Leveraging the value of cloud computing in the leasing industry
Published on May 2, 2013
By Mitch Kaufman, MSCS
President, IFS Technology Solutions
In the eyes of many industry analysts, information technology (IT) has reached the point of diminishing returns. As McKinsey and Company notes, it is “no longer a game-changer” and IT spend “doesn’t correlate with business success.”
As leasing companies begin to trim IT spending, cloud solutions can be a key driver in reducing costs. They free up IT staff to focus on business process improvements, enable computing environments to scale up or down in response to company needs, and help organizations in implementing disaster recovery and business continuity plans. This article provides an overview of the types of cloud solutions and how the leasing industry can best mine their value.
Three delivery models: considering the options
Currently, three distinct cloud delivery models are available:
- Software as a service (SaaS) applications are the oldest and most widely used model, leveraged for over a decade by millions of consumers. These applications run offsite and are accessed over the internet through a PC-based browser or mobile device.
- Infrastructure as a service (IaaS) applications are used by IT system administrators and system engineers to build entire computing environments. In this model a server can be created in minutes, complete with an operating system of choice for just pennies per hour.
- Platform as a service (PaaS) applications are used solely by developers who want to write new applications that benefit from the scalable nature of the underlying cloud. As more users subscribe to the application, it automatically expands its use of resources to support the load. PaaS would not typically be used for existing or legacy applications, however, as retrofitting the code to adhere to the resources of a particular PaaS provider would be prohibitively expensive.
As most leasing companies are not large developers of applications, we will focus in this article on the SaaS and IaaS models.
A brief history: tracking the evolution
These three delivery models, and the cloud itself, would not be possible without “server virtualization.” This concept dates back to the mid-1960s, when the IBM Watson Research Lab began the M44/44x project to study “time sharing.” Server virtualization, once implemented, would allow multiple applications to run simultaneously on a single physical machine as if each were executing on its own computer. As computers were large and costly at that time, it was imperative that they be used to maximum capacity. Time sharing provided the solution.
Fast-forward to the 1990s, when servers had shrunk significantly in size and cost and were proliferating everywhere. Power, space, and utilization concerns were once again the driving force behind the initial server-based VMware virtualization offerings.
Since then, other players such as Citrix, Microsoft, and Sun have joined the fray. Today’s virtualization software allows a single server to appear as multiple servers, each potentially running a different operating system and each completely independent of the other.
How can the leasing industry best head into the cloud and realize its value today?
SaaS: expanding the market
Many leasing companies have been early adopters of cloud technology through such popular software as SalesForce.com for customer relationship management, GMail or Hosted MS Exchange for eMail, and Carbonite for remote backup services. Many use SaaS; some even use it for their core leasing system. This $15-billion slice of the software industry continues to expand as more new products and legacy applications are offered through SaaS.
Gartner predicts that by 2015, the market will top $20 billion. Significantly reduced upfront costs, enhanced access to the latest version of subscribed software and lower IT costs for infrastructure and staffing all serve to amplify and accelerate the return on investment for acquiring software through this delivery method. Scalability and flexible accessibility are also distinct benefits.
SaaS has its drawbacks, however, including potential problems with:
- Control: While it’s advantageous to have the latest software, it’s also disturbing to log on one morning and find that your software has been upgraded – requiring training to use new or modified functionality.
- Security: Although data seems to be hacked no matter where it’s stored, data stored offsite is often perceived as being more vulnerable.
- System outages: Outages are a natural concern; however, internal systems also go dark at times.
- Internet access: If you are subscribing to mission-critical applications, it might be best to have a backup connection to the internet to ensure continuous access.
- Data integration: If you use a variety of SaaS solutions that need to communicate with each other on existing on-premises applications, data integration can be challenging. Custom interfaces can be built, and newer IaaS players, such as Dell Boomi, Informatica, and CloudSwitch, should be evaluated.
IaaS: creating in house
Although most leasing software vendors now offer a hosted SaaS version of their software, many have already purchased or developed their own in-house systems. In this scenario, IaaS is the best solution for leveraging the cloud.
Amazon AWS, Rackspace, and ATT are some of the largest IaaS providers. Microsoft has recently made changes to its Azure platform to move in the direction of IaaS, but it initially was primarily a PaaS offering. Unfortunately, these services seem to be in the spotlight only when they experience an outage. That’s because some of the largest SaaS applications – for example, Netflix, Instagram, Dropbox, and Zynga – are built around them.
Deploying an IaaS solution is a three-step process:
- Choose an IaaS provider. The largest and most well-known is Amazon AWS, whose range of services and server templates is unmatched in the industry. Although Amazon AWS is not known for its support, varying levels of upgraded support are available for subscription, and you can be assured that someone will always answer your questions. Rackspace is the other dominant player in this space and also has a broad service offering with “fanatical” support to boot, although personal experience would debate the ferocity of the fanaticals. You won’t find unanimous support for either company, and you won’t go too far in the wrong direction by choosing either. Having worked with both, I recommend Amazon AWS.
- Decide what to deploy to the cloud. Leasing startups should begin with a virtual private cloud (VPC) and forego any internal hardware, while companies with existing infrastructure and IT staff would do best to implement a hybrid solution.
Hybrid solutions are common and enable leasing companies to leverage cloud resources and integrate them with on-premises hardware. Excellent uses of cloud resources in a hybrid configuration might be test systems, training systems, or storage of large, seldom-used data. The payback on these uses can range from 70% to 90%, as you would pay only for the servers when you need to train new users or test new software releases. Cloud connectors (virtual private networks) enable these resources to become an integral part of your internal network, making integration with existing applications no more difficult than for on-premises hardware.
Startups should resist the urge to purchase any in-house hardware and configure a VPC from the outset. Scalability, accessibility, and redundancy are compelling reasons to forego server ownership.
- Grow your network with your organization. As your organization grows, you can expand the size of your network without incurring significant upfront costs. You can reduce the ongoing hourly cost of servers (at least at Amazon) by purchasing a reserved server. When it’s time to open remote offices, a VPC will afford easy access to system resources over the internet. Also, having a remote system will facilitate easy access for internal users working from home or traveling for business. Disaster recovery solutions are often expensive to implement, especially when capital for a start-up is at a premium. IaaS offers a robust, cost-effective disaster recovery option.
Although IaaS has many advantages, it is by no means a “set-it-and-forget-it” proposition. Key considerations include:
- Ongoing monitoring: After implementation, system performance must be monitored in detail, and system downtime – planned and unplanned – must be responded to. System performance can change drastically over time even though the demands of your application might not.
- Other tenants: Because you are assigned to a “slice” of a physical server, you have no control over other “tenants” of that server or how those tenants’ application demands might change over time. Unruly tenants are referred to as “noisy neighbors.” In response to a degradation in performance caused by a noisy neighbor, you will have to move to another server; this amounts to stopping and restarting your server. It is unlikely that you would be assigned to the same physical server.
- Need for multiple vendors: Your IaaS deployment plan should include using multiple IaaS vendors to mitigate outages or disasters at a single vendor. For example, if Amazon AWS will be your primary provider, then it might be advisable to use not only Amazon S3 for data storage but at the same time push your data into Rackspace Cloud Files. The cost is just pennies per gigabyte, but in the unlikely event of an Amazon meltdown, wouldn’t it be nice to have access to all your data and just have to provision new servers?
Most IaaS providers have multiple data centers around the country. You can mitigate the loss of any one data center by replicating your server in another data center. A provider like Amazon AWS makes this easy with services such as AMI Copy (Amazon Machine Instance), which can migrate all your servers to another data center. If you run primarily in the AWS Virginia data center, it would make sense to make backup server images in the AWS California data center on the west cost. This level of protection costs pennies per month and will be priceless in the event of a disaster.
Into the future: reaping the benefits
The new handbook of IT demands a smaller, more agile and less expensive IT organization. Those who cling to the past and continue to develop costly in-house applications instead of subscribing to SaaS solutions, or deploy and support costly hardware farms in lieu of rolling out far cheaper IaaS solutions, will be viewed as nothing more than another cost center. The new IT organization needs to be closely aligned with business goals, innovate for greater efficiency and employ competitive advantage. The cloud is, and will remain, a key enabler to help foster the transformation from old to new IT. Leasing companies are well-positioned to head into the cloud – and leverage its full rewards.
About the author
Mitch Kaufman is president of IFS Technology Solutions (www.ifstechnologysolutions.com). Launched in 1994, IFS provides industry-leading products, custom software, and IT services to support client needs throughout the US. The company serves a wide span of industries and organizations, from small to large enterprises, with a full range of IT services and software products – headlined by its flagship offering, IFS LeaseWorks. IFS innovations, focused applications, and support are expressly designed to help companies improve business processes, enhance productivity, and grow market share.