MT Expert - IT: Why The Cloud has a silver lining

Auridian's Ade McCormack explains why small businesses should consider using web services...

Last Updated: 31 Aug 2010

Web services, cloud computing and Software-as-a-Service are IT buzzwords that litter the marketing of technology service companies. They are also used liberally within business school literature and even management journals! So what do you need to know about them?

Firstly they are three different terms for the same concept, which reflects the trend in the IT industry away from buying application software, such as word processing and customer relationship management, towards renting it as a service delivered to the user via the Internet.

The concept is sound. If something appreciates in value, buy it; if it depreciates, rent it. Application software and even hardware are more or less obsolete at the time of purchase – there is always something better coming close behind. So the move towards a service based model has merit. You’ll always get the latest version - whether you like it or not! And from a finance perspective, you don’t have to front-load your investment by making a large capital purchase: with web services you pay less up front, but you pay a little bit regularly forever.

This model of computing has a number of other benefits. The associated processing usually takes place on the supplier’s servers. That means you don’t need to purchase expensive user hardware, enabling you to move away from PCs to so-called ‘thin-client devices’ (any user device that has no storage or processing capabability - and is thus cheap!). This has the effect of reducing the total cost of ownership of your user hardware.

Similarly the supplier also handles the data management aspects of the service. Some organisations like the web services concept, but don’t feel comfortable with their data sitting beyond the garden fence – so some service providers will enable their customers to use the service but retain physical ownership of the data.

So by using web services you have in fact not only outsourced your applications to a third party – you’ve also outsourced your IT infrastructure.

For small-to-medium-sized organisations this is an important benefit. Web services can by thought of as a means by which cash-strapped organisations can get access to designer-label software. And many of the big names in IT are rushing into this space (though some are rushing slower than others)

Google has taken the game one step further and is offering such services for ‘free’. But Google is not a charity and so these services are not truly free – the price you pay is ‘access to your eyeballs’. If Google can secure these, it can offer them to its advertisers for money. So if you don’t mind context-sensitive advertising, then this is worth exploring.

Web services are the way forward for the IT industry. It also provides a great way to reduce your IT expenditure and technology-related risk.

Ade McCormack is an FT columnist, author, speaker and leadership advisor. Visit his blog at

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