"The Cloud", arguably the IT term of 2013 and still trending in 2014. Cloud is one of the most misused terms in IT, primarily it is a term coined by marketers not technologists. In defence of the marketers, a technologists definition would be "geographically and resource independent multi-tenant scalable computing" – and that just isn't going to sell.

So, what do we actually mean by Cloud? In its most simple sense, the Cloud is the transition from physical servers and infrastructure on-site to the use of a data centre based network of elastic computing.

Cloud represents one of the tectonic shifts in 21st Century IT. It is not an iterative change, it is genuinely innovative. Professor of Innovation at Newcastle University, Prof Roy Sandbach defines innovation as "matching what is needed with what can be done". Cloud computing recognises that businesses need the output of an effective IT infrastructure, without wanting or needing to have that infrastructure on their own premises with all of the associated maintenance and support resource.

Furthermore, it recognises that a business may need to scale its infrastructure, in near real-time, and that this cannot be achieved efficiently or sustainably with physical infrastructure. Cloud leverages the fundamental principal of economies of scale, if multiple tenants or users can operate from the same infrastructure, that infrastructure can benefit from a collective investment that allows it to perform as a stronger entity than the sum of its parts. No individual company or user could afford the setup or operating costs of the infrastructure, but they all benefit from its use on a variable demand basis.

The 4 components of Cloud:

Elastic computing.

A fulcrum of Cloud's effectiveness is the ability for resource to automatically scale with demand. This ability to "stretch" the scale of resource is a critical advantage over traditional on-site technology. Previously, surge capacity for the launch of a new product of to support a heavy trading period would require significant capital investment and resource planning. In the Cloud, scale is instantly variable and directly proportional to demand; when your application or service needs more capacity it is provided and you only pay for the resource you need as and when you need it. The removal of significant capital expenditure, and the associated implementation lead times are significant advantages to the Cloud as an infrastructure model.

Multi-tenancy.

When talking Cloud we are usually referring to the public Cloud. The public Cloud is an openly accessible and deployed infrastructure that anyone can access i.e. it is publicly available. This doesn't mean that it's not secured or cannot be appropriately restricted, just that it has the capacity to be accessed from anywhere. A premise of public Cloud architecture is that the environment will be multi-tenanted i.e. there will be many businesses hosted in the same environment benefiting from the infrastructure economies of scale.

As-a-Service methodology.

The transition to the provision of services on a genuine as-a-service basis, such as the investment by SAGE into their Accounts Extra platform, is key to the Cloud model. Cloud is not taking an existing software product and making it available on a pay as you go basis. A true Cloud solution is organically linked to the hardware environment for which it was designed, with virtualised servers being instantly provided as and when required, and data available across all devices at all times.

Shift from CapEx to OpEx.

The cloud facilitates a shift from IT projects being heavily front-loaded with capital expenditure (CapEx) to a very soft entry and ongoing operational expenditure (OpEx). The Cloud allows you to rent supercomputer style capacity and capability for what it used to cost to buy a word processing package.

What does it mean for your business?

In simple terms, if a proposed solution recommends the purchasing of in-house servers of hardware, has significant up-front CapEx, can't be used by all of your staff from anywhere, comes with significant limits to the amount of extra users or demand – then you're not being offered a Cloud solution. Cloud has the capacity to improve the efficiency of your business IT strategy whilst reducing your capital expenditure and leading to a far healthier balance sheet and front line workforce.

Article by Stephen Purvis of SGP Consulting.

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