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Up in the clouds

11 February 2014

Victoria Masterson examines the case for the cloud.

Is cloud computing the coverall IT solution offering scale, savings and shorter contracts, all on demand? Or do data security concerns mean buyers should still be wary in this rapidly developing area?

During the Cheltenham Festival – the most prestigious meeting in the National Hunt’s UK horse racing calendar – traffic to the TV channel and website At The Races doubles. In the past, managing these surges in demand was difficult and costly. Around 1.5 million racing fans regularly log on for racing information, previews, news and other services. 

“We were worried that when there were spikes in traffic to the website – for example, during events such as Royal Ascot and the Cheltenham Festival – operating costs couldescalate with a traditional hosting platform,” explains Miguel García, Head of Technical for At The Races.

“Conversely, during quiet periods in the racing year, demand would fall.” García said he had a ‘lightbulb moment’ at an event in Bradford when he found out about Microsoft’s cloud computing platform, Windows Azure. This allows Microsoft to build, deploy and manage a range of ‘on demand’ Internet-based applications and services through its global network of data centres.

“Because we pay for what we use, we’re now spending considerably less than we would have with a traditional hosting solution,” García continues. “This in turn gives us the licence to experiment more because the costs involved are minimal. “We no longer need to conduct weeks of planning before major events in the horse-racing calendar because we can organise additional capacity at short notice – it can scale up in 10 minutes. This is particularly important for coverage of unpredictable events such as a big-breaking news story about a particular horse, event, or trainer.”

This ‘pay-as-you-go’ access to computing capacity and services via the cloud is transforming the way businesses work. One of the key differences between traditional IT infrastructure and cloud computing is the shorter contracts, says Kate Craig-Wood, founder of Guildford- based IT hosting company Memset and a finalist in the 2013 FDM everywoman in Technology Awards – which celebrate women working in IT.

“The cloud is on demand so you can upgrade by the minute or the hour rather than by the day or month. Traditional IT outsourcing and system integration was based around big contracts with regular fees, large set–up costs and software licences. The cloud basically allows businesses to get away from all that and to use what they want, when they want it,” she says. Craig-Wood believes cloud computing is ‘massively’ important to businesses because it allows them to be flexible, scalable and mobile. She adds: “This is changing the way businesses think, because they realise that they don’t have to have their own data centre with hardlines back to the office, but can outsource this infrastructure without having any capex or installation costs.”

Krishnan Subramanian is a leading thinker in cloud computing and principal analyst at US research firm Rishidot Research. He believes the biggest change from the cloud is the agility it brings into business innovation.

“Unlike any time in the past, the time from an idea to product is drastically reduced, leading to innovation which helps consumers, other businesses and governments,” he says. “We are a small research firm distributed across the USA. It has made collaboration easier for us and helped us get resources which were too expensive in the past. Combined with innovations in mobile, it has totally changed how we operate our business.”

The cloud is on demand so you can upgrade by the minute or the hour..

For Norfolk-based artisanal bakery Bray’s Cottage, using cloud-based accountancy system KashFlow has freed up more time to grow the business and invent new fillings. The company makes pork pies in flavours including onion marmalade, chilli jam and apple, and employs five people across three locations – a manufacturing unit, bakery and office.

“The fact that all of us can be working on different aspects of the accounts from different locations is really useful,” explains owner Sarah Pettegree. “It means we could have someone in the office raising an invoice and someone at the other end putting in receipts. If a customer has a question about how much they owe us, we can look it up right away. It can make us look a bit more slick and professional – as though we’ve got an office of accountancy staff. It also frees up my time to focus on marketing, developing the products and coming up with more fillings.”

Steve Salmon, a Principal at KPMG’s UK chief investment officer advisory practice, says the cloud allows small businesses to access big enterprise applications that might previously have been out of their reach, while large companies are using the cloud to increase the efficiency of large functions such as human resources, finance or supply chain management.

“The question we’re being asked is, how can the cloud help us improve or automate these business processes? Often you find the cloud is just one part of the mix, so it may be combined with some classic or legacy applications and some traditional outsourcing. What we’re seeing is the cloud element of that increasing.”

Despite advances in encryption technology, data security on the cloud remains a concern, particularly for businesses in highly regulated industries such as financial services.

“We’re seeing customers pushing on cloud providers for increased transparency and that’s through independent assurance and attestation,” Salmon explains. “These IT providers come in all shapes and sizes and one of the big challenges around the cloud is the lack of standards and lack of interoperability between the different providers. IT has to somehow make all this work and integrate with existing systems to deliver what the business needs. That’s hard work and that’s the disruptive angle.”

Surveys show that uncertainty over information security is one of the biggest issues for larger organisations considering moving systems or data to the cloud. The economies of scale in cloud computing come from sharing resources and outsourcing IT responsibilities, and this can introduce new security risks for organisations. Director, Equiniti Technology Solutions, Nigel Farr says: “Organisations in the public sector and regulated industries will have well-developed governance processes for risk management and can address the risks involved in cloud computing; however, it is still a developing area. At the minute there is a drive for many organisations in favour of private cloud solutions from providers like Equiniti or from shared service centres within government.

“With a private cloud solution the main benefits of cloud computing such as economies of scale and operational flexibility can still be achieved, but the security risks are clearer and easier to manage. Organisations are typically able to tailor private cloud services to meet their individual requirements and incorporate them as part of a full outsourcing arrangement including business applications and support services.”

Rick Simmonds, Managing Partner at Alsbridge, a specialist IT sourcing advisory firm, adds that there is still a limited selection of cloud applications for large companies. “As yet, the cloud has made little impact at the enterprise level, with a few major successes such as Salesforce.com (a popular online customer relationship management application) and some later entrants coming up fast on the tracks, such as Workday (the cloud-based human resources application).

The cloud represents a fantastic opportunity to get more technology for less, but the risks are that for big, complex companies the standard software offerings might not be appropriate to their needs.”


Skyscanner, the global flight comparison website that receives 30m visits per month, uses a private cloud infrastructure model to give the business the flexibility and scalability it needs to manage visitor volumes to its website and mobile apps.

“We have huge fluctuations in visitor numbers around the world at any time and we’re also growing the business and visitor numbers at a significant rate,” explains Peter Sturrock, Skyscanner’s Director of Service Management. “Our site needs to perform well at all times, regardless of how many other visitors we have on the site. Cloud computing helps us achieve this by giving the ability to add on additional capacity at peak times to handle bursts of traffic, as well as making sure that any site downtime is at a bare minimum.”

At the University of Edinburgh Business School, Senior Lecturer in Information Management Dr Ashley Lloyd points out that the bigger the data centre, the more efficiently they can share resources internally and smooth out peaks in demand.

“This is why cloud data centres are getting very big, with the latest commercial cloud data centre being built in China set to be as large as the Pentagon!” he continues. “With vendors getting this big, avoiding lock-in will be important for companies who want this relationship to flex both ways.”

John Dryden, Chief Technology Officer at IT support consultancy IT Lab, suggests that while cloud computing is the ultimate in virtualisation – even the server is virtual – it is also an echo of the old mainframe days, when computer terminals saved data on a huge central machine.

“The reason we ended up with PCs on every desk in the early 1990s was because we simply didn’t have good enough connectivity to the mainframe to give users the access they needed,” Dryden adds.  “That has changed dramatically over the last decade and the bottleneck of connectivity is no more. Today’s high–speed links not only allow greater data bandwidth, but also deliver it at affordable prices.”

The cloud also offers spin-off ‘eco’ benefits. “Overall in the world, IT emits as much CO2 as the aerospace industry,” says Dr Patrik Kärrberg, Research Fellow and Research Programme Director at London School of Economics, Department of Management.

“If you’re using cloud computing, you’re generally more energy efficient than running standalone computers or in–house server farms. There are also some accounting implications because if you’re renting cloud computing monthly, it’s a cost rather than an asset on the balance sheet that would be written off over time.

“If you’re an investor in a start-up company, you may see it as beneficial to have a small fixed monthly cost, rather than the large up-front expense of IT equipment, which may result in considerable capital cost at the outset.”

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