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IT has emerged accompanied by vast marketing campaigns and even bigger promises, yet cloud computing is already living up to its hype for a growing number of Australian businesses. Looking for ways to extract more value from their IT investments, they are finding the cloud offers an enticing mix of lower costs and improved flexibility. While it comes in a variety of forms and flavours, the concept underlying cloud computing is relatively straightforward. Rather than using a computing infrastructure housed within a business, capacity is provided by an external third party. As a result, computing resources become a service or utility, in the same way as electricity and telecommunications.

When talk of cloud computing began in the mid-2000s, some tech industry watchers likened it to traditional IT outsourcing, in which an external party took responsibility for an organisation’s IT systems. However, cloud computing is much more than that. Because resources are consumed in an “on demand” model, the cloud offers the prospect of far greater scalability and flexibility than traditional outsourcing ever could. “Business understanding of cloud computing has grown in the past few years and early adopters are enjoying the benefits,” chief information officer for IBM Australia and New Zealand Steve Godbee says. “In many cases, business leaders are seeing the potential and putting pressure on their IT departments to adopt it.” Godbee says a recent IBM global survey found that 60 per cent of CIOs believe cloud computing is a strategy they will pursue – almost double the number who felt that way two years ago. While some of this rise can be attributed to vendor marketing campaigns and media coverage, Godbee says it is also coming about because of the increasing use of cloud-based computing by consumers. He points to popular services such as web-based email and video-calling as examples of the acceptance of cloud platforms. “Look at Gmail, Skype and Facebook. People are finding it easy to get on board and use these cloud services. Businesses now want the same thing.”

One of the chief benefits offered by cloud computing is the potential to shave significant proportions off the amount of money paid for IT infrastructure. Rather than equipping specially constructed data centres with rows of expensive servers and networking gear, applications are run and data stored within an externally provided facility. As well as removing a large chunk of capital expenditure, this also strips out associated costs such as support staff and maintenance contracts. “In the area of labour costs, organisations are seeing in the order of 40 per cent savings in IT management.” Cloud service providers are quick to agree that cost savings are a big driver for new customers. “Cloud computing provides a transformational pricing construct,” Macquarie Telecom managing director of hosting Aidan Tudehope says. “It parallels what happened in the industrial revolution. You used to have power generators attached to the side of the factory. Now you just plug a device into the power socket and you get a bill from the utility company for whatever you use. Cloud is doing just that for computing.” Macquarie Telecom has built a series of data centres in Australia and offers cloud services in the public and private sectors.

Another big benefit is improved business agility. With IT underpinning virtually all commercial activity, being able to change infrastructure quickly can be a real competitive advantage. In the past, for example, a company looking to offer a new product line or service would first have to design and build the IT systems needed to support everything from design and construction to supply chains and sales. This process could take many months, as hardware was installed, applications sourced and customised data stores put in place. Cloud services radically change this process. A business can rent the processing and storage capacity it requires and have it made available almost instantly. Cloud-based software can be configured quickly, with links established to back-end processes such as billing and accounting.

“All businesses need to be able to speed up the process of getting an idea to market,” Tudehope says. “Cloud allows you to have a supporting IT infrastructure in place in minutes or hours, as opposed to weeks, months or years, as has been the case in the past.” While the benefits of the cloud are significant, some experts advise planning carefully before jumping in with both feet. Proper assessment of the growing number of options on the market is critical for long-term success.

Optus Business managing director Rob Parcell says many organisations opt for a phased approach to the cloud. This may mean initially using a cloud provider for tasks such as disaster recovery or off-site back-up services. “Once customers become confident [in the cloud], they will tend to put more services into the environment,” he says. Such a path tends to involve incremental steps and the adoption of a so-called “hybrid cloud” strategy. As a first step, an organisation creates what is termed a “private cloud” by evolving its existing internal IT resources. Through the use of a technique called virtualisation, application servers and data stores are morphed into an integrated, on-demand infrastructure. An organisation’s users then access resources from a central computing pool (or cloud). In some cases, a charge-back model can be introduced, creating transparency in the amount of resources consumed by particular users or departments.

The second step is to link this private cloud to external cloud resources, creating the flexibility to access extra capacity during times of peak demand. “Technology has evolved to the point where it is a relatively straightforward decision for an organisation to move at least part of its IT infrastructure into the cloud,” Parcell says. “I think that within three years we’ll see the majority of organisations using a cloud service in some way.” Tudehope agrees: “I have no doubt we will look back in five to 10 years and see that what was happening in 2011 was a fundamental change in how we procure IT services.”

Source The Australian