Digital Media Buzz > Businesses Cash in on Cloud Computing

Businesses Cash in on Cloud Computing

By Ned Smith

If you want to make a techie swoon, just mention “cloud computing.” This seductive metaphor for a software distribution model known as software-as-a-service (SaaS) has grabbed the attention of individual and enterprise alike as the new best answer to all vexing IT questions. The Cloud is lauded for its ability to slash software costs, boost flexibility and productivity and unleash new paradigms for how to get things done in business. The fact that SaaS offerings from the likes of Zimbra, Google Docs and a legion of other providers are something of a thumb in Redmond’s eye is just icing on the cake for those who bridle at Microsoft’s longtime domination in business applications.

But call it what you like — software on demand, ASP, software-as-a-service — cloud computing is here to stay. It’s on its way to becoming the big dog in business productivity applications, and this dog has bite as well as bark. If you peel back the rhetoric and breathless hype, it’s actually making a difference in the way companies do business.

The big analytic guns in IT like Gartner and Forrester Research tend see the world in macro terms that focus on market expansion and total cost of ownership (TCO) — the kinds of things that get attention in the corner office. Their numbers and predictions indicate that cloud computing does pay off and is taking its rightful place in the corporate IT arsenal. The proof is in the marketplace acceptance. Gartner predicts that the global enterprise market for software-as-a-service will grow by nearly 22 percent in 2009 as companies turn to hosted applications to reduce costs during the economic downturn. Our nation’s capital, for example, made the switch from Microsoft Office and related software to Google Apps and is now saving nearly $3.5 million annually, according to Computer World. On a per-user basis, Forrester estimates, making the switch from Microsoft Exchange to Google Apps reduces yearly cost from about $300 to about $90.

Business life, though, is about more than cost. For most of us the story has more of a pulse when we look at it up close and personal. In Detroit parlance, it’s where the rubber meets the road. And the anecdotal, although a notoriously mushy metric, often gives us a better answer to the question: Does Cloud Computing live up to the brag? Is it improving people’s business work life as well as the bottom line?

“The shift toward SaaS is happening and it’s real,” says John Robb, vice president of marketing and products for Zimbra, a company that provides an e-mail, calendar, address book and collaboration platform that competes with Microsoft Exchange and is used by 41 million users globally at 60,000 companies. “We’re trying to simplify the end-user’s life as well as the administrator’s. We take a Web-based view of offering access from any computer with any browser. Taking the application off the desktop and moving it into the cloud allows for a consistent approach to backup, trouble-shooting and access to data. It dramatically simplifies the company’s administrative requirements.”

Zimbra has taken a hybrid approach, offering both on-premises and SaaS solutions to customers. “We’re playing both sides,” Robb says. “If you’re looking for speed and TCO, SaaS will always be the way to go. If you want on premises, you’re going to get additional control of the Zimbra platform.”

LaunchSquad, a 35-person technology PR company with offices in San Francisco and New York, made the switch to Google Docs about a year ago. The company originally looked at Zimbra, says Jason Throckmorton, one of the agency’s co-founders. “We felt like we were struggling with supporting and managing the Office suite because we were having numerous problems with the e-mail client. We had people who were completely losing their e-mail. We realized we wanted to transition into a cloud-based offering.”

Google Docs beat out Zimbra because of user familiarity. “Everyone across the board was already already a Gmail user, so there was a comfort level with how the application works and how it looks and the overall user experience,” Throckmorton says. “It was a pretty easy transition and we had no training costs. We’re seeing the same migration on the part of our clients, many of which are startups.”

The big payoff, though, was in process improvement. “We work as teams for each of our clients,” says Greer Karlis, a LaunchSquad account executive. “Google Docs has allowed us to collaborate and update materials in real time with teammates on the other side of the country. The switch from Microsoft Office to Google Docs has streamlined how we manage information and changed the way we work in a big way. For example, two people making updates to one spreadsheet previously has to e-mail the latest version in Excel to each other for an update. Now, we can all update the same Google spreadsheet together.”
There are, though, a few thorns in this bed of roses. Word, for example, is still a necessary evil for LaunchSquad. “We’ll go 75 percent to 90 percent in creating a document in Google Docs and then we’ll export it into Word because that’s what we use to send to clients,” Throckmorton says. “Sometimes you lose formatting when you go from Google Docs to Word. If Google could resolve that, we’d get rid of Word altogether.” And there’s also Google’s reputation for customer aloofness. “Google has terrible customer support,” he adds.

Moving to the cloud had a similar genesis for Traction (www.tractionco.com), a 30-person ad agency in San Francisco. “As the company has grown, management of resources and productivity has become steadily more critical,” says Adam Kleinberg, Traction’s CEO. “We had problems with people losing data and laptops and started looking at options in the cloud.”

Traction started out looking at agency management solutions, but couldn’t find any that exactly matched their needs. “Because so many of these things have open APIs, we were able to customize a suite of best-of-breed applications to meet our needs,” Kleinberg says. The result was an amalgam of Zimbra for messaging and calendaring, Clicktime for time and budget tracking and Merlin for project management.

“It immediately made us more efficient and solved a lot of problems,” he adds. “I just dropped my laptop on a flight to New York. Killed the laptop, but didn’t lose a lick of vital data. I could have kissed my Director of Technology.” Now, he says, “my account people are free to concentrate on the part of their job that provides the most value, which is thinking strategically about our customers’ business instead of dealing with a lot of the menial details of client management.”

There are three primary reasons why companies look at cloud computing, says Balakrishna Narasimhan, senior director of strategy and marketing at San Mateo, Calif.-based Appirio, which was named as one of the “100 Players in the Cloud Computing Ecosystem” by Cloud Computing Journal. The first two, he says, are straight forward: reduction in TCO and reduced initial investment. But the third driver, he adds, although difficult to quantify is as important as the first three: the ability to innovate and to be agile. “What a cloud platform lets you do,” he explains, “is not worry about infrastructure and networks and really focus on building a good solution.”

Appirio, which offers products and services to accelerate the adoption of on-demand solutions, has a healthy appetite for its own dog food. “We very much believe in the cloud,” Narasimhan says. “The cloud enables you to do fundamentally different things in a fundamentally different amount of time. We don’t have any servers. We run our business entirely on the cloud and help customers to get to the same point.” A key virtue of cloud applications such as Google Docs, he says, is that “the software just keeps getting better and you don’t have to do anything.”

Cloud computing has also paid off for Appirio’s bottom line. “Your costs are much better,” Narasimhan says. “We spend about 1.8 percent of our revenues on IT. The Gartner benchmark for companies our size in between 6 and 7 percent. It’s clear that if you’re going to start a company now you don’t want to invest in servers and IT infrastructure; you want to focus on the business.”

Yaron Sinai, founder and CEO of New York-based Elementool (www.elementool.com), which provides Web-based project management and customer support tools, concurs with Narasimhan’s optimistic assessment. “SaaS offers more than promised,” he says. “I see it as the future of software solutions. I think eventually everyone will use this type of service. With a SaaS solution, every time you log onto your account you use the latest version of the application.”

SaaS, Sinai says, enables you to bypass upgrade hell, particularly at large companies, where the process of upgrading on-premises software can take countless hours over many months. “By saving time you save money,” he says.