14 June 2011

Not pie in the sky?

To some, it's a mechanism for providing outsourced IT via the internet; to others, a route to virtualisation. Either way, cloud computing is getting some serious hype. Brian Tinham reports

"I personally feel that cloud computing is a no brainer." So says Chris Riley, business manager at power transmissions firm Radicon, which recently signed a three-year, £750,000 deal with business systems firm ICM to host its entire IT in the cloud. That includes its SAP ERP system, as well as all servers, storage, data, email, IP telephony and service desk support – all via a WAN that connects Radicon's Huddersfield HQ with sites in the Netherlands and Sweden.

"We're an engineering company, so why should we invest heavily in licences, servers and good business systems people – who are difficult to get anyway – when there are experts out there that can do it all for you?" he asks. "At a meeting with ICM, they brought 10 people, covering servers, infrastructure, telephony, etc… How on earth can a manufacturing company compete with that?"

It's difficult to argue with his logic. However, Riley's uncompromising approach flies in the face of the vast majority of manufacturing business leaders, currently clinging to their IT systems and people. Most believe firmly that their presence on site is nothing short of critical to their companies' competitiveness and indeed their very survival.

So who's right? Let's get some context. Radicon had been part of Clyde Blowers, and before that David Brown of Aston Martin fame, so was used to paying a recharge for group IT. Then, when Indian engineering giant Elecon acquired the business, it was faced with the unenviable task of becoming self-sufficient in just 150 days. As Riley puts it: "We realised we would be unable to build our own infrastructure within this deadline… It can take 90 days just to get broadband."

And that is the point: when faced with the apparently impossible, people are forced to think outside the box. Also, Riley already had experience of hosted systems, with Salesforce.com CRM at David Brown. "That system gave us just two hours of downtime in five years across the whole company, which was nothing compared to some internal systems," he quips.

But what about ERP? Riley agrees that, just as with other manufacturers, if his firm's ERP fails, it can't do business. But for him that was an argument for, not against, cloud computing and in particular ICM, with its Birstall data centre's track record.

Was he brave? We're talking about systems handling serious production: although Radicon doesn't manufacture in the UK (that's all done in Thailand and Eastern Europe), it does handle configuration and assembly. And with products comprising industrial gearboxes for conveyor drives and mixers, that's a lot of BoMs in the cloud. Further, orders range from off-the-shelf units, with a guaranteed 20-minute turnaround, to larger deals on 12-week lead times. So speed and integrated sales, supply chain and production are key requirements.

"We've only been live for a few weeks, but my experience to date is that the connection we have is excellent. We used to have 250kbps for 400 users on site; now we have a 2Mbps connection for 35 users," says Riley. "Also, the business, from the shopfloor up, is running just fine."

As for the annual cost, he says it's much the same as under Clyde Blowers, at around £120,000 all-up. "That's nothing, compared to hiring three IT people, before you even begin to buy any hardware and software," he laughs. "The system we now have is supported by a huge knowledge base of ICM experts, which we could never employ in-house. And the licence deal on Microsoft software, for example, is all managed through them, too, so there are no upgrade costs."

Sounds too good to be true? Well, yes and no. Whether cloud computing will work for you depends on several factors, including: the make up, age and effectiveness of your existing systems; precisely which systems or services you're considering moving cloud-wards; and who you engage to run the project. There's also the small matter of what exactly you understand by cloud computing (see panel): for many IT vendors, it's little more than a new name for yesterday ASPs (application service providers), but on mature technology and with the lure of useful on-demand provisioning and subscription-based payments.

Interestingly, though, those points are at some variance to concerns typically expressed by manufacturers. Most tend to cite: general risks around confidentiality; the complex and probably highly specific nature of existing systems and workflows; and comparisons with 'black hole' bureau services of yesteryear. Many also worry about latency – although the latter is certainly not a problem for Radicon.

Neil Cross, managing director of managed services and cloud computing provider Advanced 365, is unequivocal: not all organisations are ready to embrace cloud computing and some lack adequate contingency plans in the event of it all going horribly wrong. His advice: first, determine what you want to achieve and why. "IT is about delivering improved business services, not just smooth-running technology," he warns. "Both public and private cloud options should be reviewed alongside non-cloud alternatives, with the benefits and drawbacks of each given fair consideration."

Cross then suggests the usual: understand your business drivers, as well as the IT drivers; failing to prepare is preparing to fail; and reducing complexity is as important as reducing cost. "Cloud computing may not be cheaper, due to the costs of accessing cloud services and having to retrain your staff," he warns. Beyond these, he urges managers to choosing the right partner, capable of end-to-end services, and to ensure an adequate SLA, particularly where business-critical applications such as ERP are concerned.

"The increase in acceptance of cloud computing will undoubtedly lead to a surge in uptake, as organisations continue to wrestle with spending cuts," says Cross. "However, despite the many advantages, [cloud computing] does not represent a magic wand for organisations to solve existing business issues."

Start small
For companies not desperate for a new beginning, a sensible approach may be to start small, with services to one side of daily business, probably not well managed but with a degree of criticality – such as disaster recovery (DR). That's the recommendation from backup and security software firm Acronis, which points out that companies the world over depend on applications and operating systems, with patches, fixes, local changes, templates and years of knowledge that are frequently poorly protected.

Its survey of more than 3,000 industrial SMEs, conducted by the Ponemon Institute, reveals that just over half (51%) are failing to make DR a sufficient priority, with nearly two thirds (60%) citing lack of budget and IT resources as the main reason. Nearly a third (30%) say they would face substantial risk of downtime in the event of a serious incident.

"Cloud computing… offers a credible cost-effective alternative to tape and disk-based DR," explains David Blackman, general manager for Acronis in northern Europe. "Local backups kept on site may allow you to recover from problems, such as mistakenly deleted files, or a crash of a server or workstation, but they won't protect you from fire, flood or theft. To survive those onslaughts, SMEs need… a complementary off-site strategy."

There's no doubt that makes sense, but for those with one eye on where technology is going and another on cost cutting – particularly those at or near system renewal – take a look at US tool and die manufacturer, Chirch Global Manufacturing. CEO Tony Chirchirillo explains that when his family acquired the business a couple of years ago, it was running an ancient version of Epicor Vista ERP that was no longer man enough for his growth plans.

"We didn't want just to catch up to the current version," he says. "We wanted to leapfrog the competition with a platform for the future. So when we found that Epicor was launching an initiative to take ERP into the cloud, we became a beta site for their SaaS [software as a service] offering."

That went live in April last year, and Chirchirillo asserts that the system and service has been excellent, with plenty of flexibility, in terms of configuration, workflow and reports, as well as robust manufacturing tailored to his firm's processes.

"One of the reasons we went to a cloud-based system is that, as an SME, it's very difficult to obtain and fund highly skilled IT professionals," he says. "Another is that, because of cost and resource issues, you generally find SMEs fall behind on their ERP updates, which means technical limits and eventually some trauma. With cloud-based ERP, you outsource to a high-salaried group and you're always on the current version."

And he sweeps aside perceived issues around latency and IP, making the point that technology has moved on, and that SMEs wedded to doing everything in house are at greater risk than those with a sensible outsourcing strategy. "That has to include IT: when you run ERP conventionally, it may start standard but then you modify the code. That triggers compatibility problems and then knowledgeable people leave. Cloud takes away all those risks."

Attitudes will change. As one wag remarked: "As long as the data is right, delivered quickly, the integration is there and the price is right, people won't care whether it's on site, in the cloud or on the moon."

Cloud in perspective
The hype surrounding cloud computing is only going to grow. According to research by Gartner, CIOs view the cloud as their top technology priority for 2011 and the analyst expects the number of organisations using on-demand computing to rise to 43% within four years. Meanwhile, IT service management software firm Axios' latest survey suggests that 68% of global organisations are planning to adopt cloud.

Then again, a recent study by Microsoft indicates that almost two fifths of firms will start paying for cloud services within three years. And backup software specialist Acronis' survey of SMEs reveals that 32% of industrial firms' IT infrastructures will be in the cloud by the end of this year.

Take your pick. One of the reasons for the variance in those findings is that there is already a range of quite different cloud offerings – most notably private clouds, hybrid clouds, public clouds, SaaS, PaaS (platform as a service), IaaS (infrastructure as a service).

Pundits expect private cloud to see most of the activity, primarily because of the clear business agility, cost savings and peace of mind they offer. IaaS is a good example, with its promise of on-demand 'plumbing' to support application and platform requirements as they ebb and flow. As system migration firm SANpulse's CEO Peter Mehta points out, traditionally, requests for new infrastructure might take weeks if not months. "By sharing the infrastructure resources in a pool and taking advantage of resource virtualisation, enterprises now have the ability to build infrastructure on demand," he says.

But is that what you understand by 'cloud'? And does it mean you can realistically expect to run some or all of your systems and infrastructure off site? Phil Lewis, business consultant and director at ERP conglomerate Infor, concedes that today's interpretation of 'cloud' isn't quite the same as the original concepts of shared computing, with autonomous database and processing services, application hosting frameworks, etc, all available on a global high speed network.

"Cloud is being used as a term to give more credibility to some of the offerings. No one is re-engineering their systems for this. We're all basically allowing customers to access systems – applications, web services and virtualisation – via the internet, and calling it cloud computing," he explains. "But we take that very seriously: cloud provides additional options. On applications, for example, we offer cloud-deployed ERP, asset management, expense management and we're looking at others. So users can have systems hosted, subscription based, on a public cloud or under traditional perpetual licensing."

You can't knock that. From a practical point of view, this view of cloud takes advantage of massive resources in high performance data centres to provide tightly coupled data, application and presentation services – just like conventional computing, but delivered via the internet. So manufacturers get the technical and cost benefits of: outsourced resilient system hosting and management; theoretically easy scalability (although you might want to consider the implications of testing and training); and potentially pay per use.

"In the future, systems will be designed and managed differently – more in line with the original concept of cloud, with virtualised server farms, and data management and application services," predicts Lewis. "But users won't see the difference."

Brian Tinham

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