Cloud computing is perhaps the most talked-about shift in the technology industry today. The concept of running applications from the cloud is quickly evolving from a futuristic vision to a commercially viable alternative for mainstream business. A recent survey of global 2,000 companies revealed that 30 percent are already using cloud infrastructure to host their applications, and another 20 percent plan to do so by next year.
This shift to the cloud started some years ago when companies began to invest in cloud-based business applications such as human capital management and CRM. With the proven success of these initiatives, the next logical step is cloud-based business transactions.
Are you ready to move your e-commerce applications to the cloud? If you are like most companies, you probably conduct business on your Web site today with customer-facing applications deployed in-house and managed by your IT organization. Moving those systems to the cloud has implications beyond IT — it actually speaks to the fundamentals of your business.
Taking the Plunge
As a CIO or member of the management team, you should first ask yourself, “What differentiates us in the eyes of our customers and competitors? What is our core business?” Too often IT infrastructure investments subtract from the total pool of available dollars for investment in the core business. What if those capital investments were free and focused on true market differentiation?
Companies typically decide to move to the cloud in order to focus investment and efforts on the core business. Cloud computing frees you from the constraints of the standard IT investment model. By adopting a pay-as-you-go model, you can be more responsive to changes in your business environment and allocate investments to meet changing market dynamics in real time.
There are many efficiencies inherent in cloud-based application development. Operating in the cloud means more rapid development, better responsiveness to business changes and the ability to quickly extend your existing CRM applications. Yet the question of whether it makes sense for your business to move your applications to the cloud should not be taken lightly. It requires serious thought.
The Burden of Support
Like any paradigm shift, the move to cloud computing did not happen overnight. It began when early adopters took a chance on third-party hosting of non-core systems like CRM. The dazzling success of Salesforce.com brought about a sea change in the enterprise applications industry. Today, the market for hosted business applications has reached maturity, with pragmatic buyers trusting more and more of their infrastructure to the cloud.
E-commerce itself has followed a similar curve. Not long ago, online banking was a startling idea fraught with doubts about security, privacy and reliability. Today, we take it for granted. However, the IT infrastructure required to support e-commerce has added a new burden to the cost of sales in most industries. With IT capacity already pushed by demands for new business applications and more integration of existing systems, including those acquired through mergers, e-commerce applications strain to meet demand at peak business cycles, and transaction costs mushroom as IT struggles past capacity.
If these scenarios sound familiar, you may be ready to make the move to cloud-based e-commerce. To determine whether the cloud makes sense for you, fill out this simple scorecard:
- Is your IT department over capacity?
- Do you anticipate adding new e-commerce applications in the next year?
- Do you have a backlog of applications for development?
- Will you have a new e-commerce site or planning to update the current one?
- Do you have an appetite for a new development platform?
- Do you have integration challenges in maintaining your e-commerce site?
- Does your business have seasonal cycles or other fluctuations in demand?
- Are you looking to lower your customer transaction costs?
For the answers above, give 10 points for each “yes” and 5 points for each “no.” If you scored 60 or higher, moving your e-commerce applications to the cloud may help you save money and time and make it easier for customers to do business with you.
The Cloud’s Advantages and Challenges
However, may not make sense for every e-commerce business to run in the cloud just yet. For one thing, the decision often does require trusting a key part of your core business to someone else. On the other hand, the following advantages for the cloud over traditional e-commerce solutions are compelling:
- Speed: Building your application in the cloud is five times faster. You can move your branding initiative into a selling platform and start taking orders in just a few short weeks.
- Cost: Because they share a proven development platform and leverage significant economies of scale, applications in the cloud can be built for 20 percent of traditional e-commerce costs. Cloud-based e-commerce also eliminates the need for costly CRM and e-commerce integration projects following mergers and acquisitions.
- Scalability: Particularly with business-to-consumer sites, traditional e-commerce implementations require up-front development efforts that allow them to scale literally overnight to meet spikes in demand. In the cloud, it is much easier to scale, particularly during holidays or peak business cycles.
- Customer Focus: Running your e-commerce business in the cloud helps make it easier to do business with customers by simplifying interactions and driving down transaction costs.
- Pay-as-you-go: The cloud model minimizes up-front investment and addresses seasonal and promotional fluctuations with a pay-as-you-go approach. Thousands of new users can be added with no additional investment.
Of course, moving to the Cloud is not without its challenges and concerns. These include questions about security and reliability, reluctance to trust a partner with an important aspect of the business and, simply put, fear of the unknown. These valid concerns are being addressed today through a combination of emerging industry standards and best practices.
- Security and reliability: With the right development platform, security and reliability actually improve due to centralization of data and increased security-focused resources. For example, Force.com has emerged as a trusted development platform and one of the most secure platforms available today. It received the ISO 27001 certification, an internationally recognized standard for certifying protected information. Semi-annually, Force.com also undergoes Statement on Auditing Standards examinations and SYSTRUST audits.
- Trusting a key part of your business to someone else: This shift in mindset has occurred countless times in lots of industries. For example, the power industry went from utility companies generating their own electricity to a decentralized approach enabling them to source power from multiple suppliers. As early innovators prove successful and solutions reach maturity, involving trusted partners in non-core business processes begins to make perfect sense. Before long, the practice becomes the rule. We predict this evolution will hold true for cloud computing.
- Navigating unknown territory: As with any industry, there are leaders and followers. We believe the early adopters who choose a partner to guide them will be farther ahead of the competition than those who do not see the value in adopting a cloud solution until it is the norm.
The benefits of cloud-based e-commerce are clearly visible. Take the example of a leading biosciences company that offers products used by academic and pharmaceutical scientists researching cures for cancer and Alzheimer’s. By moving its e-commerce site to a cloud-based platform, the company has been able to make available online their entire, extensive line of products, including infrared imaging reagents, consumables and software. Deployment in the cloud means very quick back-end updates by marketers, not necessarily IT. Changes in price and promotion for cross-selling and up-selling, and other improvements, can be made real-time to address a company’s changing market dynamics.
Without a doubt, cloud-based e-commerce is here to stay. Putting your applications in the cloud with a trusted partner and in a solid development platform provides undisputable speed, economic value, and significant benefits in terms of customer acquisition and retention. See for yourself how ready you are. Whatever you are selling, develop a plan to sell it in the cloud.
Bill Loumpouridis is president and CEO of CloudCraze by EDL Consulting.