The cost-saving benefits of this evolving technology are increasingly evident, and procurement would be wise to take note.
Cloud computing was still a new concept in 2006, yet since then it has enabled a new range of digital services. Many of us now use the technology daily, streaming music from Spotify, watching Netflix or using an online service to send emails or store photos.
If you store or access software over the internet or intranet, you are using a cloud – and an external company is using its servers to host and supply your own vital information and software in the shape of databases, storage, networking, analytics and other intelligence.
And this year, according to Forrester research, the market will keep growing – to be worth over $200bn – as more and more businesses take it on in earnest. But how much do we really understand the technology – or the risks it may present – and what it can do for your business?
The market is led by just six major players: Alibaba, Amazon Web Services, Google, IBM, Microsoft and Oracle.
Cloud service providers are responsible for upgrading and maintaining the technology within the cloud, and generally, customers pay for the services they use, like on-demand renting of computing services. Financially, this means the customer can move hardware and software from capital to operating expense and eliminate the cost of running on-premises data centres.
Cloud infrastructure can be designed in three ways: for open use by the public; private, where the hosting service sits on the company intranet or offsite but behind a firewall; or a hybrid, mixing public and private or a community cloud designed for organisations that share common concerns.
Software-as-a-service (SaaS) is the most commonly used cloud service, delivering software applications on demand and on a subscription basis. It is predicted to grow annually by 18% to 2020.
Platform-as-a-service (PaaS) supplies an on-demand environment for developing, testing and managing software applications, and is predicted to be the fastest growing cloud category, according to KPMG. Infrastructure-as-a-service (IaaS) rents IT servers and virtual machines, storage, networks and operating systems, usually on a pay-as-you-go basis. It too is set to grow.
The major benefit of accessing software via the cloud is that it is constantly updated without further investment. It also means the business can scale up rapidly when required, adding power or storage when there is a surge in demand or if moving to a new location. IT teams no longer have to manage the on-premises infrastructure – that continual software patching and computer set-up – and can instead concentrate on more strategic business goals.
On the minus side, cloud customers need to weigh up the privacy and security risks of ‘outsourcing’ their digital assets to cloud service providers. By choosing a cloud model, you are giving up control over the system and relying on the provider to deliver the performance and reliability levels you require.
Security issues were highlighted last year when the US military sought a private sector contract to run a cloud service holding classified information on weapons, military personnel, intelligence and operations. However, the benefit of using cloud services - not available at this scale through public sector - was to being able to give front line soldiers latest intelligence, it pointed out.
Data security concerns and loss of control are commonly cited as reasons not to adopt cloud computing tech, yet research shows that most security breaches happen on site rather than at cloud providers, where data is secured with multiple layers of security and encryption keys.
And providers are seeing a growth in demand - Google’s deals of over £1 million across all cloud products more than tripled from 2016 to 2017. The CBI believes the UK economy alone could get a £100bn boost to productivity if businesses were more willing to embrace cloud computing and online procurement to reap the benefits.
Clouds also make it easier to use the same platform to track a product through its life cycle and oversee the entire supply chain, facilitating better real-time decision-making, visibility and collaboration.
Procurement in the cloud
Governments are starting to adopt cloud procurement. The UK has a cloud-first policy, while in the US the Agriculture Department is piloting a cloud centre of excellence initiative. It has closed 21 of 39 data centres as it moves towards just one. This year it launched a mobile-friendly website, Farmers.gov, where farmers can apply for services online, and is developing a plan to consolidate 22 end-user services providers down to one.
Super Retail Group, a leisure retailer in Australia with $2bn annual sales supplying more than 600 stores, launched a single demand-and-fulfilment platform on the cloud in 2011. It began with 400,000 SKUs, and expanded to 1.4 million. The firm says the cloud services model proved scalable and reliable, and after just six months of implementation, it could cut inventory holdings and safety stock by 20%.