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Moving Businesses to Cloud Complicates IT

6 min read

Cheaper and easier cloud computing options from big companies like Amazon, Microsoft and Rackspace are making it simpler for businesses to eliminate physical servers, but are complicating the jobs of local information technology firms.

“Cloud computing” is a squishy term: Everyone who has a Gmail account or uses Dropbox stores information in the cloud.

But as the term relates to the world of IT and managed service providers, businesses increasingly are looking to move bulky, space-consuming server infrastructure into purely digital spaces.

Prices can vary wildly by the needs of the consumer, but Herve Roggero, a software developer and blogger, this year illustrated the cost differences between on-site computing and cloud hosting.

Using the same specifications for each setup, he calculated the price of hosting and maintaining two new servers over the course of three years. He posted the results on GeeksWithBlogs.net.

Microsoft’s Windows Azure would cost $53,676; Amazon’s service would cost $63,952.

Buying the two servers and licenses to run on-site would cost $132,200.

In short, the cloud is looking better and better.

“Most businesses have at least one, two or three applications that require an on-premise server,” said Robert Lindley, president of Innovative Systems Inc. of Little Rock. “Small businesses often don’t have anything on-site except maybe QuickBooks. It’s easier to make that decision to move to the cloud.”

Lindley said that when Microsoft released Office 365, its cloud-hosted office suite, “Microsoft’s take was that it would impact more of the medium-sized businesses than the small,” Lindley said. “I thought at the time that that was totally wrong. Over time I’ve been proven right. Office 365 is definitely affecting small businesses more than medium-sized ones.”

The net effect, Lindley said, is that smaller IT services firms like ISI need to have more small-business clients to generate the same revenue. When a business chooses to cloud host, ISI doesn’t lose the client entirely, but it does have to deal with an additional party in the client relationship.

“It’s interesting,” he said. “It’s taken some time for that to all shake out. People thought it would mean less business for us. But just because we moved the server to the cloud doesn’t mean less business. We still maintain the relationship.”

The relationship is just more complicated, he said.

“The relationship with Microsoft ends up being a managed relationship,” he said. “When we have full control of an exchange server on-site, changes would be something we had total control over,” he said. “Now we’re making calls to Microsoft, and it takes longer for us to resolve the issues.”

That means ISI’s expenses go up, Lindley said.

“It’s requiring more time dealing with the vendor,” he said. “We’re further from the source, so it takes more time to make repairs and figure out what’s not working with the service. The other thing is when we move everyone to Office 365, and Microsoft has a hiccup, and the exchange server goes down, how many clients are affected? Now the phone starts ringing off the hook and it’s out of our control.”

It’s not all bad for the smaller firms, though. Some firms, like Little Rock’s PC Assistance Inc., use larger cloud services for other operations:

“We typically leverage the cloud for spam filtering because we don’t ever want that to enter into the network,” said Ted Clouser, executive vice president of PC Assistance.

“Additionally, we do some cloud backups for additional protection. And for any business that doesn’t have ‘brick and mortar’ already, the cloud is ideal because they don’t have to invest in IT infrastructure when they have no actual building to put it. For any business without office space, cloud computing has great value.”

But he was quick to add that “cloud computing isn’t a ‘silver bullet’ and likely never will be.

“For some of our clients that have embraced public clouds, there have been some challenges with getting to the cloud, reliability and availability, and, should they ever desire, there will likely be issues getting ‘out’ of the cloud, or moving elsewhere.”

Lindley said a good option for a smaller IT firm is to build the relationship with both the client and the cloud provider.

“Maintaining a high relationship with Microsoft is very important with us,” he said.

Join ’Em

In the future, the issue for smaller IT firms will be whether or not to offer their own cloud infrastructure, thereby bypassing the issue of having to deal with the bigwigs.

“I feel like one of the things that makes Arkansas strong is that we believe in ‘staying local,’” Clouser said.

“By doing so, you know the people you’re dealing with and you ultimately have a stronger relationship. Given the growing importance of IT, I think it’s essential to have your infrastructure local — whether it be on your own premise or in a local IT provider’s data center.”

Lindley said it’s been “a very hot topic with a lot of managed service providers, whether to develop their own cloud solutions to offer to clients.

“My take is it’s not as cost-effective to do that. You’ve got other companies far better equipped. So you can partner with someone like Amazon or Microsoft to provide that cloud solution.”

But as IT firms scale up, becoming a cloud host is within reach.

Publicly traded Windstream Holdings Inc. of Little Rock, for example, has been bolstering its managed services sector by building multiple data centers around the country.

A smaller example is Netgain Technologies Inc., a mid-sized managed service firm based in Lexington, Ky., with offices in several states including Arkansas.

In Netgain’s model, the company often owns the clients’ server infrastructure and can host them from its data center.

“If you move your stuff to Microsoft or Amazon or Rackspace, you’re at the mercy of Microsoft or Rackspace at that time,” said Brendan Jacobson, director of managed services sales at Netgain.

“So for me, when you look at the cloud and that scenario, I would say of course big companies like Rackspace are going to have very nice, awesome data centers, because they’ve got the money to spend. For me, that’s a pro.”

But Jacobson said there’s a certain amount of service lost when using one of the largest providers.

“I know Netgain’s invested probably $1.5 million on its data center,” he said. “For most small or medium businesses out there, we provide probably 20 times the level of service they’re able to do in-house.

“You’re working with a privately held company with 150 employees — we treat every customer the same. When you go to Microsoft or Rackspace, one of those guys, you’re a little fish in a big pond.”

Jacobson also noted that one issue with a Microsoft or Amazon server can affect thousands of clients.

But despite this, Jacobson said, he doesn’t consider Netgain to be in direct competition with the big boys.

“Our prime marketplace is the small and medium business with anywhere from 20 to 250 computer users,” he said. “Amazon and Rackspace are trying to get your companies that are huge: hospitals, Wal-Marts, Targets, Meijers. For us, we’re able to provide a local service to the small to medium business marketplace at a fair price.”

“They get to work with the same people for the same company. If there’s an issue, they can come knock on our door.”

Jacobson said he doesn’t worry about the big cloud players at all.

“What I worry about is the one-man IT shop who says he can do it but doesn’t deliver half of it.”

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