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Should organizations use cloud computing for all of their information systems needs? Why or why not? What management, organization, and technology factors should be considered when making this decision? Consider the size of the organization in your answer.

Cloud computing allows digital firms to employ the services and storage needed, when they need them and, as wireless connection options increase, where they need them. Customers are charged based on server utilization, processing power, or bandwidth consumed. Cloud computing has the potential to upend the software industry since applications will be purchased, licensed, and run over the network rather than at the desktop. This shift will put data centers and their administrators at the center of the distributed network while processing power, electricity, bandwidth and storage are all managed remotely.

While many organizations will use cloud computing to meet their technology needs, I do not feel they should rely solely on it. Instead, I advocate a mix of services – some in the cloud and some internally hosted – to allow a digital firm, especially the one for which I work, to be properly positioned for future needs and protected in business continuity situations. Not putting all of one’s eggs in a single basket is a prudent maxim for any IT manager to follow and is applicable in this circumstance.

There can be substantial financial inducements for the digital firm to use cloud computing. “Investments in Web services, grid computing, self-healing systems, pay-as-you-go services, embedded business processes and other innovations designed to improve reliability and reduce the cost to deliver IT services will bolster the organization’s bottom line” (Farber). As the network manager for a gas utility of 700 internal clients and 300,000 customers, I have seen my company’s data center grow from 15 servers in 2004, to 75 in 2008. This five-fold increase has expanded the budget of my cost center – running close to one million dollars per year. Even if those cost increases are passed on to the ratepayers, I would be remiss as a manager if I did not perform a total cost for ownership analysis of moving the firm’s information systems to the cloud. While cost may be the most prominent and compelling factor in my recommendation, there are several management, organization, and technology factors to be considered before I encourage my company to purchase its computing power in a similar manner as its energy utility consumption.

In his book, The Big Switch, Nicholas Carr draws a powerful analogy between the history of electricity and the future of online computing, arguing that, as the turn of the last century brought a dramatic change in energy production, this century sees the human race on the verge of an ocean of change in the way we use computers. Electricity went from being something companies generated for their own use to centralized utilities powering whole cities. Computing is moving from working solely on the hard drive of your computer to something that happens remotely at data centers (Farber). In his derisive article, IT Doesn’t Matter, Carr posits competitive advantage through innovation is no longer a deciding factor in the success of the digital firm. He believes all sources of corporate technology are moving toward commoditization and this foresight heralds the transformation of information systems from assets to utilities.

It is management’s responsibility to recreate and transform an organization over time in response to the needs of the company and its customers. Moving a mainframe-based CRM and several dozen Windows based applications to the cloud would create a significant upheaval in both how my department delivers and the way our firm’s employees consume IT services. We need to establish thorough planning processes and exercise responsible leadership with our business lines to prove the budgetary value and technological advancement these changes would bring to the company.

The cultural issues such a change presents would be the foremost organizational factor to overcome in moving our information systems to the cloud. From knowledge workers to senior management, each employee is accustomed to the speed and availability of applications at the desktop level. Convincing executive level management of the security and reliability of cloud computing will be imperative to create buy-in at all levels. Everyone in the organization will need to be convinced the privacy of corporate and personal data will be maintained for all applications used in the cloud. Establishing those factors with internal auditors for compliance with state and federal regulations will also take significant effort.

Lastly, the technology factors precipitating this change will be formidable. Redundancy and reliability become factors controlled at the service level agreement level – not with local administration or power utility. New systems can be tried and tested in the cloud without interference with existing systems. Cross-pollination of data sources is the most compelling value of centralizing data. Such crossbreeding could spawn new views of the data, or even unearth new data not resolved from the single sources. Commonality of applications in the cloud means business units no longer need to wait for IT to implement a system, write a report, or generate a query. All of this and more can be performed just in time for and by the business.