Cloud computing: A game-changer for businesses

Cloud computing is a game-changer for businesses, which now face the choice of adapting to the demand for ubiquitous access to data or losing customers to tech-savvy competitors, says a University of Illinois expert in e-business strategy and information technology management.

Michael J. Shaw, a professor of business administration, says big data is here to stay, and businesses need to adapt to the new reality that cloud computing is not merely the next Silicon Valley dot-com bubble.

"If your competitors move to the cloud and you don't follow, that gives them a distinct advantage, because it introduces more intimacy in their relationship with their customers, so they can react to what customers want more quickly," says Shaw, the Leonard C. and Mary Lou Hoeft Chair of Information Systems at Illinois.

"You can almost sense the shifting consumer demand," he says. "I think it's going to evolve into something that's going to be here to stay for the long-term. It's a model that comes from several developments—access to computers, better networking, and the need of the consumer and enterprise users."

Shaw says this should be a real wake-up call for businesses, because not only is cloud computing a huge leveler of the playing field, it's also a chance for firms to run their business more economically and efficiently.

"It provides a new business model that many potential clients might like," he says. "Consumer expectation also has changed in a big way. They expect that services and data—basically, everything—will be readily available from the cloud. So it's a new model to run a firm's IT-infrastructure, and it affords businesses more opportunity to integrate their applications, which is greatly needed because it’s more efficient in terms of resources."

Businesses also can improve their own internal processes through cloud computing, Shaw says.

"It makes things like procurement a lot more efficient," he says. "Enterprise applications and customer relationship software—that's all increasingly running in the cloud. The next step is adding the social media component, which will ultimately make relationship management with customers that much more innovative than it is now. Those factors all define the competitiveness of a company."

While cloud computing is really nothing new to anyone who has ever checked email or watched a video in a Web browser, Shaw says it changes the dynamics of IT for businesses big and small by creating economies of scale.

"Cloud computing changes the calculus of running a data center, as well as a way of building an information infrastructure," Shaw says. "For big companies, it makes data more shareable. For smaller companies, it makes a computational platform and enterprise applications more readily available. It's almost as if there are more rental opportunities—they can rent the platform rather than buying it and building it themselves. So the economics are a big driver."

But cloud computing has what Shaw calls some "non-trivial" risks and downsides, including some potentially huge security, data integrity and environmental costs.

"The security issue is cloud computing's biggest Achilles Heel," he says. "Although the security concerns are big, nothing in business is without risk. Electronic banking carries the same risks, as would upgrading the power grid into a smart-grid. So cloud computing is not unique to risk-management. Firms just need to manage that risk, which really comes down to the issue of IT governance. I don't want to be wildly optimistic, because you really do need to develop IT governance to manage the risk from cloud computing. Security is a multi-layer issue not only related to computer and system security, but also governance and control of the business process, application and management levels."

While the server farms and data centers necessary for a seamless cloud computing experience consume an enormous amount of energy, that may actually be beneficial from a sustainability standpoint.

"When you share computing resources, you are actually helping the environment because you're not wasting additional unnecessary capacity by investing in your own information infrastructure," Shaw says. "By sharing, it's less likely you would get rid of the outdated servers and related equipment simply because you don’t need them anymore, because they're now more shareable."

Although consumers are more familiar with commercial-centric cloud-based services such as music and video streaming, Shaw says there will eventually come a day when the cloud will be ubiquitous throughout our entire households.

"Once we integrate it, it's going to be seamlessly woven into our lives," he says. "Eventually, our refrigerator will let us know when we're low on milk, and will be able to send a reminder to a mobile phone to buy some on the way home. Similarly, by coordinating business processes through the cloud, companies can better manage their supply chains or respond to their customers' needs."