There are a lot of articles and ‘buzz’ about cloud services or cloud computing. Cloud computing is not really a new concept and has its origins as far back as 1950s when mainframe computers were popular. Individual terminals had no real capacity but utilized the massive resources available on the central mainframe computer. The concept of centralized computing has evolved into what we call ‘the cloud’ today. John McCarthy (September 4, 1927 – October 24, 2011) was a leading scientist who first proposed the idea of Cloud computing in the early 1960s.

Mainframe computing gave way to workstations starting in the 80s. The ability of a single user with a reasonably powerful workstation to complete tasks such as payroll or engineering calculations opened the door for computers to permeate all aspects of business very quickly. This evolved into client/server computing whereby organizations could maintain autonomy amongst individuals with workstations but still give them access to shared resources on a server. The internet allowed organizations to setup centralized but highly accessible networks often referred to as private clouds. Virtualization allows physical resources to be allocated and shared easily.

So, your company buys its first computer and sets it up to do a variety of tasks. Perhaps you have a retail store and you use the computer as a till as well as your accounting system. Time progresses along. You add additional workstations and eventually, a server so that the workstations can access shared information like accounting data or perhaps inventory management systems. Your organization continues to grow and you find you need additional servers to house central mail systems, web services and remote users. Recently you amalgamated all the servers into a single virtual environment, with a second redundant server which allows for fall back in the event of an emergency.

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Cloud computing could be the next evolution in your organization. Take all the servers, workstations and put them up onto the web. Users are now highly mobile, working from home computers, mobile phones and even public access terminals at various locations. Organizations can rapidly grow or downsize depending on market conditions. Performance is negotiated based on demand, not on your budget and need at the time of purchase.

You are out for coffee with your spouse and you bump into your favourite car salesman. During pleasantries, you mention you have been thinking about replacing your car with a new vehicle. She pulls out her mobile device, sits down and you go through some options. The perfect vehicle is parked at the lot. The website video looks really nice, and you bring a finance manager from the dealership into the conversation via a connection where you negotiate a great deal and some additional options. Someone from the dealership brings you the car, and an insurance agent shows up to switch over your coverage while you enjoy your second cup of coffee. The technology exists right now.

Typically when you are considering a purchase, it is good practice to get several quotes. Large organizations can go through a much more complicated process of requests (for Information, Proposal, Quotation, Tender, etc). Sometimes organizations will negotiate a preferred vendor contract and allow departments within the organization to order as needed from a vendor or vendors.

Small to medium sized businesses have the purchasing power to draw the best deals but not necessarily the expertise to determine the best proposal. Consequences of making a bad decision are costly as they can affect your entire operation. Sometimes things are working poorly because you haven’t been willing to spend the funds to put the right solution in place.

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“Mark, I need a communication system between this desk and that desk in the building over there.”

The client pointed out the window.

“I have the perfect solution, it’s under $10.”

The client exclaims, “You’re wonderful! You always look after our needs!”

I handed him a string, with two cans.

“If the string is not long enough, I can sell you an upgrade to extend it.”

I try and get all my customers to check my pricing on a regular basis. If I am retailing a printer for $400, and a box store has it for $350, I want to know about it. Sometimes I can match the price and sometimes I can’t. It doesn’t mean that I’m trying to take advantage of the client because occasionally a price is much higher. As products are discontinued, some retailers will lower the cost in order to clear out inventory for new models. Sometimes it isn’t the same product at all, as box stores often have products designed for the retail market that could cause problems in the long term. Once, I found a brand of UPS that was identical to what I was selling to a client. The box store unit had the Model # modified with a sticker that added an ‘A’ to the end…and it was 25% cheaper than my wholesale cost.

Small to medium sized companies need to look at different strategies. Getting a quote on tires for three service vehicles isn’t going to offer much savings over your typical retail customer. Dealing with a single automotive shop should save you considerable money in the long term if they put looking after you as a client ahead of making money on a single job.

When dealing with an IT company, look at downtime and performance. Are your staff happy and are things working well? Document what your expectations are, ongoing issues with equipment, service issues or questions about new technology. Having five staff down for a significant amount of time can cost you thousands of dollars in lost productivity. When there are problems do they take responsibility or deflect blame to others? Slow Internet performance is often blamed on the Internet service provider. If this is the case, shouldn’t it be documented and resolved with the service provider? Be prepared to listen to solutions and spend the money to get results.

With the rapid advancements in technology it can be very difficult to keep up with where your company needs to be or where you want it to be. Technology has transformed virtually every business you use, the customers you deal with and how you produce your product or service. Managing this change is challenging and requires an increasing level of sophistication. Larger organizations are starting to utilize Enterprise Architects who identify and direct the company’s overall direction for all their technological needs. Think of an orchardist who is pruning, looking at the tree for what it is, and what it can be. EA’s is being recognized as a profession and are starting to develop standards (see http://www.feapo.org/index.php)

Integrating new ideas or concepts into a company is not an easy task. Even a simple thing like email can quickly become as much a problem as a solution. Staff can spend hours reading and responding to messages when their time might be better spent elsewhere. Sometimes simple projects can suddenly become a key component to the business. Recently, on a trip to Vancouver, my family was looking for something a bit different to have dinner. I often use the internet to research. I checked out a popular restaurant review website (I like www.urbanspoon.ca) , then over to a government site to read health inspection reports for food handling (see Interior Health Authority). We found a fantastic little bistro with amazing food!

Take a close look at your business or organization. It’s not just the problems you need to identify. There can be gaps in your business you need to identify. Do you have a website and would it benefit you? Are you or your business on Facebook, twitter, and LinkedIn? Think about how nice it is to eat at a restaurant with wireless debit machines. I can sit and enjoy time with my friends or family until the waitress brings over the debit machine, no standing in line waiting to pay. It frustrates me when I can’t find the operating hours for a business easily on the internet. I often use my smart phone to see when places are open. It would be nice to have QR codes to product literature in retail outlets. If the resources aren’t available, then I search for the product online, sometimes finding better prices at another location. Always evaluate your business and see if some key component could be more efficient. Look at trends, talk to your IT personnel and assess benefits versus risk.

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One of the most surprising aspects of my industry that continues to confound me is what companies will spend on IT. Other areas of business have generally accepted some standards for calculating projected costs, IT has evaded this analysis and unfortunately many organizations have allowed spending to get widely out of control. Public sector organizations often have the worst problem with IT budgets that are swollen. There are some very basic calculations that I use as a benchmark for determining what an organization is spending, and what it should be spending. There are two distinct areas that I have identified and two categories within each. Workstations and Servers are the cost centres, and categories for each are operating and capital costs.

Workstations

While the number of staff will affect overall costs to a small degree, generally it is the cost of workstations that I concern myself with. Ideally, each workstation costs about $15-20 per month to maintain and about the same to purchase. I generally plan on about a four year life for workstations. Extending the life will increase costs because maintenance goes up. Replacing frequently will also increase the cost for both capital outlay and maintenance costs. Modern, advanced organizations with cutting edge technology do not spend less on maintenance, they spend more. Buying cheaper computers from box stores might save money on capital costs, but will drive up operating costs. There are many factors that will increase costs, such as an engineering firm which will require higher end computers and expensive software that an accounting office does not require.

Servers

Servers are central computers that can be setup to do a wide variety of tasks, including centralized e-mail stores, backups, accounting and industry specific software. In my industry the generally accepted principle is that when you hit about six workstations, it’s time to look at getting a server. Surprisingly, server costs effectively double the cost of a network - $15-20 per month per workstation for maintenance and about the same to purchase. For example, a 10-workstation network server runs about $150-200 per month to operate and $150-200 per month to purchase (plus workstation costs). I like to see servers replaced about every four years, but I would say five years is the average life. For smaller organizations, the calculation is difficult because good, stable servers are priced at certain points. A five-workstation office will likely have the same server as a ten-workstation office, so capital costs will be comparable. The larger the organization becomes and the more servers, the more reliable the price is, and you can actually start to see some savings due to efficiency.

These costs are for discussion and comparison purposes only. There are a lot of factors that will affect costs. Be aware of hidden costs. Sometimes, as organizations grow and evolve, a particular person in the office will become the IT person. It used to be common for law firms and medical offices to have one partner act as the ‘computer’ tech. These calculations are good for comparing what it would cost to outsource versus lost revenue. This is also true for small businesses where the owner spends his or her time fixing, troubleshooting and installing IT. You might be quite proud of what you spend looking after things yourself, but is it the best use of your time?