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Understanding the Costs of Cloud Computing

Updated January 1, 1 . AmFam Team

Understanding the ins and outs of cloud computing doesn’t mean you need to be an expert in the field, you just have to know where to look! These tips on the enhancing your business with cloud computing will get you the facts you need to outsource your computing needs with confidence.

What is cloud computing?

Simply put, cloud computing is defined as using the internet to act in the way that a locally-owned server used to. It continues to play an ever-increasing role (Opens in a new tab) in how tech companies manage their and maintain their code.

The Big Benefits of Cloud Computing

Cloud computing can transform a small business’s operations, cut down on information technology costs and enable employees to access company data online at any time or place. However, those benefits may come with a price.

“Cloud computing can save you money,” says Kevin Jackson, chief executive officer of GovCloud Network, a company in Washington, D.C. that helps businesses leverage cloud-based services. “But there are hidden costs as well.”

If you’ve been thinking about cloud computing for your business, here are four areas in which cloud computing can impact your bottom line.

Cloud Computing as a Technology for Business Growth

One benefit of cloud computing is that it enables you to service multiple people at the same time with the same infrastructure. As a result, you don’t have to finance new equipment or buy new software every time you add an employee or client.

However, as your business evolves, such as adding large numbers of employees or product offerings, cloud services tend to become more expensive. For example, you may pay one rate for the first 15 people with access to the cloud and a higher rate for the next 25. “The bigger your business, the more expensive cloud computing may be until it may be cheaper to buy your own infrastructure and to implement it,” says Jackson. “Especially if your requirements are static.”

Data Security and Privacy in Cloud Computing

In some ways, information on the cloud is more secure than data stored on a desktop, Jackson says. After all, cloud service providers spend a lot of money to protect your data, and if a security breach occurs, the service provider incurs the costs of fixing it.

But if sensitive data such as your customers’ credit card numbers is hacked, not only might you be sued for failing to protect the information, but you may lose the trust of your clients.

“If the information is so key to your business that you could never recover from its loss, do not put it in the cloud,” Jackson says. Performing the required due diligence is the responsibility of the small business owner. “Organizations must always match the security and safeguards used with the sensitivity of the information and data being protected.”

Minimizing Employee Downtime with Cloud Computing

If you’ve ever experienced a computer crash, you know how much an equipment malfunction costs in lost time, money and productivity. If your hardware goes down and your data is on the cloud, you can pick up right where you left off using a different computer, tablet or even smartphone.

On the other hand, if you’re depending on the cloud to get tasks done and the service goes down for an hour or two, that lost time can cost you money if you don’t have a backup. In addition to outsourcing hardware needs, some business owners are taking advantage of hiring a virtual team, a cloud-based alternative for modern groups seeking to scale up carefully without spending money on a physical location. These changes in the way businesses work are all driven the cloud’s ability to unite workers through the internet, often improving efficiency while keeping overhead to a minimum.

The Joys of Outsourcing Equipment Upgrades

One of the benefits of cloud computing is that the cloud service provider has the responsibility of upgrading the technology. “In order to maintain their business and give you the best service, the service provider will continually update the service,” Jackson says. At the same time, cloud services are typically accessible via myriad devices so you don’t need the latest and greatest computer to work on the cloud. As a result, you may be able to spread out your hardware purchases.

However, you have no control over when the cloud service provider will update the software or possibly get rid of a feature you like. “When you’re leveraging cloud services, change is constant and you have no control over it,” Jackson says. “Some will see that as a downside.”

Careful analysis of your cloud computing options are key before you settle on a group to host your data. Take into account the target firm’s track record of data security, as not all cloud computing groups operate and maintain security measures the same way.

When it comes to the costs of cloud computing, the key is determining whether the benefits outweigh the costs, Jackson says. “Cloud computing requires risk management, due diligence, effective service level agreements and active metering and monitoring of IT services being consumed.” When used effectively, cloud computing “is a real sea-change in business.”

While you’re considering the importance of cloud computing and safeguarding everything that you’ve worked so hard for, take a moment and revisit your business coverage with an American Family Insurance agent (Opens in a new tab). Your business will be better protected and you’re going to feel great knowing your investments are covered.

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