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Former Member
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Here is another blog from my LinkedIn profile that had a great deal of popularity that I thought I'd share on SCN.

The Cloud Transformation

The transformation to the Cloud by both customers and vendors has some interesting twists along the path. Let's focus on one area of the Cloud for this discussion. For the purposes of this post, I'll talk about the software side of Cloud computing. Some vendors will insist that if the software is hosted, it is a Cloud application and so long as it's sold via a software subscription. The other side of this coin is software that is multitenant, single code base, hosted by the provider, delivered over the Internet, is consumed through a web browser, and is sold on a subscription basis as a service. Today, with regard to software, the question too often debated "Is it Cloud or is it Hosted?". And furthermore, does it matter? I will make the case that it does but it depends on how you want to define Cloud software.

Depending on whether you associate Cloud computing with a software subscription model where software is sold as a service (SaaS) or whether you associate Cloud computing with how Wikipedia defines Cloud Computing, you could come away a bit confused. Cloud computing versus Cloud software.

According to Wikipedia, Cloud computing involves distributed computing over a network, where a program or application may run on many connected computers at the same time. It specifically refers to a computing hardware machine or group of computing hardware machines commonly referred as a server connected through a communication network such as the Internet, an intranet, a local area network (LAN) or wide area network (WAN).

The journey to the Cloud may have started in the 1960's when centralized hosting first became popular and IBM and other mainframe providers created the concept of service bureaus (basically time sharing of massive mainframe computers), then fast forward to the 1990's when the wide use of the Internet became popular and application service providers (ASP's) became an accepted business model as a way to initially host and manage client server business software. Then, beginning in the late 1990's and early 2000 where software started to be delivered as a service using a subscription model with multitenancy and delivered through a web browser. In many respects, all of the points on this journey could be considered Cloud computing, so vendors today have a very wide latitude to define their software as Cloud software.

The differences between hosted and cloud software

So what is the difference between hosted software and Cloud software? What defines true Cloud software? Is it Cloud because: 1) of how the software is delivered, 2) of how the software is priced, 3) of its multitenancy, 4) it has a single code base, or 5) because it's consumed via a web browser? Or all of the above. From a marketing perspective, almost everyone will define Cloud software differently and most times to their benefit, especially if they are a vendor. From my perspective, at a high level, it is because of these five characteristics.

When you start thinking about this, and if you're old enough, you'll remember the old Memorex commercial, "Is it live, or is it Memorex?". The question today, if this were a commercial, "Is it Cloud or Is it Hosted?".

Let's start with a few short Cloud software evaluation questions.

1. Software Delivery
Is the software delivered over the Internet? If you can answer yes to this question, it probably can be considered Cloud software.

2. Software Pricing
Is the software priced as a service using subscription pricing for each user that consumes the software? If you can answer yes to this question, it probably is Cloud software. Answering yes to this question by itself is not necessarily conclusive though. Do not forget that some software which has a perpetual license (you actually own the software) can have per user pricing, but it's not on a subscription basis.

3. Multitenancy
Is the software multitenant? For software that claims to be multitenant, according to Wikipedia, it should be a single instance of the software that runs on a server(s), serving multiple client-organizations (tenants). If you can answer yes to this question, there is a high likelihood that it is Cloud software since multitenancy is key attribute that allows Cloud software vendors to bring down the cost of the software subscription. However, multitenancy is not required for software to be considered Cloud software. We can discuss this point in more detail later.

4. Single Code Base
Does the software vendor make use of a single code base for all of it's customers? The answer to this question forms no basis for determining if software is Cloud software but is important to know so you can expect more frequent upgraded releases. It is just another aspect that allows a vendor to drive down software costs because they only have one version to maintain and support for all customers.

5. Consumed via a Web Browser
Can the software be consumed by the end-user using a web browser? If you can answer yes to this question, there is a very high likelihood that the software is Cloud software. By itself without other corroborating evidence, it may not be Cloud software, since some modern client-server software is hosted internally but is only accessed from your local area network (LAN) and also uses a web browser for the user to consume the software.

Why Should You Care?
Why should a customer care if the software is Cloud software, and why are these questions asked? Bottom line, in my opinion, the goal of Cloud software, Software as a Service (SaaS), is to drive down the cost of owning software. This is accomplished by moving non-core functions, which are not special to a company's business (such as IT), to a third party who provides the software as a utility (service). In this case, the vendor accepts responsibility for all aspects of the software including: 1) the maintenance of all hardware; 2) creation and maintenance of all Internet access and networks; 3) disaster recovery preparedness; 4) maintenance of the software; 5) guaranteed user accessibility using a Service Level Agreement (SLA); 6) basic system and software level support; and 7) is legally obligated to take necessary security precautions to safe guard the customers privacy and data.

What this means to a customer is that you need to establish what you want in terms of your software and avoid the semantics of "Is it Cloud or Is it Hosted?". What I mean is don't focus on terminology but create sound requirements around what you're trying to accomplish. Here are some other questions that you will find important when determining if Cloud software is right for you. These questions are in addition to the basics of software selection, which is determining what your business and application requirements are:

  1. Can the software be provisioned and deployed almost instantaneously?
  2. Can you increase and decrease utilization of the software on demand?
  3. Does the software require customizations to work or is it highly configurable?
  4. Does it have features which allow you to extend the functionality (extensibility)?
  5. Does it have the ability to support robust security features like SSO?
  6. Does the software provide robust API's for supporting integrations to both on-premise and other Cloud software?
  7. Can the software exist in a hybrid application environment since it's rare that a company can move to a total Cloud architecture overnight?
  8. Does the software allow localizations for the different jurisdictions your company operates in?
  9. Can the software be delivered to your users in their native language?
  10. Does software vendor have data centers in your country or jurisdiction to support your country's data privacy laws?

These are only a few examples of questions you should ask but there are many more criteria that can be used when selecting software. It really depends on the type of software services you're attempting to acquire.

Additional Considerations

As a customer, should you care if the software is multitenant? Earlier, I said I would add more to this topic. While not all inclusive, I would suggest you should care because multitenancy helps a vendor drive down maintenance costs because of the features of multitenancy like 1) a single database; 2) easier upgrades, 3) reduced hardware costs, and 4) other IT savings. I would expect that if your software vendor has multitenancy you will most likely have a better pricing structure.

Using Cloud software, businesses can access software or other server technology and expand or shrink services as their business needs change. The concept of paying only for the services you need using the subscription pricing model allows your company to add or remove services (software and hardware) as needed, virtually on demand, and pay only for what you use. Be sure to ask the vendor how often and how much you can scale down or scale up your usage of their software services.

Determining whether it is Cloud or not is a matter of semantics, and what is more important is does the software meet your business needs. Be sure that your computing and business needs drive software selection and help you to get more for less while driving down the total cost of ownership. It doesn't matter what type of business you have, delivering the software to a global workforce (global could mean more than one location) without the cost and overhead of an IT staff and data centers allows you to focus on your core business while allowing you company to expand rapidly against your competitors using the freed-up resources.

If you're not in the business of managing software and delivering IT infrastructure, then moving to a software subscription model using Cloud software makes logical and financial sense. Cloud software is basically outsourcing data center and software services to a third party while allowing you to focus your internal resources on things that are core to your business.

My favorite analogy is this. Just because your business uses electricity doesn't mean it's in your best interests to create your own power station. Today, most people never give a second thought to this and simply come in and turn on the light switch. Shouldn't your software be the same way?

About the author of this blog post. Allen Peterson is the President and Founder of Aasonn. Aasonn is a global Cloud consultancy and HRO provider who has implemented and integrated HR/Talent systems for over 2,000 SAP/SuccessFactors customers in 30 countries in the last eight years. Today the company has a new division to deliver HRO using highly integrated Cloud solutions with highly standardized HR processes. The HRO product is called the Employee Cloud. The company's new HRO solution is focused on the employee experience.

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