Gain the competitive advantage while lowering your start up costs with IaaS.

 

Abstract

In this paper, I focus on private cloud services that provide Infrastructure as a Service (IaaS) specifically for Small and medium-sized enterprises(SMEs). While no solutions are practical for all SMEs I will provide insight into when it is most advantageous for SMEs to utilize IaaS, as well as the trade-offs involved with IaaS and why some content does not belong in the cloud.
In the past, the building, maintaining, then evolving a private infrastructure was an extremely expensive investment for SMEs. Now, modern cloud providers are offering a more cost-efficient solution through cloud services. Making the decision to; build a storage infrastructure, or rent cloud space, a judgment call between capital expenditures versus operational expenditures. This is because of the hardware utilization and asset redundancy factors that come with building and owning your own infrastructure. While operational enterprises may experience some explicit costs associated with migrating compared to enterprises in the planning phase, implementation is very affordable and easy. The enterprise need only contract the space needed from the cloud provider and plan accordingly for their building to have appropriate bandwidth capabilities. While there are, trade-offs associated with buying over building i.e. the loss of knowledge your employees may have regarding infrastructure technologies and their implementations’ as well as lack of control due to outside interference.
I have concluded from my research that cloud services can realistically provide IaaS more efficiently and cost-effectively than building private in-house infrastructures.

Keywords: IaaS, Cloud Computing, SME, Small Business, SMB, Start-Ups, Infrastructure Costs.


Introduction

Technology is a defining factor in the pursuit of competitive advantage for small and medium-sized enterprises also known as SMEs. To be specific SMEs are; “The category of micro, small and medium-sized enterprises (SMEs)… made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro ($53 million US)…”(European Commission. 2003.)
In the past; building, maintaining, and evolving an enterprise computing infrastructure was an extremely expensive investment for SMEs. Now modern cloud providers are offering a more cost-efficient solution through cloud services. Cloud services as defined by the National Institute of Standards and Technology (NIST) is “… a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction”. (Bildosa, 2015.) There are four deployment models in reference to Cloud Computing Services; Private, Community, Public, and Hybrid. (Bildosa, 2015.)
In this paper I will be focusing on private cloud services that provide Infrastructure as a Service (IaaS) specifically for SMEs. Microsoft describes Infrastructure as a service (IaaS) as an instant computing infrastructure, provisioned and managed over the Internet. That can be quickly scaled up and down with demand, in which the SME pays only for what it uses.
This helps SMEs avoid the expense and complexity of buying and managing their own physical servers and other data center infrastructure. Each resource is offered as a separate service component, and an SME need only to rent a particular service for as long as necessary. The cloud computing service provider manages the infrastructure, while the SME; purchases, installs, configures, and manages its own; software, operating systems, middleware, and applications. (Microsoft, 2017) While no solutions are practical for all SMEs I will provide insight into when it is most advantageous for SMEs to utilize IaaS in the cloud, as well as the trade-offs involved with IaaS and why some content does not belong in the cloud.

Analysis

Deciding to Buy or Build.

Whether your SME is in the planning stages or in need of infrastructure upgrades, the decision to build your storage infrastructure or rent cloud space normally boils down to capital expenditures versus operational expenditures. If you are planning for a new enterprise; you will most likely have more initial investment capital compared to monthly capital after launch, but this does not essentially mean it is lucrative to build your own infrastructure. This is because of the hardware utilization and asset redundancy factors that come with building and owning your own infrastructure. SMEs which are currently operational and just looking for other options are most likely already familiar with these hurdles.

The decision to build your storage infrastructure or rent cloud space normally boils down to capital expenditures versus operational expenditures…

Hardware utilization

A key difference between utilizing IaaS and building your own private infrastructure is the realistic utilization of resources. It does not matter if your infrastructure will use LTO or SSDs to store your data, it is extremely difficult to achieve 100% storage capacity on any storage medium due to technical limitations of the hardware (of which there are too many to elaborate on in his paper). In short this means; if you plan to utilize 300TB of data, in actuality you will need to purchase closer to 400TB. With IaaS the cloud provider absorbs the costs associated with this detail and your enterprise only pays for the storage infrastructure it needs.  (TVB Europe,2014.)

Asset Redundancy

It makes no difference if an enterprise is building or buying their infrastructure; redundancy of those stored resources for disaster recovery is an element that needs to be addressed. If you are building your infrastructure, this detail literally doubles the capitol required for your infrastructure budget. If your enterprise plans on storing 300TB of mission critical resources locally, it will need to build an additional 300TB of infrastructure as secure redundancy for disaster recovery.   With IaaS the cloud provider is liable for ensuring; data protection as well as redundancy, and thus absorbs the cost associated with building and maintaining the disaster recovery infrastructure. (TVB Europe,2014.)(Microsoft, 2017.)

Cost of implementation

The facts that I have presented thus far provide a clear point regarding initial investment. IaaS is extremely affordable in comparison to building your own infrastructure.

Nothing in the business world is free. So what is the cost of implementation?

This is where operational SMEs, and SMEs still in the planning stages, part ways.
SMEs still in the planning phase will have an advantage here as there is no initial investment involved with utilizing a cloud provider, in fact, Microsoft reports helping companies lower their cost of borrowing by 90% thru utilizing their cloud services. (Microsoft, 2017) Additionally, implementation is very easy; the enterprise need only contract the space needed from the cloud provider and plan accordingly for their building to have appropriate bandwidth capabilities.
If you are an SME that is operational and looking to expand your infrastructure, there are going to be explicit implementation costs in addition to the costs of ensuring your building has appropriate bandwidth capabilities. These explicit costs are costs associated with downtime that may occur during migration, and costs associated with training employees to use any new interfaces (though training is becoming less of a factor as cloud technologies such as OneDrive and Google Drive become normalized).
In short very few SMEs truly need to own their storage infrastructure in today’s business environment. In most cases it proves fiscally beneficial to let a cloud provider manage your data so that your enterprise can focus on its core business. (Gaudens, 2015.)

Agility

If you are not familiar with this business word buzzword yet; “…agility refers to the distinct qualities that allow rapid response to changes in resource needs without losing momentum or vision. Adaptability, flexibility, and balance are three qualities essential to long-term business agility.”  (What is Business Agility?, 2013.)

I bring this up because SMEs are ever-changing in terms of resource demand and without years of data available to make resource demand predictions, it can be hard to see when your business will need more or less resources before it happens. By utilizing a IaaS your SME can always have as much or little resources as they need, when they need it.
In the following sections, I will elaborate on how IaaS provides these qualities of agility in order to help your SME become more agile itself.

Adaptability

IaaS is extremely adaptable because cloud providers already have the resources your business needs. In turn, they can provide them faster than a private self-managed infrastructure can be upgraded, and at a fraction of the cost. This means that when your new product takes off and there is a sudden large influx of business, your infrastructure will not hold you back. You do not want your SMEs sales website crashing because the demand for your product increased faster than you could anticipate or possibly afford to upgrade your private in-house infrastructure.

Flexibility

IaaS is also extremely flexible; not only can it be upscaled quickly but it can also be downscaled quickly and easily. This is huge in terms of reducing costs of surplus assets. By utilizing IaaS your SME is never stuck paying for more resources than necessary.

Balance

When I talk about balance in reference to business agility I am talking about cost balancing. SMEs have a tendency to grow unevenly in terms of its departments and the specific department that will grow is very much dependent on what type of SME you are. An online retail enterprise will need a much larger amount of web server infrastructure compared to a custom home construction enterprise. With the adaptability and flexibility of resources provided by IaaS, your SME does not need to spend capital upgrading an entire infrastructure just because one department needs more resources than the current infrastructure has.

The Trade-Offs of IaaS

            Considering the steps modern cloud providers have taken to ensure enterprises get on board with cloud technologies there are no real downsides to IaaS. That is not to say that there are not trade-offs. One trade-off is the loss of knowledge your employees may have regarding infrastructure technologies and their implementations’. This is a tradeoff not a downside because depending on the type of enterprise you are, this may be beneficial to you. A custom home construction enterprise can save a considerate amount of capitol if they do not need to hire an IT resource to manage their infrastructure. Another consideration for your SME is lack of control due to outside interference, this would be an issue such as downed public network lines. Without in house emergency recovery options production could potentially be halted until the network lines are repaired. This situation would only be a disadvantage if your SME is in a remote area. In the case that you are in a local area; if your public network is down, most likely the other businesses around you are having the same issue.  This issue can normally be remedied by ensuring your enterprises building has redundant public network access demarcs in place.  (Schultz, 2009.)

Not Everything Belongs in the Cloud

It must be noted that corporate espionage will always be a factor in competitive markets and while cloud technologies have become extremely secure (most of the time more secure than private infrastructures) there are times when specific data should not be uploaded to the cloud. The person/s responsible for managing the cloud services for your SME should use good judgment when deciding what should be uploaded to the cloud and ensure their employees are aware of the decisions made in regard to this subject.
Depending on the security level of your on-site clients, some SMEs may want to decide against uploading their latest and greatest or unpatented ideas into the cloud.

Conclusion

While there is no one size fits all approach when deciding if IaaS is right for your SME.
Services have evolved to the point where they can realistically provide IaaS more efficiently and cost-effectively than building private in-house infrastructures.
IaaS contracted through a legitimate cloud provider produces an ability for SMEs to have fast and responsive reactivity along with agility in an ever-changing business environment. IaaS yields this extremely high utility over private

IaaS is fiscally beneficial to SMEs because it removes expensive surplus resources associated with owning your infrastructure.

IaaS yields this extremely high utility over private in-house infrastructures by removing the cost associated with building, maintaining, staffing, and expanding private in-house infrastructures. Furthermore, IaaS is fiscally beneficial to SMEs because it removes expensive surplus resources associated with owning your infrastructure, and while there can be trade-offs associated with utilizing IaaS. A quality cloud provider will ensure; agility, flexibility, and reliability, of resources in addition to security of data, at nearly zero investment cost and0 aa relatively low annual costs to business owners.

Thus, closing the gap of competitive advantage large enterprises hold over SMEs.


 


References

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Microsoft (2017, March). This cloud opens doors of opportunity: Fortune magazine, Volume 175(Issue 3), pg. 1.

European Commission (2003-05-06). What is SME? Retrieved from  https://web.archive.org/web/20150208090338/http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm

TVB Europe (2014). Content storage management: own VS cloud. Retrieved from
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GAUDIN, S. (2015). The Cloud Helps Enterprises Break Chains Shackling IT. Computerworld Digital Magazine, 2(1), 3-5. Retrieved from http://web.a.ebscohost.com.www.library.oit.edu:2048/ehost/pdfviewer/pdfviewer?sid=915abb07-c380-454d-bd41-d27819128580%40sessionmgr4007&vid=1&hid=4107

What is Business Agility? (2013, July 29). Retrieved February 16, 2017, Retrieved from http://www.hrzone.com/hr-glossary/what-is-business-agility

Schultz, B. (2009). WALKING THE LINE. Network World, 26(19), 24-26. Retrieved from
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Content Storage Management as a Service: A More Efficient Way to Protect and Manage Media. (n.d.). Retrieved February 17, 2017, Retrieved from http://www.nabshow.com/thought-gallery-tech-talk/content-storage-management-service-more-efficient-way-protect-and-manage-media

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