A fairly big buzzword in IT circles  for the past while has been “Cloud Computing” or “Cloud Services”. Now, as an IT pro myself, I generally don’t like to use too much tech jargon with my clients. However these terms have gained such common acceptance by IT-types, that it occured to me that many business types may not completely understand the technology or the implications.

So let’s spend a few minutes looking into what it means as a definition, and what it can mean for your business.

Firstly, what does ‘Cloud Computing’ really mean? Well, Cloud computing refers to service, software, or functionality that is based on the internet. Google Docs is a good example of a Cloud application. The name Cloud actually comes from technical drawing that us geek-types use; when we draw network maps and the like, the Internet is almost always depicted or represented by a cloud in the drawings. Hence, Cloud computing…

So what other kinds of applications and services exist as Cloud applications or services? Lots! Anytime you see something prefixed by ‘Hosted’, it’s likely classed as a cloud service. Hosted applications like Google Docs or Calendar, Hosted Exchange, and Hosted Sharepoint are all examples of Cloud Services. The Salesforce application is probably one of the oldest and largest examples of a Cloud Application.

The bigger question though is… what do cloud services mean for you and your business? This is actually a pretty long answer, so I’m going to chop it into two… one today, and another one next week. This week, it’s about the cost calculations of Cloud Services vs. doing things more traditionally (in-house, with the application installed on a server somewhere).

Let’s look at Hosted Exchange for our calculations. Traditionally, if you wanted to host your own Exchange email server, you needed hardware, the operating system, software, and support and maintenance for all of it. Let’s say you have a 15-person office. The server for Exchange will cost you $5000, and the Exchange licenses just around $2900. Add another $2000 for the whole thing to be setup properly, and a further $2000 per year to keep the whole thing properly maintained. 3 year running total is about $16,000.

Now if, instead, you decided on Hosted Exchange, you’re looking at about $22/ month/ person. So in that same 15-person office, you have (22×15)x12= $3960 per year, or just under $12,000 over the same 3 year period. And this does NOT take into account any emergency services that may be required on an owned server – which you would be responsible for. With Cloud services, all the updates and maintenance are included in the regular monthly price, so you’re never worrying about whether or not things are up to date.

As your organization gets bigger, the math changes a bit. Bigger organizations require bigger, more expensive servers, and eventually a person dedicated to managing just the email systems. With Hosted Solutions this requirement goes away, or is greatly reduced. And the principle is essentially the same across many Cloud Services and applications.

The downside is that you become dependent upon your internet connection to do much of your work. If the Internet goes down, how do you connect? (Although in some cases this isn’t an issue – email being one of them.) There’s also the question of territoriality; where is the service or application hosted? Where is your data actually kept? In some cases this matters, because your data is usually subject to the laws of the country where it resides. In the U.S., the Patriot Act allows law enforcement to access pretty much whatever they want, when they want. So if your company deals with personal information, you may need to look at offerings based in your own country.

Of course, as with all issues you should consult your IT support company or personnel to determine the best course of action. And check back next week to learn about the other side of the how Cloud Services can help your business.