Tech Lover 9

Much has been said about cloud based applications for individuals, small groups and trivial applications meant for companies and cloud based software for small and medium businesses.  So what about heavyweight software meant for companies of size to operate their core businesses?
Much of this software continues to be developed or implemented as IT systems for individual companies. There are several software workhorses from different industrial verticals that deserve mention as examples.  A few  of them are operational support system applications in telecommunication networking, merchandising systems in retail, policy administration systems in insurance and account management systems in banking. Being able to provide or consume heavyweight software services through the cloud is a different ball game altogether.  There are many, many constraints involved.  Before thinking about these constraints, and much less how to address them, it is a good idea to think about why companies would like to have these services provided from the cloud in the first place.

The freedom from having to install and run software is a powerful motivator to obtain services from the cloud.  Maintaining sophisticated  software applications is normally not a pleasant experience for most companies.  Running software may require dedicated data centers and teams of specialists in networking, database and hardware and specialists in packaged software whose services need to be bought at high wages.  And these are companies whose core business is not to run IT systems. Implementing software makes a company highly dependent on software vendors and IT consultancies.  Another powerful motivator would be freedom from failure.  The cost of failure has been high.  In “The Critical Success Factors for ERP Implementation: An Organizational Fit Perspective,” Information & Management 40, no. 1(October 2002), K.K. Hong and Y.G. Kim make an assessment that failed implementations could be as high as 75 percent.  We are looking at the possibility of the cost of failure not being borne by companies for the first time, thanks to the cloud.  What is more, companies will not be left with software that does not work.  Apart from eliminating the need to develop, implement and run software, some alleviation from failure and agility, other key benefits would be saved CAPEX, increased access to software, increased exposure to players like suppliers, third parties etc and thereby more standardization of processes and more focus on core business activities.  However the following words of caution are in place:

• While saved CAPEX is definitely an implied gain, it is too early to assume guaranteed savings in overall expenditure at this point, unless operations are so fickle that hardware or software needs to be overhauled very frequently.
• Easier management cannot be assumed either considering that there is not much experience out there managing cloud software vendors.  Some pains and learning along the way should be expected.
• Scalability could be another gain, but the pitch about being able to meet sudden increases in business that can be made to entice smaller players or startups may be met with consternation with companies of size.  Also, insulation from failure could be a disadvantage.
• Not much is known about how much business processes may need to be modified to suit the cloud, though hopefully the availability of many and specialized variants of different services will make this less compelling than with packaged software.  But again having too many vendors involved could decrease accountability and customization may become dearer.