Cost-Conscious Cloud

While some concerns remain about data security and application uptime, there’s significant movement within the retail industry toward cloud-based solutions that can be delivered on an on-demand basis, and it’s easy to see why. Unlike many other technologies that retailers have had to adapt to meet their business needs, it’s as if cloud computing was designed specifically with the cost-conscious, data-deluged retail enterprise in mind.

For retail CIOs seeking a quick ROI payback from any proposed new initiative, adopting cloud-based solutions offers almost immediate cost savings. Not only is there less need for up-front capital investment in hardware, software and deployment, but these solutions are typically available on a per-usage basis, opening the door for retailers to use as much of an application as they need at any given time.

In addition, this pricing model allows retailers to move many IT costs from the capital expenditures budget line to the operating expenditures line, which can free up CapEx funds for other IT projects.

But most industry experts, along with retailers that have already adopted cloud solutions, agree that cost savings are only their most obvious benefit. Cloud-based solutions’ expanded availability offers retailers new levels of flexibility and speed to market. IT departments can scale up support in far less time than traditional application architectures would have needed.

Defining Cloud Computing
Cloud computing has nothing to do with meteorology. It got its name from the “cloud” graphics used to represent any off-premise computing area, in this case the Internet.

Cloud computing “allows users to obtain computing capabilities through the Internet, regardless of their physical location,” write Michael Mojica, Jeff Stephenson and Alan Healey in the May 2010 Accenture report, Six Questions Every Retail Executive Should ask About Cloud Computing. “Computing clouds are in essence online, supersized data centers containing hundreds of thousands of servers hosting web applications.”

There are public clouds, which take advantage of massed servers to lower all participants’ costs and are essentially available to anyone, and private clouds maintained by a company or group of companies, as well as public/private hybrids.

Cloud-based services are broadly divided into three categories: Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). Applications designed for traditional distribution methods can be adapted for cloud delivery, but many technology vendors are now designing solutions that specifically optimize cloud-based models.

Applying Power to ‘Big Data’
Many retailers would like to use more of the data coming from mobile technology and social media to gain greater insights into customer behavior and demand patterns, but one of the barriers has been the enormous IT investment required for both hardware and software.

In addition to lowering costs, mitigating risk and increasing flexibility, the cloud computing model expands access to massive computing power. And because retailers can use this power on an as-needed basis, they gain the benefits of deep data analysis without having to invest in technology that they might use for only a few days each week or each month.

The cloud’s combination of expanded computing resources and delivery to virtually any Web-connected device also adds the possibility of using its solutions to conduct real-time analyses.

“Scenario modeling, what-if analysis, and forecasting, which are ‘lumpy,’ data-intensive processes, are great candidates to be served by cloud-based solutions,” according to the Accenture Six Questions report.

Addressing Security Issues
The nagging questions about cloud computing have to do with security and application uptime. While acknowledging that no IT architecture can guarantee full 100% uptime, cloud proponents say that the use of multiple servers and data centers offers higher redundancy levels than would be possible with a single enterprise-operated data center.

In addition, data security is a concern no matter what type of IT architecture a company uses. Retailers traffic in Personally Identifiable Information (PII) about their customers as well as financial and transactional data, not to mention sensitive proprietary information about prices, promotions and their own interactions with vendors and suppliers.

Experts say the move to a cloud computing model can actually be a catalyst for assessing and addressing security concerns throughout the retail enterprise.

7 Security Recommendations
  • The Accenture Six Questions report provides seven security recommendations for companies considering a cloud deployment:
  • Work with your provider to determine its attention to security, privacy and compliance with data laws in all relevant jurisdictions.
  • The security of the cloud should be equal to the most risky client that is serviced by the provider.
  • Require your cloud computing partner to provide you with its risk assessment and how it intends to mitigate any issues found.
  • If the cloud provider does not have a seasoned Privacy Officer and a client-facing CSO, CISO, or equivalent security role, it is a sign that the provider doesn’t take security seriously enough.
  • Schedule monthly discussions with the cloud provider’s top privacy and security people.
  • The cloud provider should have the ability to map its policy and procedures to any security mandate or security/privacy/compliance-driven contractual obligation you face.
  • Pay attention to your cloud provider’s adherence to secure coding practices.
  • What cloud-based solutions can provide is cost savings with much higher levels of IT and business flexibility than retailers have been accustomed to.
Cloud-based solutions are just starting to sprinkle their benefits on the retail industry, and there are strong indications that these “showers” will quickly grow into a downpour — and that more and more retailers will like this change in the weather.

This article is an excerpt from the RIS report, “Cloud-Based Technology: Key Opportunities for Retail.” To download the full report, go to and click on the “Thought Leadership” tab.

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