The Cost Effectiveness of Using Cloud Computing

Cloud Computing and Organizational Cost Management

The contemporary market trends have put a lot of pressure on many businesses to cut down on their spending and unnecessary costs using any reasonable measure. The globalization and the emerging trends in business demand that for any business to stand a chance to grow and expand across borders, it has to both adopt the current technology and do so at a reasonable cost that will not negatively impact on their profit margins. Investments into the information technology has been seen as one of the most significant and best approaches to not just cutting operational costs but also expediting the organizational processes, making the organizational systems efficient and also central in profit maximization of any organization. There are various technological advances that have been accepted in organization such as use of email as an official communication channel and acceptable documentation, teleconferencing, video conferencing and even online chat groups where employees from same company across the globe can exchange idea. Cloud computing is yet another central technology that is rapidly being accepted and adopted into many organizations with the ultimate aim of having their strategic and operational plans costing significantly lesser with the aid of cloud computing.

Thesis statement

Bearing that the use of network based applications is inevitable and central in the running of business on a daily basis, cloud computing is necessary in cutting cost and ensuring that the organization still runs efficiently. If done in the proper way and with the right cloud computing partner, this approach to network outsourcing is sure to help generate income and reduce the cost of operation. The paper delves into the available libraries and articles online to find out what the positive aspects in terms of cost effectiveness can be found in cloud computing, the associated risks that an organization gets into as well as the precautions that the organization considering cloud computing needs to take into account before committing fully.

Tenets of cloud computing

Cloud computing is the technology of utilizing a network of servers that are located in a remote location and hosted on a remote internet platform meant to store, manage and process data as opposed to the use of personal computers or even the local servers within the organization (Apostu A., 2014a: Pp118). The data stored in the cloud can be accessed and released to the organization within a short notice and minimal management effort hence cats as a quick storage and access point. The date is delivered-on-demand basis and the services are utilized on a pa-for-use basis as well (IBM, 2016). There are specific cloud computing software that cater for the specified market or customer needs, for instance those that are customer relations based, those that deal with human resource management, human capital man agent, enterprise planning and many other fields that have specialized cloud computing software that they vend to potential customers. Indeed many software vendors are increasingly switching to the cloud-based strategy as a replacement of their traditional delivery modes.

Since cloud computing is a utility, the cloud computing vendors often cater for the underlying infrastructure and software that are needed in the establishment of the remote cloud computing systems. The vendors will then enable the customer to be able to access the particular data from any location suitable for the client. This means that the vendor will charge the client for the service provided hence effectively cutting out the costs of having to erect an independent cloud computing infrastructure for the organization. The vendor provides the software as a service (SaaS) and the software has multitenant utility hence many customers could be using the same software all at the same time, a fact that compensates for the financial inputs engaged hence making their profits as well (Radack S., 2012:Pp4).

The cost related benefits of cloud commuting

One of the most outstanding and obvious reason why any organization would get into having their data hosted in a remote central server and also access software from same place is due to the related reduction in the computing costs. The cloud computing technology enables organizations and businesses to have access to large volumes of software usage, data usage and data storage facilities and services at a minimal upfront cost. The organizations that utilize the cloud computing solutions avoid the capital input in the infrastructure and the hardware needed hence the costs are met by the vendor companies who invest in such ventures (Macias F., & Thomas G., 2011).

The other cost benefit to the organization whose data is stored in a cloud technology is the passing of the infrastructure maintenance cost to the vendor. As Apostu A. et.al, (2014b) indicate, the firms will minimize the costs of maintaining as well as regularly upgrading both the hardware and the software and the primary infrastructure. The vendor takes up the cost and the responsibility of ensuring the server has the latest and updated software as well as the best hardware that will ensure the safety of the data they store for customers.

More organizations have also opted for the use of cloud computing in their software solutions since unlike the traditional standard software that will require money in licensing for use and the annual maintenance fees in order for the organization to continue using it effectively in their computers, most cloud computer software vendors will eliminate both of these fees. Most of the vendors will bill the organization on a monthly basis or on quarterly intervals according to the user basis. This turns out to be cheaper and more effective for organizations since they would not have to pay for the time that they do not use the software and it sits idle in the computer, not being productive as would be the costly traditional software licensing.

The benefits of the cloud computing transcend the savings that the organization can make as noted above and involves the ability to expedite work within the organization. The technology allows for the implementation of new applications faster than the traditional format. This is because the cloud computing vendors have large capacity for redundancy which can be used to provide for any higher demands and provide scalability. This means that the operations within the organization will be at an optimum at all times, leading to higher productivity as supported by the relevant software from the cloud computing vendor. The vendor will also give the customer a guarantee of the up times of their server and having back up platforms for operating incase of a hitch in their servers. They will also assure the customer of the recovery process hence security for the data and also relieve the customer of the burden of investing in hardware and software for data backup (Intel, 2016). These are costs that are cut out of the annual budget for the organization hence more organizations tend to prefer and opt for the cloud computing approach in operation, storage and support of their software and systems.

With the onset of the cloud computing into the organization, the IT approach necessarily changes and the IT skills that are needed to use and handle the software changes. This means that as the applications move to the cloud, there will be lesser need for people to install, configure and maintain the software. There will also be fewer hardware used hence the need for the manpower to help maintain the hardware will also go down. The IT team will have to be reduced and only a few who will be helping in the implementation of the program by showing the members of staff how to use the software will be retained. This measure will cut down costs that are related to hiring a large team to be responsible for the traditional operation of the software on each computer (Lee, L. S., & Mautz Jr., R. D., 2012).

Cloud computing has also brought into the organizations the work flexibility and portability of work. In the traditional system where the relevant software were installed into the office computer and would be used during the office hours only, the cloud computing has transcended such limitations. With the cloud computing possibilities, the individual can work from anywhere and as long as they are connected to the internet and have the required details they can continue with their work undeterred since the software is hosted at a central server and not personal computers. This has been noted to increase productivity among employees and managers who prefer to continue working beyond the capacity that the normal office hours may avail. It has also allowed those travelling away from the state or even outside the country to be able to keep updated on the ongoing of the organization and even work from far off distances (Mirashe S.P. & kalyankar N.V., 2010: Pp90).

The challenges of cloud computing to the organization

The concept of cloud computing is basically outsourcing a service to a vendor who specializes in the same, and just like all the other outsourcing services that exist, there are risks that are associated with them, so is the cloud computing service. Once an organization relinquished the task of hosting and maintaining a server to an outside entity, it should be ready to have or expect challenges over the control of the application starting from the support of the application. Since the outsourced application is in a cloud or a remote server, the basic control and primary support is in the hands of a third party and there are risks associated with this move. First, the response time will have to be agreed upon between the organization and the vendor and it may likely not be as fast as the organization may want it to be. In the process, the organization may lose some precious time waiting for a troubleshooting team from the vendor or waiting for the activation of given software that they may want to use. Since the software is effectively shared among many customers from the central server, the customization of the applications or even modification of the applications may take considerably longer than if it was being done from within the organization. Worse still, the IT experts within the organization who were to deal with the application are likely to lose acquaintance with the manipulation and application of the software and processes involved (Merrill, 2014).

The other aspect of risk in cloud computing is the issue of security of the data that is hosted in some remote server. This is constantly an issue that management is concerned about since the communication with the central server is done only through the internet. With the large volumes of data constantly being sent and received from the server, there are risks that are associated with the internet and possibility of hacking into the system and taping into the data flow between the firm and the server. The organization has as a matter of fact extended the trust for the boundaries it has set for its data to an external source which is the server. There is need hence to have the best controls to not only ensure the integrity of the data, but also to ensure availability of the same (Turab N.M., et.al, 2013: Pp210). The integrity and availability of the data can be ensured by the vendor putting in place essential back up plans for the data and also disaster recovery processes that are effective.

The privacy of the organizational data is yet another concern that often comes up. This is due to the fact that the cloud computing is a multitenant platform where there are several customers all accessing data from the same severs at the same time. There is the risk of other dubious customers accessing data that does not belong to them and the vendor needs to put in place adequate measures to ensure each client's data is properly segregated to avoid such instances. This concern comes along with the confidentiality of the data of the customers since the data from the organization is basically surrendered to the care of the vendor employees. It is essential that the employees of the vendor maintain the confidentiality of the data and not to manipulate or expose in any way the data they have been entrusted to take care of, most of which could be sensitive. To this end, there needs to be an effective data access control and monitoring system that can be accessed by both the vendor personnel and the customer to ensure they are both up-to-date with the access and flow of data.

Yet another important consideration to make before deciding to have particular software supported by the vendor is the risk of the vendor failure in business and closing down. If the vendor suddenly closes shop and ceases operating the cloud computing, the impact on the organization can be massive, despite having gotten back the data they had stored in the cloud computers, the software that was supported by the vendor will be withdrawn hence leaving a significant void and stalling operations within the organization. The organization hence needs to keenly consider the category of software support they can entrust the vendors with and what they need to host in-house despite the related costs. It is also important for the vendors to have in place, for the sake of the customers, a transition plan that supports the clients to relocate to another vendor in case of unforeseen eventualities like closure of business.

Considerations to make before opting for cloud computing

Cloud computing in the contemporary business environment and economic time is inevitable, and despite the disadvantages that may come along with the technology, it is just prudent to be certain of how to approach it in order to gain the maximum cost benefit for the organization rather than neglecting it all together. There are a few factors that the organization needs to consider before opting to go for a vendor as follows;

The class or type of applications or data that are best suited for the service of cloud computing is important to consider. The outsourcing of applications mostly works best for those applications that have mass usage among the employees of the organization and those applications that generate large volumes of data or transactions per day. In this category, the straight forward applications commonly used like the emails and the point of sale management are some of the possible software to subject to cloud computing. The other consideration to selection of applications for cloud computing are those that require frequent updates, extensive maintenance and would need significant attention from the IT team. Such applications need to be outsourced with the right vendor in order to lift the strain from the IT team and also cut down on the number of IT members needed and in effect reduce the operational costs within the organization.

The other consideration is the type or class of applications that cloud computing is not suited for or best as opposed to the internal handling of such applications. There are applications that are highly customized fro the use by the organization in specific hence are not suitable to be hosted by any other host to manipulate. This also applies to data that is considered highly sensitive or private to the company. In as much as the cloud computing is able to host any form of data and application needs, there needs to be an evaluative approach to what can be hosted depending on the sensitivity of the data and the applications. There are functions that are critical to the mission of the organization or a given task that could be short-term of long-term. Such mission sensitive applications should not be hosted on the cloud computing, otherwise it may compromise the timeliness of the task especially if it happens that the access timing is delayed. The other applications that should never be subjected to the cloud computing are those that act as the connection between the organization and their primary source of income, as well as those that form the base for the operations of the organization as a whole. If the lifeline of the entire organization depends on it, then there should never be consideration of such applications for cloud hosting.

The management needs to also look at the due diligence involved before outsourcing the services to a given vendor. It needs to be clear whether the vendor and the service intended will serve the needs of the organization in an effective manner. The management, in determining the particular service to settle for will hence consider the needs of the current users and the potentiality for change in the needs of the users and future users as well. The management must extensively involve the employees and the end users of the services they intend to outsource. Then, the management will have to ensure the needs of the users and all the factors considered can be met or matched with the vendor service availability, storage capacity and backup, safety in handling as well as the disaster recovery ability. The vendors then need to be evaluated on not only ability to meet the needs identified by the management, but also the sustenance of the same in terms of their financial ability and potential of staying in the market for years. The management can use the levels of certification and licensing that a vendor has, plus the previous work they have done, their history in the same market and the relevant companies they host to make a decision on the vendor to choose (Raymond K.C., 2010: Pp5).

Cloud computing and the globalization trends

The cloud computing, as seen from the benefits herein is one of the biggest success steps that technology has taken over the years and a platform that has facilitated great and extensive interactivity of processes and also communication in effect enhancing operations of organizations not only at the regional level, but international or at global stages. There are various functionalities that have their basis or foundation on the cloud computing platform in order to effectively operate at the global levels.

There are multinational corporations that are known to operate various branches in the U.S. as well as other nations in other developed countries or even in developing nations in Africa and Asia. However, there are organizational cultures and standards that effectively permeate the operations of the organizations and the employees, whenever they are, have access to these organizational outlines and guidelines. These are global trends that can be facilitated effectively through cloud computing where the organizations have their data that is intended to be shared with employees globally to a given cloud vendor and then the employees across the globe are facilitated on how they can access and utilize the data.

The cloud computing, which is an on-demand service model for computation is also seen to transcend the global geographical, technological, and administrative boundaries that traditionally confined information ad services. The vendors now can offer their services not only to companies or organizations with their head offices within the U.S., but foreign organizations from other parts of the world can easily sources for the hosting services from the vendors based in the U.S. and still have a conclusive service contract signed and service effectively executed from the remote locations of both the vendor and the organization seeking the services. This is in line with the global trends of supply and demand and the effect it has on quality of service. Since the cloud hosting services can be sourced from any part of the globe, the organizations have wide range of choices to pick from, hence the vendors need to prove their worth of trust and also perform to the highest expectations of the clients. This is an ample example how the global market influences competition and in effect drives levels of services provided by the IT companies.

The cloud computing has also positively impacted on the democratization of the access to knowledge or information in many parts of the world. The SMEs can now have access to unlimited amount of information about their areas of operation and their trade, they can benefit from ICT inventions and services at a minimal cost or minimal investment, small businesses can also get training of their staff through the virtual training programs or from a trainer who is overseas and all these made possible through the cloud computing.

Organizations globally have also benefited from cloud computing in that they have stayed up-to-date with the software and trade trends and organizational management approaches that are latest in the market. Since the software are hosted at a central server, software vendors can easily use the cloud vendors to advice the potential clients on the latest software in the market, as well as the improvements or updates that have been initiated on the already existing software. This approach benefits both the receiving organization that has its essential data hosted and operates from across the seas as well as local organizations that deal in developing and selling software at a global level (Science Daily, 2014).