management by paul engle
Is cloud computing real?
Cloud computing first was
described by computer scientist John
McCarthy in 1960 when he surmised
that computing power someday may
be purchased the way we buy electric-
ity from the power utility. In the last 10
years, Amazon and others have experi-
mented with large networks of servers
programmed to share the load during
peak demand for computing power.
Recent studies indicate significant
potential savings by using networks of
servers, not dedicated machines.
Cloud computing offers advan-
tages like fast ramp-up of services,
elimination of capital spending and
expensive data centers, ability to use
capacity during peak demand and virtu-
ally unlimited data storage. Most cloud
computing services bill companies a
service fee. Still, key challenges remain
before companies abandon data centers
and network servers.
While providers will “guarantee” data
security and reliability, it is difficult to
gain the same comfort when using a
service provider compared to having
your own data center. Most IT manag-
ers sleep better knowing that their data
and applications are in a secure loca-
tion behind multiple firewalls. Cloud
computing services promise security, but
there is little history by which to judge
these services, and the consequences of
losing sensitive data are high.
Many companies may choose a hybrid
route — maintaining their own data
centers for critical, sensitive computing
20 Industrial Engineer
needs and outsourcing less critical tasks
where privacy is less important. This
frees expensive computing and staff
resources to focus on important tasks
and provides backup and capacity during
peak computing demand.
Three models of the industry have
evolved. The first is to purchase comput-
ing capacity from an outsource provider.
This is referred to as “infrastructure as
a service.” In this model, the customer
buys computing capacity and maintains
responsibility for the operating system,
application software and database. Access
is normally through a website from any
location. The service provider offers data
security during transmission and storage
and promises a high level of reliability
against system outages. The customer still
is vulnerable to acts of nature, cut fiber-
optic cables and other calamities.
The second model involves the
supplier providing a computing plat-
form, including operating systems and
data structures. In this arrangement,
“platform as a service,” the customer no
longer is responsible for updating and
maintaining the operating system, but
still provides the application software.
This arrangement allows the customer
to focus scarce IT resources on critical
applications rather than on data center
operations or network operating systems.
The third model involves a turnkey
solution. The service provider supplies
everything except the data. The arrange-
ment is referred to as “software as a
service.” Software as a service is attractive
Cloud computing
offers an opportunity.
to companies that wish to focus valu-
able resources on core business needs
rather than on IT infrastructure. While
this is the most expensive of the three,
significant savings can be realized by
eliminating the need for a large IT staff.
Is cloud computing right for your
company? As always, it depends. In a
stable company, with critical comput-
ing and data security requirements, the
answer may be no. For a rapidly growing
company that stores large amounts of
nonprivate data or that has large, unbal-
anced computing loads, cloud computing
offers an opportunity to outsource a
potential drag to future growth.
We will hear much more about cloud
computing, as it may be the next big
trend in the ever-changing world of IT.d
Paul Engle is a senior manager with Grant
Thornton’s Management Advisory Services.
Engle, who holds an M.B.A. in finance, has
more than 25 years of experience in manage-
ment, operations, product development, sales
and marketing, strategic planning and business
process improvement consulting.
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