Monday, September 30, 2013
Advantages and obstacles of running business on cloud
Zhou (Joe) Ye
Cloud computing is the top 1 hot word in IT industry in recent years. And it inevitably involved in supply chain management topic. I worked in SAP, the largest ERP software producer, for 5 years and cloud computing had been a topic in the company’s top management team.
There’re several significant advantages of running ERP at cloud rather than the current mode.
At the moment, ERP software is running as centralized system on the servers. The maintenance of these servers is responsibility of the manufacturer itself. Therefore each ERP user pays for its own maintenance. However, it’s a different story in cloud computing. The servers are actually at cloud side like Amazon, Google or Microsoft. The maintenance cost will significantly drop due to economics of scale.
Additionally, the firm running ERP should maintain both the software and hardware by itself, whereas it might not be good at that since it could be a plastic bottle manufacturer. Therefore, consulting firm like Accenture or IBM and support team of ERP software provider like SAP are hired to help the client (plastic bottle manufacturer) implement, upgrade, and maintain this huge system. Since the whole process (from the beginning installation to daily maintenance) is outsourced, and it’s hard to estimate the volume of work, the cost is not transparent to the real stakeholder – the plastic bottle manufacturer. And in the real world, this cost is usually very high. In the cloud computing world, the plastic bottle manufacturer need not worry about transparency. The price of cloud computing is clearly marked based on the storage size, the data flow size, and computing power needed, rather than private and man-day based contract with consulting firms.
Besides the cost efficiency, a unified system format and more integrated communication channel in cloud server will make the business process between different business entities much easier and effective. Just as mentioned in the article “Cloud computing: The answer to supply chain woes”, in current ERP systems, partners across the supply chain often do not provide each other with timely enough information, and process steps tend not to be joined up as seamlessly as they might be[i].
However, just like adoption of ERP systems 20 years ago, there’re also obstacles to run business on cloud. The top 1 problem is security concern. Now every ERP servers are running at each company’s headquarters, which means all the confidential data is physically within the company border. While in cloud computing’s case, all the business data, confidential or not, legal or not, will be in Amazon, Google or Microsoft’s hands. No matter how cloud computing services claimed about privacy, this security concern about data’s physical location is hard to overcome in the short future.
Another problem is when the whole economics is running on the cloud, the reliability of cloud servers is very critical. Technical breakdown or terrorist attack on these servers may bring the whole nation’s economy down.
To sum up, cloud computing is a very smart and effective methodology in future’s business management. It is the trend in spite of the obstacles in the way at the moment.