All systems in the cloud

Cloud computing is hot!

A lot of companies are now investigating how to place software in the cloud i.e. outsource it.

Before I tell you what I think of this let me just describe the reason for having software in the first place.

The reason for having software

There are three reasons for having software:

  • To automate a business process

  • To collect data during a business process

  • To provide information as decision support during a business process

In todays business climate you have to be unique - i.e. have at least one unique product or business process. And you need to maintain that uniqueness either by keeping ahead of competition in your unique field or by making it difficult or unattractive to imitate your product or process.

Things to put in the cloud

If you are trying to keep ahead of competition you need to have a highly flexible and agile application portfolio and if this is the case you should put standardised activities in the cloud e.g. shipment of goods or e-payments to take full advantage of partners specialising in these activities.

Business processes that do not add to your competitive advantage could be outsourced or the software placed in the cloud e.g. general ledger will hardly bring you any advantage it is just something that need to be in place and function correctly.

Things you should never place in the cloud

Business processes or activities that give you edge over your competitors should never be placed in the cloud

1. They could be reused by other companies removing your uniqueness

2. You will have less influence on the rate and direction of change making it dificult to stay ahead.

Governing principle

Buy for competitive parity - Build for competitive advantage.

In this case 'buy' meaning "buy software as a service from the cloud" and 'build' meaning "build and maintain the software inhouse (could be build/operated by external partners as bespoke software)".

Talk back

Please comment on my thoughts - Get in touch if you want to know more.

EHC LogoErik Haahr
ErikHaahr Consult
Better IT at a lower cost

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Erik Haahr


Thank You Russell

It looks like we totally agree on this topic. Erik HaahrErikHaahr ConsultBetter IT at a lower costemail | web | profile | twitter | blog | Skype


Russell Henley


All systems in the cloud

The problem with the word 'cloud' is that it's definition is just as fuzzy! We maintain private 'cloud' solutions for customers, which have aspects of SaaS, but are more akin to IaaS (yes, it's another 4 letter abbreviation - it would appear the IT industry is now fed up of the TLA (that's three letter abbreviation) and has now moved onto 4...). IaaS is Infrastructure-as-a-Service (and is what we do in private cloud solutions). Basically kit on demand, scale up, scale down at will. Pay for what you use. Rent-an-OS. 'Cloud' is taken by various venders to mean anything from SaaS to IaaS to just Virtualisation in general (including in-house). Which is why nobody knows what it really means (they all have their own definition). Cloud is not: a) just the internet - you can have private clouds inside local or larger networks b) virtualisation - doesn't have to, benefits for doing it though c) a panacea - nope, cloud doesn't do certain stuff, and carries risk with it d) SaaS, IaaS or anything else Cloud is about abstraction. To answer some more specific points: 1) SME business should not develop software, *unless* they would gain a significant competitive edge by doing so. A lot of SaaS solutions are one-size fits all, which precludes the competitive advantage. If everyone used what differentiates me from my competitor? However 'mashing' SaaS solutions together can be quite economic (I've just done one, and we mashed together a bunch of different sources to do really complex stuff - services like online backup, credit checking, postcode/bank validation, mapping etc. etc.). It's almost like developing with Lego sometimes due to the block-like nature of some of these services. 2) SaaS and Cloud isn't just about browser - the browser is limited in what it can do unless you extend it with proprietary stuff like Flash, which even then has limits. Most of our cloud solutions use Terminal Services to provide access to the software - which means you get all the flexibity of on-demand services: you get a powerful and familiar environment (i.e. a Windows desktop), but all your data, email and applications are neatly packaged away for you to not worry about! It's also cheaper and easier to develop applications away from the browser (for starters it's quicker to test you app once, rather than once per browser...) Plus you can then rent *all* your software in one go, saving a fortune in capital costs. Not saying the browser is dead - far from it - but some apps work better away from a browser. 3) You can draw parallels with time-share, which makes a lot of sense (virtualisation is just time-sharing physical hardware after all...) - however unlike Timeshare you can scale up and down on demand, and pay as you go rather than up front. To me cloud is about utility computing - it powers SaaS but isn't just SaaS. Cloud computing enables you to be free from the old-school approach of IT (servers, operating systems, installations etc.) and just get it to work, only pay for what you use and scale up or down quickly if you need to! Regards, Russell. Russell HenleyManaging DirectorHenley Software LimitedT: 01628 550030 | M: 07770 380004 | email | web | profile | twitter | blog


Richard Holmes


Benefits of the cloud

Hi all, interesting discussion. As another Cloud vendor, I try to avoid getting overly techie on these things as 'normal' people just slip into a coma and fall off their chairs. There's some stuff about renting an online version of your software or logging into a single central version of it, but already I can sense eyelids fluttering. Some simple benefits however: Upgrades are handled centrally by the software provider- consider recent VAT changes all done automatically. Flexibility for homeworkers, remote workers, part-timers with daytime childcare issues. Time/energy savings when you can just log in at the same time as others (in our case the accountant) without driving across town, parking, waiting etc. Cost tends to be very competitive as supply chain savings are passed on. Changes and additions are quick and easy to implement as the providers tend to be cutting edge developers with a 'can do' approach, rather than 'they'll have to get on with what they've got'. We are seeing huge increases in people moving from traditional desktop accounting by normal people who don't need all that jargon. They want easy to use, cost effective solutions and semantics aside, Cloud or SaaS or online web based systems fit the requirement. Yes security is a consideration- cloud providers are very aware of the need for absolute security. But where's your data safest? On a computer with little or no backup, or deep in a secure server complex with state of the art protection? looking forward to seeing which side of the fence people are on. best regards, Richard Holmes Cloud Accounting Software Since 2001 Accounting Web review


Thomas Power


All systems in the cloud

This is not easy to understand. Whether something is or isn't SaaSsy or is or isn't a Cloud. In general, cloud computing customers do not own the physical infrastructure, instead avoiding capital expenditure by renting usage from a third-party provider. They consume resources as a service and pay only for resources that they use. Many cloud-computing offerings employ the utility computing model, which is analogous to how traditional utility services (such as electricity) are consumed, whereas others bill on a subscription basis. Sharing "perishable and intangible" computing power among multiple tenants can improve utilization rates, as servers are not unnecessarily left idle (which can reduce costs significantly while increasing the speed of application development). A side-effect of this approach is that overall computer usage rises dramatically, as customers do not have to engineer for peak load limits.[10] In addition, "increased high-speed bandwidth" makes it possible to receive the same response times from centralized infrastructure at other sites[11]. Are you saying businesses one day will use all software through a browser? Apart from the browser and the internet is this any different to timeshare in the 1960s?


Paul Clark


'Cloud Computing' is not 'SaaS'. Local Apps are not 'In House'

Hi Erick, Thank you for an interesting blog, and congratulations on trying to offer some structured thinking and models on the subject of SaaS and Cloud Computing. I should declare an interest first: I am a vendor of a SaaS business automation product, BlueCamroo, that supports the workflow all the way from Lead Generation, through Account Management, Opportunity Management, Project Management, Time Tracking and Case Management, to Invoicing and Payment. You may feel this colours my response, but hopefully I can keep my comments fairly rigorous and objective. 1. SaaS is not Cloud; Cloud is not SaaS SaaS (Software as a Service) is a commercial charging model for delivery of software products, often with associated value such as data hosting and backup. SaaS is commonly provided over the web, however any arrangement where I offer to 'rent' my technology to you, rather than sell / license it outright, is SaaS. Consider, for example, the Google Search Appliance. This is a big yellow box that you rent from Google, comprising server, operating system and Google software / database. You plug it into your own servers, and if you keep your servers in-house, then this is in fact fully 'in house'. But it is also Software as a Service: you pay Google every year for rental of the Google Search Appliance; you never own it; they have control of it at all times. Conversely, consider the position of an application vendor, or indeed a company with its own bespoke systems, such as a distributed booking or stock control system, for example. Such a company can choose to buy and maintain servers, manage the operating systems, patch the servers, deal with hardware issues, etc; and they can choose to locate these servers on their own premises, or in a dedicated Colocation Facility. These are their own proprietory software systems, that are - or contribute to - the source of their competitive advantage. They could also choose, however, to place these systems "in the Cloud", by buying-in processing from a "Utility computing" vendor such as Amazon EC2, 3tera, etc. So, SaaS can be in-house or in the Cloud, as can proprietory systems. 2. SaaS is not outsourcing; Buying software is not insourcing You describe putting software in the Cloud as outsourcing it. I'm not sure these are equivalent things. For the application vendor or company that puts its own software that it has developed in-house into the Cloud, that is outsourcing the hardware platform, but it is not outsourcing the software. For the business that uses Microsoft Exchange Server, it is outsourcing to the same extent whether it buys Exchange Server software from Microsoft and sets up its own server, or whether it simply rents a hosted Exchange Server service from any one of a number of Exchange hosts. The business has not invested its own money and time in building a mail and messaging server; it has outsourced that to Microsoft, the only question is whether it is outsourcing management of the hardware and application configuration as well. 3. Small businesses (other than software companies) should not be developing software You state your governing principle to be: "Buy for competitive parity - Build for competitive advantage." This is an adaptation of the general make/buy decision that manufacturers apply to sub-contractors, and is a good principle for a large corporate, that has the resources and skills to develop it's own applications. For a small business, however, it is completely unrealistic to suggest they should be developing software; the costs are completely prohibitive. Consider BlueCamroo for a moment. We offer an end-to-end business solution that for a small business with six users would cost $100 per month. So, over say 3 years, we're talking $3,600, or about £2,500. How much software is a small business going to build for £2,500? (Let's set aside the cost of 3 years data hosting etc). Even at the more expensive end of SaaS offerings, such as, or at the extreme end of on-premise ERP applications such as SAP, there is no commercially rational 'build' alternative for any but the very largest businesses. So? So, whilst I disagree with your basic thesis that businesses should buy cloud apps for undifferentiated activities, and 'build' in-house apps for differented activities - not because it is wrong in theory, but simply because it is uncommercial in practice - I do think there is a related and relevant rule: Businesses should select proven process templates for their undifferentiated activities, and seek to adopt best established practices to maximise efficiency, reliability and cost-effectiveness. Businesses should carefully configure and customise the software and services that they use - whether licenced/in-house or SaaS - in order to fit their differentiated processes where they have an opportunity to perform distinctive, value creating activities in a superior fashion to their competitors. What every business owns is not the software it uses, but how smartly it uses and configures that software, and fits it into effective offline business processes. Smart software, together with smart implementation and smart processes, is the route to superior value. The decision of in-house / cloud / SaaS is quite separate to this, and should be on the merits of the individual case. Best, .paulclark42180sig {display:none;}@import url("");Paul ClarkBlueCamrooIntegrated, Online Solution for Lead Management, CRM, Project Management, Time Tracking, Case Management, Billing and Workflow Automation. 31 Day Free TrialLow Cost CRM, Project Management and WorkflowIntegrated Online Time TrackingOnline Invoicing and PaymentsHosted CRMt: +44 (0)844 445 7494 x803   e:   w: www.bluecamroo.comIntegresis LtdWeb Solutions, Internet Software Development, and Content Management tools for web designerst: +44 (0)207 112 6707 x801   e:   w: www.integresis.comOpenSites Web Development PlatformWebsite Content Management SystemE-Commerce ModulesFree Web Development Tools