The Pros and Cons of Cloud Computing: Part 1

Over the coming week we will be discussing the pros and cons of cloud computing in a four-part informational series.

THE PROS AND CONS OF CLOUD COMPUTING

In publications and website across the information management spectrum, cloud computing is all the rage. Many in high tech see cloud technology as the mainstream; however, high profile hacking incidents have revealed serious vulnerabilities to information stored on the cloud. This article explores the positive and negative aspects of cloud storage for records management. Let’s start with the good news.

LIMIT CAPITAL EXPENSE & COST REDUCTION

Cloud computing is outsourcing; many outsourcing decisions are made with an eye toward limiting the amount of capital expense incurred by the business in order to improve profit or lower cost. Most studies on operating ratios in this area are proprietary (and expensive) but a review of the data that exists on the web puts at least some industries spending between 1 and 3 percent of their annual budget on IT. This should not be seen as a broad marker across industries, since some industries would be expected to spend much more than that on IT. (Think Facebook vs. Ford).

Management consultants Mike Hales, Frank Fahrenback and Julie Metelko, A.T. Kearney, cite infrastructure as a major component of IT cost in an article titled Spending Smarter, Rebalancing the IT Budget. According to the authors, “roughly 75 percent of IT budgets are allocated to the infrastructure and personnel needed to support ongoing operations.” Regarding the storage of information, which is one of the primary uses of cloud technology, the authors report, “Data storage is another area where companies typically overspend. Storage is typically 30 to 70 percent underutilized because it’s difficult to estimate need and it’s not scalable.”
Because oftentimes records management does not fall under the IT umbrella, issues related to records management may not be adequately addressed. A classic example would be funding an electronic document management system or infrastructure and software that support enterprise content management. The purchase of this software and related infrastructure and maintenance costs can exceed resources. ASP (application service provider) models, which are also known as Software As A Service (SaaS) or On-demand software may be a more cost-effective means of implementation since costs can be spread over the period of usage.

It should be noted that capital expenses are not the only type that can be reduced by cloud adoption. There are many IT-related expenses that can also decline in a hosted environment. Support of products is built into the cloud. This may drastically reduce the number of IT staff and materials required to manage application software and upgrade and patch hardware and software. Licensing costs may also be reduced throughout the
enterprise since licensing is often incorporated into a hosted pricing model. Upgrades, security fixes, and 24-hour support functionality may also be a part of a hosted infrastructure.

Check back on Monday, July 9 for Part 2…

This series is courtesy of PRISM (Professional Records & Information Services Management).

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