Minding the Store

By Tony Kontzer  |  Posted 03-05-2008 Print Email

Minding the Store

It probably won't be long before West, who supports more than 100,000 tax professionals, gets his wish, but his company's needs are quite different from those of small and medium businesses. SMBs are more likely to want to put their IT operations in someone else's hands so they can focus on their core business.

"We're running our whole company on cloud computing," says Brian Leffler, vice president of TTI Instruments, a 30-person firm in Williston, Vt., that sells industrial instrumentation. "It works great for us, and it's a tremendous competitive advantage. It lets us concentrate on the most important things."

Leffler's experience underscores just how great a match cloud computing and small business are: TTI had been running its operation on Microsoft's Great Plains enterprise resource planning software for small business, but the cost of licensing the software, provisioning servers and acquiring complementary software for niche tasks such as lead management became excessive. Leffler opted to switch to NetSuite's integrated on-demand applications, committing to a five-year $100,000 contract to run the entire business.

In comparison, Great Plains would have cost TTI about $110,000 over the same period, plus the cost of the staff resources needed to administer the servers, back them up, install updates and handle any other maintenance tasks. Today, all 30 TTI employees spend pretty much all day accessing their NetSuite environment using nothing more than a Web browser. As a result, Leffler has become a believer in the promise of the cloud. "It saves us money every day we use it," he says.

Leffler expects one of the traditional assumptions of IT--that having an IT department is a detriment to small businesses while larger companies need internal IT units--to face serious challenges in the future. "Over time, that line will be blurred, and even big companies will be embracing cloud computing," he says.

That's not to say traditional IT will disappear. Rather, as big companies become more willing to bring cloud computing into the mix, their IT departments will be able to focus on matching application functionality to business processes, rather than on upgrading and patching applications, or writing custom code.

Leffler sees the IT staff at General Electric, one of his biggest customers, struggle to make use of new technologies because of the sheer scale of any upgrades. "When you're running IT for a 300,000-person organization, you've got a lot of constraints," he says.

Among the constraints holding back big companies are incredibly complex business processes that have taken years to refine and often require highly customized applications to support them. As a result, one of the biggest benefits of cloud applications--the ability to exploit best practices without having to wrestle with customization--is also one of its biggest limitations. Larger companies that have been willing to try on-demand applications delivered via the cloud generally have limited their use to systems that aren't core to their businesses, keeping highly customized apps in-house.

Travelport falls into that group, and CIO Powers says categorizing the company's apps along those lines was a critical part of the on-demand strategy it embarked on a little more than a year ago. She settled on a list of vanilla, cloud-friendly applications that include customer relationship management, expense reporting, payroll processing, human resources and financials. These apps don't provide a competitive advantage and don't represent things that Powers feels are distractions from more core activities.

"When we made the decision, what it boiled down to was, What is the application we're talking about?" recalls Powers. "If it's something that's highly customizable, that you have to use your way, then cloud software won't work for you."

Powers wasn't about to cede control of Travelport's core reservations system. However, she believes that over time, the ability of cloud software providers to make their products more configurable--meaning IT folks can tweak the functionality to match their business processes--will fuel growth in cloud computing.

In fact, Salesforce.com and NetSuite have been steadily adding customization capabilities into their products over the past year or two. Last fall, Salesforce added a service called Visual Force, which provides customers with a programmable user interface they can use to tweak the look and feel of a Salesforce app. And early this year, NetSuite introduced a business operating system to its on-demand lineup, giving customers tools that let them ensure their own custom code is compatible with the NetSuite framework.

The fact that Travelport must maintain a sophisticated, well-stocked data center to support its reservations service has Powers thinking about turning Travelport into a cloud infrastructure provider. She's looking at whether it will eventually make sense to rent out Travelport's excess data center capacity during off-peak hours to IT departments seeking temporary access to computing power for short-term projects.


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