 4-5 years. Supply your own numbers, but for discussion, assume that for a single server, for each of these factors you might spend 7500+500+4000+6000 (100/mo)+ 2000=20,000 every five years or $4,000 per year. This same server in a hosted environment would cost 0+0+4000+10,500 (175/mo)+0=14,500 or $2,900 per year. Hosted computing is sometimes more expensive and sometimes less than owning the servers in house. However, accessibility from anywhere, monitoring and maintenance 7x24, and no capital expenditures could be significant benefits to your organization. You will still have installation, and the need to have IT install applications. The economics dictate that cloud computing has to be considered as a strategy whenever you are ready for a major upgrade.

Our logic to this point has been around servers, but now what happens if we can do the same thing with desktop and laptops? What if your entire desktop could live in the cloud, and you could access it from any computer anywhere, perhaps from a netbook, a thin client, an older machine or a borrowed machine? What if all your applications were SaaS or virtualized? Could we do everything we needed from a small, simple computer that had a web browser? This is the vision and promise of cloud computing. And as a side benefit, it might just save you money, too.

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