Friday, August 14

Cloud: The paradigm shift to boost traditional businesses

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TA00699Just as water is piped to the home, businesses pay for as much or as little as it uses enabling cloud computing resources to be available whenever needed and charges are based on how much is being used by the company.

In an enterprise scenario which boasts complex and expensive IT infrastructures to support its business processes, the idea of just being able to pay on-demand for someone else to provide IT services, without being concerned with the details of how it is done, is something that would interest most modern businesses.

The idea of having several potential IT service suppliers, giving a competitive choice which may negate the need for an internal IT department enables the business to focus more on core parts of the business mechanics, so that business owners can stop worrying about hiring and retaining a workforce with IT skills that are in short supply.

Cloud computing is not only enabling new computing capabilities and driving process efficiencies, it is also disrupting the entire IT industry to its core.

Although the current hype around cloud computing is around expected cost savings, its true value is in greatly improving business or mission capabilities without a commensurate increase in time, people or money.

Combining off-the-shelf IT components with highly automated controls is what fundamentally enables cloud computing. This combination is also what’s driving the economic model that makes this new technology force so disruptive to the status quo.

For example, the software-as-a-service (SaaS) cloud delivery model typically does not require any advance usage commitment or long-term contractual arrangements.

SaaS not only changes the typical software vendor business model, but also dramatically changes the strategy, budgeting, procurement and management options for the IT buyer.

 

Looking for the right platform

With the meteoric rise of cloud computing, there have been many platforms that are made available for most businesses but among the more notable ones out there is Amazon Web Services (AWS).

The name Amazon might be the last name one thinks of when thinking of cloud computing as the company’s more known for its e-commerce platform to buy things from the internet.

However, this branch of Amazon, which was founded in 2006, has grown substantially as both the demand and need for cloud computing increases.

In 2006, AWS began offering IT infrastructure services to businesses in the form of web services – now commonly known as cloud computing.

One of the key benefits of cloud computing is the opportunity to replace up-front capital infrastructure expenses with low variable costs that scale with your business.

With the Cloud, businesses no longer need to plan for and procure servers and other IT infrastructure weeks or months in advance. Instead, they can instantly spin up hundreds or thousands of servers in minutes and deliver results faster.

AWS enables those that utilise their platform to scale the offerings so that businesses can operate more efficiently and lower prices of backend services.

Businesses no longer need to worry about having to wait for long periods of times for servers to arrive in order to scale up their businesses, nor do they have to worry about paying extra cost to maintain them in case business slow down.

The platform of technology infrastructure services that comprise AWS cloud has grown rapidly, as it continues to listen to customers and consistently add new features.

Speakers at the Amazon Web Services Summit (AWS Summit) 2015 recently noted that many companies today have converted into cloud computing using services such as AWS to further improve business performance.

“AWS has evolved into something to broad and so deep that it penetrates every single function supported by traditional enterprise data centers and go even further than that by offering those services cheaper, faster hence leaving the company with more time and resources to add value to other areas,” added AWS Head of Enterprise Strategy, Stephen Orban.

Head of Asean, AWS, Richard Harshman gave examples such as Astro Holdings Bhd, which lowered its cost by 90 per cent while increasing efficiency via AWS.

AWS now has services that support business applications under the purview of chief technology officers (CTO), corporate apps overseen by chief information officers (CIO), and end-user IT services that are run by people in top IT support roles in the enterprise.

The company’s strategy for tackling the enterprise data center market extends beyond simply replacing functions currently handled in-house with services.

“Cloud has become the new norm, companies today can’t ignore cloud and be competitive,” said Orban during the keynote speech at the summit.

Old-world data centres, Orban explained, required upfront capital investment with basic and storage capability and is slow to get new capabilities while cloud computing services offer a lower variable cost compared to its traditional counterpart while is also offering a broader platform that boasts new features and is ready to use.

Despite the obvious business impact of utilising cloud computing to manage a business’s IT division, many traditional businesses are finding it hard to shift as technology is changing at such an explosive rate.

More so are the conventional businesses such as those running fast moving consumer goods and the taxi industry whereby the system has hardly changed much in the last few decades.

 

EVOLVING A TRADITIONAL BUSINESS

Cloud computing revolutionised the way Sabah based Kim Teck Cheong Sdn Bhd (KTC) distributed its vis a wholesale distributor of FMCG products ranging from food and beverages to over the counter medicine and health supplements.

Founded in 1938 in Kota Kinabalu, the company has its roots deep in Sabah’s history before the formation of the country.

Dexter Lau, executive director for KTC told BizHive Weekly that more conventional businesses were rather resistant to change due to the mentality of ‘don’t fix something that isn’t broken’. The reason why KTC embraced the change was simply due to ‘fear’.

“Fear of losing out, fear of over paying, fear of not maximising potential, fear of being left behind. This is why we took the risk of moving our IT infrastructure to the cloud,” Lau explained.

Lau shared his belief that cloud computing will continue to forge a massive convergence of technologies – much like cell phones evolved into smartphones and that customised software is beginning to move to the cloud in a meaningful way.

“Platforms such as AWS give companies a peace of mind when it comes to managing the IT infrastructure. The fact that it enables integration is a huge upside as cloud is accessible from any smart device.

“This move enables me to communicate with my support services as well as my distribution centres on what is going on and what needs to be done with a simple touch of an icon. This not only minimises wasted time in traveling between centres, maintaining our own servers but also renders geographical borders irrelevant as I can access it anywhere,” he enthused.

This new evolution in cloud computing will also ‘Darwinize’ major data centres.

Traditional business application using data centres have always been very complicated and expensive. The amount and variety of hardware and software required to run them tends to be very daunting and every error could shut down the server for as short as a few minutes to as long as a few days.

Traditional data centres also require a whole team of IT professionals to install, configure, test and secure the servers. This effort when multiplied across many applications is understandably highly inefficient and costly to all resources.

*”The great thing about cloud computing for businesses such as FMCG is not only that you still retain control, but also the fact that the physical server is not ours, it also lessen the headache of having to maintain, update and secure the server. Adding to this, cloud computing also enables shared control to those that need it when it is needed.”

TA00700This means that with the evolution, business applications are more mobile and collaborative making relevant information available to those that need it in real time to make the best possible decision for the scenario.

However, despite everything, Lau noted that among the major challenges of having moving the company’s IT infrastructure to the cloud, the biggest concern was security.

During the shift to cloud computing, Lau explained that many people were asking him many questions that he wasn’t aware off.

Considering that the data included for companies like FMCG not only includes stock of the goods but also details of clients, this could cause some serious leak in personal information.

If the KTC used a multitenant cloud service database that isn’t designed properly, a single flaw in one client’s application could allow an attacker to get at not just that client’s data, but every other clients’ data as well.

The challenge in addressing this threat of data loss and data leakage is that the measures you put in place to mitigate one can exacerbate the other.

“KTC was one of the earlier companies to embrace cloud computing. We have shifted our IT infrastructure to the cloud six months before the government shifted the focus on cloud computing for businesses.

“So being one of the early adopters, there were not only many resistance but many risks as well including security as when we first started, the security features were not as solid as it is nowadays,” Lau noted.

One could encrypt the data to reduce the impact of a breach, but if the company lost the encryption key, they lose the data. However, if the company opts to keep offline backups of the data to reduce data loss, the company increases the exposure to data breaches making trustworthy systems such as AWS such an important aspect for businesses like KTC’s.

Before moving it’s IT infrastructure to the cloud, Lau noted that business have continued to be stable adding that, ‘by implementing cloud I would not go as far as to say that the business have gone better or that it would impact a better sales performance especially in my line of business but it has stabilises an aspect of the business and help assure peace of mind from the original fear we had.

“So in short, although it did not impact the performance of the business in terms of sales, it has helped me streamline the business and enable me to save on resources at the back end,” he said.

“In terms of limitations, I have yet to find any issues as thus far it has freed up a lot of the company’s resources for us to focus on other aspects. But what I want to see in the future from cloud computing players such as AWS, is perhaps more price reduction as more companies are going into the cloud.”

 

TAXIS HAILING A NEW TOMORROW

Since its launch in 2006, AWS now counts amongst its customers many international and local corporations such as Netflix, Spotify, Astro, Foursquare, Unilever, as well as MyTeksi.

According to MyTeksi CTO, Wei Zhu the company’s aim to revitalise the taxi industry in the region is slowly but surely coming along with all of these safety features on offer.

Reviews of the MyTeksi have been nothing but good reviews with statements such as ‘hassle free’ and ‘reliable, excellent service on its review page on both Google Play and Apple AppStore.

TA00701Every time a user orders a taxi, information of the driver and the time the taxi was ordered goes into MyTeksi’s database, making it simpler for a customer to make a complaint if need be.

MyTeksi will then be able to access the information and act accordingly.

The idea of creating the MyTeksi system was interesting as Wei explained that the original idea was to create a new and improved dispatch system for the traditional taxi services.

“Initially we tried that approach but soon we realised that mobile phone usage is growing at such an exponential rate that it became an obvious trend for us to capitalise on.

“We took it upon ourselves to not only make it easier for the taxi companies but also create a system whereby not only do the dispatcher could get hold of the taxi but the users themselves,” Wei enthused.

“However, despite the potential that we say, there is no way to tell how users and taxi companies would react. Initially not many believed in this system but as app proved itself over time, so has the company.

“In terms of analytics, AWS and its advanced analytics programme made it a whole lot easier as the services that are offered are easy to scale up in phases. This is especially helpful when it comes to addressing the dilemma of predicting what is needed in terms of technical requirements,” Wei added.

Creating a system that requires such a monumental processing ability to not only locate where the customers are together with the nearest taxi is no easy feat. Wei explained that during its infancy, the company would celebrate 100 bookings a day which now has exploded into thousands.

Cloud computing platforms enabled the company to meet such IT demand as it can maintain maximum service levels with minimum resources. For companies like MyTeksi, this means high QoS at low cost.

One of the key benefits of cloud computing is the ability to have a flexible computing service which can expand or contract in line with business demand, giving you capacity which would be impossible to generate from an in-house implementation without significant investment in resources.

Resource pooling helps providers to achieve elasticity, as resources that are no longer needed by one consumer can be allocated to another consumer that needs more resources.

This is especially useful for a dispatch service as certain times demand may be higher than average and cloud computing enables the company to increase the need for computing power and reduce it when necessary.

The increase in computing power also enables the company to improve on both security and other major complaints that the taxi industry has been plagued with.

A market survey conducted by MyTeksi showed that the average taxi driver would spend 60 per cent of their day idle or waiting for a customer while the MyTeksi cabbies don’t experience this problem anymore because real time jobs are being sent to them.

The location-based system also improves security especially when travelling alone as it takes notes of which taxi driver is sent to which passenger ensuring security for both the passenger as well as the drivers themselves.

AWS was entrusted by MyTeksi since day one to assist them in creating, developing, and managing the company’s operations with Wei noting that due to the nature of the business being unpredictable as these are untested areas of focus, MyTeksi does not have an exact understanding as to the sort of growth and scaling that is expected.

“Thanks to the nature of cloud computing, it allowed us to focus on more essential items rather than dealing with such issues as it offers the level of scaling and expansion capabilities that we need,” said Wei.

Wei added that the company ‘need not plan too much’ on hardware acquisition, forecasting, or having to deal with service, infrastructure, and human resource management concerns for its IT infrastructure.

This is of special concern when keeping in mind that the company despite being slightly less than three years old has already spread throughout Southeast Asia.

“I vividly remember the first month I joined the company which had to be the most hectic month I’ve ever worked having to wake up or being woken up at 2am or 4am as there was some issues with the system.

“During that time, we had a lot of help from our cloud computing providers (AWS). There was one night when things were really bad, an entire team of engineers at AWS Seattle actually woke up at the middle of the night to help us,” Wei explained.

When asked on his thoughts on what the future holds for the company, which is using modern IT to run a traditional company Wei said that ‘nobody can predict what the future holds’.

“Considering that we are technically an IT company, and factoring in the rate which technology is growing, a five year plan might as well be a century for us as things change so fast.

“It is hard to even tell where we will be six months from now, let alone five years.”

Wei also shared his views on cloud computing in general especially towards other sectors stating that, “cloud computing is an important evolution of technology.

“Cloud computing lowers the barrier for traditional businesses to modernise and also lowers the cost of entry for new businesses to get into any sector without worrying about the IT infrastructure anymore.

“Software now has disrupted conventional industries and significantly increases the efficiency of operating a business whether it is traditional or new. I think that is really the key contribution of cloud computing companies,” Wei highlighted.

The CTO in essence also noted that for companies that are more resistant to change to consider the impact of technology in their own lives.

“Think about your life, how you are living has changed due to technology. Where we are now, how often do you use your mobile phone to do everything? Now that’s the pace of change that we are experiencing and if you are in any line of business, you have to think about how I adopt my business to this new connected future.

“There is still this comfort factor to have something physical as many still feel that things in the cloud are not secure but I personally feel that it is counter intuitive as in reality, it is actually safer to have your system in the cloud than having a physical system in place which could be affected by many things.”

 

SILVER LINING: A MARKET CHANGE

The impact of cloud computing on infrastructure goes beyond the financial area. When an IT manager outsources a server farm to a cloud vendor, they also relinquish a large degree of control over that infrastructure, something many companies are still very reluctant to do.

However, to say cloud computing will eliminate traditional data centers is still quite a claim as many larger organisations have rigorous regulatory security requirements, and cloud computing is not robust enough at this point to sufficiently satisfy those at the proper level.

The practical benefits of cloud adoption aside, it is increasingly evident that organisations will also need to change the way they approach IT in order to derive the maximum benefit from it.

There is a big mindset shift across Southeast Asia and with the growing number of developer talent it could make way for newer and more efficient ways of managing any business ranging from traditional service industries to any ‘mom-and-pop-shop’.

Part of this, according to Harshman who was quoted in a media interview, is the establishing of smaller teams and the adopting of a ‘startup’ mentality.

What he meant is how small teams can work with greater autonomy and flexibility, but without the excessive bureaucracy, that too much management can bring. This translates into a heightened level of innovation that will stand to benefit them.

Ultimately, cloud-computing providers such as AWS  are continuing to push the envelope of cloud computing in the region too.

Seeing companies like Facebook who created a whole new personal communication industry and Airbnb created a market that did not previously exist because there was no way for individuals to efficiently offer travellers accommodation in their homes.

TA00702Cloud computing has enabled all these organisations to start small, scale and replicate their business models rapidly without massive upfront investments.

And therein lies the real lesson. If the taxis and retailing industries can be so massively and rapidly disrupted, what business is safe? The answer, very few.

A new breed of competitors has arrived: digital disruptors. These companies and individuals embrace digital tools and platforms to get closer to customers and engage them more deeply.

It might not be something the regular Kopitiam business owner wants to hear but this change is happening and unless they too move to the cloud, they might get caught in the rain.