Cloud or no cloud - how to decide?

27.11.2018 – Heiko Faller

Article for the special supplement "Focus Business Success" in the Tagesanzeiger issue of 27 November 2018

It is virtually undisputed that the future of IT in business lies in the cloud. But there are big differences in the ways it can be implemented.

According to the IDG study "Cloud Migration 2018", the cloud is not used by a quarter of the companies surveyed in Germany, Austria and Switzerland. However, the majority of companies surveyed use one or two cloud services – and one in ten companies uses up to 20 different service offerings. At the same time, 95 per cent of CIOs expect their company to be heavily involved in the cloud in two to three years' time.

But what concrete benefits do cloud services bring? And where are the risks? There is also the question of the right course of action in view of the growing supply and the progressive shift of IT services from companies to the cloud.

What actually is the cloud?

The symbol of the cloud symbolizes a computer network (e.g. the Internet). Short for cloud computing, the term "cloud" refers to the provision of IT infrastructure and IT services such as computing power, storage space or application software via the Internet. Characteristic of the cloud are resources that flexibly adapt to demand and are charged exactly according to the respective usage. All resources can be used via the Internet. Thus, for example, a virtual computer with the required computing power and main memory can be set up and launched in line with your wishes in just a few minutes using a cloud provider via the Internet.

What benefits do cloud services bring?

Cost savings
Most market participants expect cloud services to reduce costs. This is due to the absence of investment costs for the acquisition of hardware and software, the operation of local data centres and possible savings in personnel. Added to this, services are billed according to usage.

Global scaling
Cloud services scale elastically – meaning that the required amount of IT resources are available at all times. Examples are computing power, storage capacity and bandwidth. It is important that the resources are provided – where necessary – from the right geographical location. This is the only way to keep delays in the network low and ensure that all SLAs (service level agreements) are adhered to.

High reliability
Basically, companies expect little or no downtime when using cloud services. Unfortunately, there were always failures in the past. Very few companies have taken precautions or created emergency plans for such instances, but rely entirely on the capabilities of the cloud provider. Fortunately, a lot has happened in the last few years, so cloud resources are now well protected against outages.

Growth, agility and time to market
With the help of a cloud-based IT environment, products can be quickly brought to market (and to the end customer). Many startups use cloud infrastructures to quickly respond to domestic and foreign markets. They thus achieve the same reach as large, established companies, but without having to set up their own IT.

Specialized services
The large providers of cloud solutions have specialised services that are very expensive to implement. These include tools for data analysis (big data) or for voice and image recognition. In addition, the platform operators offer tools for system monitoring and log analysis, for example.

Where do the risks lie?

Dependence on one provider
By outsourcing services and purchasing services, companies become dependent on one provider. This is justifiable, if it means functions can be implemented that would not otherwise be possible or only at great cost (e.g. image recognition) or if it is possible to simply change the provider.

Unauthorized access to company data
A widespread concern of companies is unauthorized access to corporate data in the cloud. This can be remedied by using a hybrid cloud. This enables sensitive data to be stored on the company's in-house IT servers and not transferred to the provider's cloud.

Cloud computing jeopardises compliance
In the case of Switzerland, Hanspeter Thür, the country's former Federal Data Protection and Information Commissioner, recommends a Swiss cloud solution. He explicitly warns against using foreign clouds. In particular, the USA has determined that European data protection regulations do not apply to US companies operating in Europe.

If data is outsourced to the cloud, then the client – not the provider – is responsible for ensuring data protection. If Swiss regulations are violated in the cloud, the contracting Swiss company is liable. It is also the duty of the client to ascertain that the cloud provider ensures data security. In Switzerland, the first data centres of foreign providers will be opened in the first half of 2019. It may then be easier to solve compliance issues.

What is the right approach?

The decision as to whether and how a company should manage cloud onboarding depends on a large number of factors.

Definition of business strategy and goals
First of all, the company needs to define the business goals it has to achieve in what period and how. Is the existing IT infrastructure part of the plan and has it been prepared accordingly? Are additional (IT) investments planned? And to what extent? Are there any requirements that are difficult to achieve with existing resources and capabilities?

Clarifying the opportunities that the cloud offers
Cloud computing has many advantages, but it also has certain deficiencies that can be minimized with an appropriate setup. Are there any special requirements that a cloud setup needs to meet? Are there any cloud services that would be particularly helpful in achieving your business goals?

Technical analysis
After defining the business goals and the potential added value from the cloud, you need to make a detailed analysis of the existing applications in conjunction with the existing infrastructure. Which applications do you use? How is the infrastructure organized? What is the situation regarding architecture and scalability? Are there critical interfaces? Are there any applications that are suitable for cloud onboarding?

Personnel
The personnel situation is crucial for a successful assessment of the situation. On the one hand, you need experts who know the existing IT landscape well. You also require cloud experts who can assess how existing or future applications need to be organized so that they can run cost-effectively and efficiently in a cloud environment. Since cloud provider employees are often inaccessible, you will have to organise the expertise on the various cloud systems yourself. With enough time, it is possible that internal IT personnel can deal with the topic. These are the possible ways of developing expertise:

  • Testing the different providers' online services using prototypes
  • Attending training courses given by the respective providers
  • Certifications for parts of the cloud systems

Because of the complexity of cloud systems and the wealth of information needed to achieve good results, it makes sense for companies to work with appropriate partners. These should be neutral and experienced in dealing with the different cloud systems.

ROI and TCO
Using the knowledge gained, ROI (return on investment) and TCO (total cost of ownership) models are used to calculate the extent to which the potential migrations are worthwhile. This work is not easy due to the providers' complex price models. Based on the ROI and TCO considerations, decisions can be taken as to whether existing applications should be adapted to the cloud or transferred there in their entirety.

Transition planning
After successfully analysing the technological and economic circumstances, the transition can be planned. It should be noted that transition plans of this kind can become very extensive.

Summary

The cloud has already become an integral part of our everyday lives. It allows us to scale globally and offer our services worldwide and in a customer-focused way. This happens with high reliability at acceptable conditions. Compliance is still the biggest challenge facing cloud solutions today. As soon as the big cloud providers obtain their data centres in Switzerland, it is likely that this hurdle will be overcome.