Where is cloud computing the best fit?

Written by Michael Sengbusch and Gary Neights of Elemica

Companies continue to spend enormous amounts of money on systems to manage their internal processes. Cloud-based solutions help these businesses leverage their IT investments. Yet companies have focused on delivering efficiencies for their internal operations, often ignoring how to best integrate with a world of external trading partners with whom they must conduct business.

Cloud computing is very valuable in this environment, too. B2B cloud-based providers corral the various processes of doing business with external trading partners, making supply chains much more efficient, and making it less costly for companies to do business with each other. Even for those more sophisticated companies who have developed an eBusiness strategy, most are dealing with a complex environment of multiple B2B processes that need to be supported, and a cloud environment here makes it a win-win situation for all parties involved.

Certain processes that require orchestration between external and internal entities work extremely well in a cloud-based environment. Three examples of these processes are advanced order processing (AOP), logistics, and trading partner integration.

·         Advanced order processing (AOP) manages data from multiple parties including customers (demand), telemetry providers (inventory levels), and carriers (in-transit status).  A cloud-based solution integrated with these entities is more cost effective than a manufacturer, distributor, or retailer orchestrating these internally. 

·         Logistics processes coordinate suppliers, customers, and carriers.  Managing these processes via ‘cloud applications’ is more effective than via the ERP system. 

·         Trading partner integration is better handled via a cloud-based architecture.  Large companies already using an ERP for manufacturing, maintenance, MRP, and accounting are top candidates for cloud-based trading partner integration.

Smaller companies may base all of their processes, including HR, customer relationship management (CRM), Manufacturing Control, Maintenance and Accounting on the cloud to minimize investment.

Crunching massive amounts of data (i.e. video or 3D rendering) can be outsourced to the cloud. Amazon, eBay, and of course Google are prime examples. Community Management is also a natural fit for the cloud.

However, at times, internal processes excel over the cloud, especially in highly customized legacy applications, such as ERP.  Some companies have processes that provide a unique competitive advantage and should not be shared, such as bills of materials (BOMs), manufacturing process information, and financial data.

Companies that handle highly confidential data such as medical records, HR data, and credit cards require special security handling to ensure that the data is protected from internal and external security breaches during transmission. A company considering the cloud for sensitive data needs to perform a risk analysis and weigh the pros and cons.

Yet, the cloud can save companies a tremendous amount of money and will deliver benefits in multiple ways. These savings and benefits may far outweigh any concerns that management has.

Cloud computing provides business value to a company’s operations and culture. In some countries, regulations call for local providers to be used, such as in EU and Latin American financial processes. Cloud computing facilitates these processes.

Cloud-based solutions help companies connect globally to all of their trading partners, much more cost effectively than multiple one-off connections.

Cloud computing easily integrates disparate systems and information silos, allowing holistic views of an operation. But implementing the cloud can change business culture by causing shifts in staff due to the changing mix of development, maintenance, and support. Migrating to the cloud can create downtime in some operations. Where massive customization is needed, a hosted or instance-based solution might better meet requirements.

However, the advantages of cloud computing far outweigh the negatives. And the IT market is taking notice. IDC estimates that the cloud computing market will be $55 billion by 2014. Low cost is a definite advantage of the cloud, but for many organizations, agility, scalability, time-to-market, and fast access to high-quality infrastructure present more compelling benefits. Cloud computing allows many businesses to get up and running fast with a new technology or scale computing power to handle peak loads much more rapidly, efficiently, and cost-effectively than they could possibly do in-house.

There are distinct areas within an organization where cloud computing is best. Whatever you think about cloud computing, there's no question it will continue to grow, evolve, and address issues of security, compliance, and cost. Make sure you understand the realities of the cloud and the benefits it can bring to your organization.