Every so often we update our buzzword dictionaries. When this happens there’s generally a stir with a lot of confusion as marketing teams try to position their products. “Cloud Computing” is no exception. If you’re wondering what it is and if it’s for you, read on.
Let’s start with its name. For years, network engineers have been drawing diagrams to represent the networks they build and manage. In these diagrams they draw computers, routers, firewalls and other components in their network that are within their control. Often, their networks need to connect to computers and other networks through the Internet. In these diagrams, the Internet is depicted as a cloud.
Using the cloud metaphor, and in very simplistic terms, Cloud Computing describes computing that happens somewhere in the Internet cloud.
If asked to describe how you use your computer, you would likely name some application software you have installed such as Microsoft Word or Intuit QuickBooks. You might also talk about the files stored on your hard drive or server.
Cloud computing changes this. With cloud computing, everything is in the cloud. Your files are not on your hard drive or even on your server’s hard drive. They are stored on some other company’s hard drive somewhere on the Internet. The software you use to access these files isn’t on your computer either. Rather, you use a browser to access software located at another company’s site.
Hearing this for the first time might instill two different thoughts. You will either think this is the greatest thing to happen to computers or it’s the dumbest idea you’ve ever heard. Like everything, there are pros and cons. And like most buzz-worthy new technologies, very few people talk about the cons or even mention that not every technology is a perfect fit for everyone. First let’s take a look at some of the pros. Then I’ll discuss what I see as the biggest con.
There are many reasons to embrace cloud computing. I’ll start with file storage. Hard drives are notorious for crashing and losing their data. If you don’t have a recent backup you will lose all or most of your data if your drive fails. In the cloud, files are typically stored on redundant drives and backed up frequently. (Note: There is nothing inherent in cloud computing that guarantees this, it’s just the typical practice of companies providing cloud services). The number of files you can store on your hard drive depends on how much space it has. If it’s not enough, you’ll need to buy and install a larger one. In the cloud you can usually buy as much space as you need, as you need it.
As for application software, you never have to worry about installing or upgrading. This is done for you. You get the latest updates automatically. Remember, it’s running on someone else’s computer so they are responsible for maintenance, not you. And because no software needs to be installed, you can access these applications and your files from virtually any computer with Internet access, anywhere on the planet.
Since most of the work is being done on someone else’s computer, your computer does not require very much computing power. This means you can get by with a lower-end computer than you would normally need, saving you money up-front. And since you pay as you go, you won’t incur the initial expense of software either.
This last point appeals to CPAs from a tax perspective as well. Since the cloud computing model does not require purchase of expensive computer hardware or software, and is a pay as you go service, the service typically qualifies as an operational expense vs. a capital expenditure. An OpEx can be applied as a tax deduction in the same year it is incurred. This is different from a CapEx, which is amortized over a period of several years. So you get the write-off right away rather than waiting a few years for it. If this is a main deciding point you should talk to your tax accountant to get the details specific to your situation before making this decision.
There are many other pros and some cons that I won’t go into here. But there is one con that needs to be mentioned. Since everything happens in the cloud, you can’t do anything if you can’t get to the cloud. For those who struggle with poor Internet service, this may be the deciding factor. Some small business owners tell me their service goes down at least once every few months. Some report less frequent outages, but when it is down, it’s down for the whole day while they wait for their ISP to get it fixed. If your Internet service is down and you can’t get to your files for a few hours (or all day) while your ISP works on it, can you still be productive? Will you stay in business? Maybe it’s time to switch ISPs. If you can’t, maybe cloud computing is not for you yet. Or maybe a hybrid solution is a better choice.
There are many variations of cloud computing and I have only scratched the surface. If you’re thinking about getting into cloud computing, make sure you get all the facts and have analyzed all your computing needs before jumping in.
If you would like us to meet with you and discuss which technologies are best for your business, give us a call at 303.728.9647 or send an email.