Why is it important for CRE professionals to know when cloud computing is not cloud computing?

Cloud computing. Sounds fluffy, nebulous, and something best left for the techies? Not so.

In fact, far from being an ephemeral technology trend we’ll all soon forget about, Cloud Computing is one of the most fundamental shifts in digital technology that has ever occurred and will change all businesses, including commercial real estate.

Let’s take a step back, and define cloud computing, and then discuss why you should be paying attention to it.

Let’s also define what it’s not so that people can’t misuse the term around you.

What is cloud computing?

The easiest way to explain cloud computing, sometimes just called “cloud”, is to look at email today. You can have an email program, Microsoft Outlook for instance, installed on your computer as a stand-alone piece of software. Everything is local to your computer and the servers in your organization. If your servers need maintenance, your email does not work. If your IT manager quits, your email will soon not work either. This is not cloud.

On the other hand, you could access your email through a service like Gmail. You log in via a web browser. It doesn’t really matter which device you use – your laptop, a tablet, or smartphone. If you have an internet connection, you can access your email. That is because nothing is stored on your specific device (“local”). Instead, everything is securely stored in the cloud – huge servers belonging to Google in the case of Gmail. Your security is provided by Google’s security team instead of Joe the IT Manager doing the proper daily upgrades.

Today you are probably using cloud computing services all the time: Dropbox, Google Drive, Salesforce, Facebook, Netflix, LinkedIn, etc.

The official definition of cloud computing, according to the National Institute of Standards and Technology (NIST), includes the main characteristics that a service must meet to be accurately considered a cloud computing service. According to NIST cloud computing must be:

  1. Ubiquitous
  2. Convenient
  3. On-demand
  4. Accessed via the internet
  5. A shared pool of configurable computing resources
  6. Able to be rapidly provisioned and released with minimal management or service provider involvement.

 The top five business benefits of cloud computing

  1. Cost savings

Another term you might have heard is software-as-a-service (“SaaS”), which also means cloud computing services. This highlights a key economic benefit of cloud computing: you only rent what you need. You don’t need to make large capital investments upfront. Your ongoing costs are predictable, known contractual expenditures instead of unknown consulting services, hardware & software costs.

Other cost savings come from economies of scale: your cloud services provider is pooling your requirements with many others, bringing down overall unit costs hundreds or thousands of times. And finally, you need fewer IT staff and consultants to manage cloud computing services.

  1. Speed and flexibility

Cloud computing dramatically reduces the complexity of on-premise computing services resulting in pretty much everything being faster and having more flexibility. From initial installation, getting up and running, ramping services up and down, integration with the rest of your tech ecosystem, and access to data and analysis, cloud computing brings year and month timeframes down to weeks and days, even minutes in some cases. This is wildly different than the on-prem solutions you have been using for the last 20 or 30 years which may take months or years to truly set up and/or upgrade.

  1. Automatic software updates

Versioning, and all its backwards compatibility complexity (defined as making sure that your old files work when you upgrade to the new version), is a thing of the past with cloud computing. All users are always on the latest version, which is upgraded automatically in the background by the service provider. Integrations are brought along, without the need for big and expensive refactoring exercises. With the cloud, optimizations, security enhancements, and new features can be rolled out in real-time. When security threats emerge cloud providers are notified by their security teams (who work in conjunction with other SaaS providers and in some cases US Gov’t assistance) to rapidly fill the threat. This way it is not your firm versus the global hacking community. It is professional security teams that are your line of defense.

  1. Security

At first, it might sound counter-intuitive that cloud computing is more secure than hosting hardware, software, and data yourself. But the reality is that you can never, ever invest the same time and money into security as cloud providers do. Another way cloud computing taps into the benefits of economies of scale. In addition, from a business continuity point of view, cloud computing offers backups and speedy data recovery. A key thing to remember is that they are protecting their key source of revenue – in the case above, your email system – and they will spend thousands of times more to do so than you would on your own.

  1. Mobility

Because cloud computing is ubiquitous, access to cloud services are truly device-independent. This includes enabling your people to access sophisticated business services with their smartphones and tablets. In turn, this introduces a whole new way of working, collaborating, and interacting with clients or coworkers from anywhere.

Bonus benefit: cloud computing is more sustainable thanks to resources being shared, less hardware required, and reduced energy consumption.

What is not cloud computing?

There’s a term “cloud washing” that refers to companies describing a service as being cloud computing in their marketing materials when in reality it is not. It is like the saying that you can’t put lipstick on a pig. The problem is that by doing so, the provider sometimes convinces the customer that they are getting all the business benefits of the cloud but in reality, they won’t. Sometimes companies use cloud washing tactics as they begin a multi-year migration of legacy services to the cloud, knowing that they will not actually be there for several years.

This situation is doubly problematic as the customer not only doesn’t get all the benefits of the cloud, but they have another migration in their not-too-distant future when their service provider launches their cloud-native service.

A cloud-native service refers to one that has been built from the ground up for the cloud, not a legacy service that has been shoehorned into a cloud-esque wrapper but still functions on a technological level as it did before.

How do you tell if something has been cloud washed? Some tell-tale signs include:

  1. The service isn’t easy to integrate into your ecosystem of cloud services.
  2. The use of Citrix or other “Remote Desktop Services”. These are used because people need to retain their ability to function as a desktop application. This is not true cloud.
  3. The service isn’t mobile accessible.
  4. Updates are infrequent.
  5. The system is slow and cumbersome.
  6. The user interface is old, annoying, and non-intuitive. This is because non-cloud applications are much harder to keep modern given the difficulty with upgrades.
  7. The service is inconsistent across devices (or is limited to certain types of devices)
  8. You need to make custom integrations and may have to pay the provider to help you migrate them between versions. In general, if a vendor is talking about versions, they probably aren’t true cloud.
  9. You need to buy hardware or software.

Cloud computing has driven the emergence of new business models, new businesses, and new ways of working. It is not something that will blow over. It is a fundamental change in how the world does business, not dissimilar to when Henry Ford introduced the assembly line, or the people began using interchangeable parts.

Therefore, it is important to be able to distinguish between true cloud computing and cloud washing to ensure you realize the business benefits of this evolution in technology.

About Rockport VAL

Rockport VAL is the long-awaited market alternative. Rockport VAL provides CRE Valuation and Discounted Cashflows. VAL is user-friendly, affordable, powerful, and connects easily to your tech ecosystem. It’s Cloud Native (it was created in the cloud), so there’s no cloud washing here, just the simplicity and advantages of cloud computing.

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