Cloud cuckoo land

What is it with cloud computing? It's everywhere! Just look at the websites of the major suppliers of professional software. They are either in the cloud, or so they claim, or headed for the cloud very soon. So let's look at what it is, what itmick offers, and consider the risks and the benefits.

You've heard of NIMBY (not in my backyard). Well, these are NOMS: not on my server. The software isn't on your laptop, desktop or network server. It's on somebody else's server, which is owned or leased by the software vendor. The software is accessed by you via the internet, so by you from anywhere you happen to be with an internet connection.

Sounds like fun? Maybe. But more than that it sounds efficient. From the vendor point of view, they don't have to send you a CD or come to your office to install software and wrestle with your IT department. They just have to control your access to a website. For the vendor, it should mean a better match of resources: more server space at busy times, less when quiet.

And there are low staff costs in managing the installation - or rather, no installation. In short, it's SaaS (software as a service to you and me). In theory, as a vendor, I can charge you for using my software and you only pay for what you use. There are various models but most seem to have a charge for the number of people who need access and a charge for the amount of space used.

This is attractive. It's a good use of resources and, in an ideal world, has the ability to match costs to revenues for the user. In my experience, cloud-based software has been charged on the number of users and the amount of storage space I use. There can be more complicated pricing models, of course, but it all depends on the nature of the application. In theory, the software is available from anywhere as long as you have an internet connection. It all sounds good, it probably is good. However, there are some key considerations.

Control and value

First, access to the software is via the internet. If your connection is lost, you can't get to the software. Think along the lines of how critical the application is. Most internet connections today are quite robust. However, if you are really concerned, consider having a fallback, i.e. an alternative provider.

Second, there's control over the software. For simple applications, this is probably not an issue, but it is for more complicated ones where you may not want to take the latest update. With this you have no choice. The software you use will be outside your control so you use what you are given. That may be a benefit as you have no upgrades to manage and are always on the most recent version.

Finally, the data is yours and it has value. The data will not be completely under your control. Ask about backup policies. Not just how regularly they back up but where backups are held. You can, and may wish, to specify a geographical area where backups are held. While you are thinking about that, consider data protection and confidentiality.

So is cloud computing the future? I think more and more applications will move to the cloud. Clearly the basic ones have moved and more will follow. Customer relationship management systems and simple bookkeeping have made a home in the cloud, for example. They tend to be stand-alone applications. For obvious reasons, it would be difficult to link cloud-based proprietary data with other data in your organisation.

Is it right for your firm? Of course, only you can decide that and if your existing software supplier is moving into the cloud they should be able to give clear reasons why. Look at the three key areas mentioned above and ask the vendor lots of questions.

Mick Jones is managing director of thewealthworks

He writes a regular blog about technology for Private Client Adviser