In 2006, Jeff Bezos launched Amazon EC2 cloud hosting. At the time, many industry analysts thought he was crazy. How can an online retailer compete as a provider of hosting infrastructure? Today, the Bezos vision has been vindicated. Businesses of all sizes are moving quickly to embrace cloud computing.

cloud computing

There are many reasons why cloud computing today is a core component of innovative enterprise software. The cloud gives businesses the capability to scale to handle capacity as an organization grows; flexible support for connecting geographically separated clients, including websites and mobile apps; and a reduction in back-end infrastructure costs. For your middle market business, centering your IT around a technology that is scalable and cost-effective will help you remain competitive as your business grows and adapts to an evolving marketplace.

When assessing the relevancy of cloud computing for your business, there are several questions you should ask:

  • Scalability. Are there peak times when large numbers of consumers or employees are accessing your software simultaneously?
  • Cost. Do you pay a lot for hosting services, including the cost of IT server software support?
  • Flexibility. Do you have client-server or multi-tier applications that you would like to convert to run as websites or as mobile apps?

When selecting a cloud computing vendor, there are an increasing number of reasonably priced options that can serve your middle market needs. The big players in this field are Amazon EC2, Google App Engine, and Microsoft Azure. Amazon has been in the game the longest and has a track record of reliability, Google App Engine is rapidly growing in popularity, and Microsoft Azure is still in the early stages but may come on strong soon. In addition to these vendors, many traditional hosting providers are also getting into the cloud game.

If you are in process of upgrading your legacy IT systems, using the cloud may ultimately make these systems more flexible for future applications. For example, your software team may be writing a replacement for a legacy PC client application or client-server system hosted on an internal office network or within dedicated hosting within a data center. In this case, your software developers should assess if they can design the back-end to run on one of the major cloud hosting providers.

If you're considering the purchase of off-the-shelf software, you should determine whether the vendor hosts their software in the cloud. Vendors of a wide array of software services are basing their latest product lines on cloud hosting. In the case of the biggest software vendors, such as Oracle or IBM, they may have built their own shared cloud hosting infrastructure in their own facilities. But in most cases, software vendors are utilizing capacity from one of the big cloud hosting providers like Amazon. This is a good thing - they keep their costs low and can often pass on the benefits from a more competitive cost for the software in comparison to traditional client software costs. From a cost perspective, this is equivalent to Salesforce.com's remarkable success in undercutting the prices for hosted customer relationship management (CRM) from competitors Siebel and Oracle in the past decade.

Many kinds of midsize businesses are already trending toward the cloud. The reduced costs and greater flexibility allow these companies to roll out applications faster to fit the needs of customers and employees. This helps profits to grow and enables nimble shifts to meet customer demand. One thing driving this trend is the popularity of mobile apps - cloud-hosting has the advantage of being an agnostic software layer that is not limited by internal office networks. Here are some examples of where the cloud can help your business.

The growth of Software as a Service (SaaS) parallels the trend in cloud hosting. Many software companies have a built-in cost structure due to their cloud hosting infrastructure that lends itself to a SaaS pricing model. The SaaS model has proved enormously popular. Among its advantages are lower costs, easier support, availability anywhere, and device independence.

In the retail segment, cloud data is allowing the disruption of previous generations of point of sale systems. A new generation of devices powered by companies like Leaf and Square allow retailers to tie sales transactions at the moment of purchase to vast databases of customer and product information stored in the cloud. Data collection can be further enhanced by cloud-supported beacons installed in stores to detect customer foot traffic and correlate with purchase information.

The need to manage smartphones also drives demand for cloud-based systems. In the days of the PC, employee software was managed by internal IT departments who directly installed on laptops and servers or used an internal private network to manage updates. To manage mobile devices that require updating, the "bring your own device" (BYOD) marketplace led by companies like Apperian offers a cloud-based infrastructure to manage installation on each phone with any necessary privacy guidelines and the remote ability to wipe data when necessary.

Backoffice financial systems are another great fit for the cloud. Intuit has shifted its focus from Quickbooks PC client software to their cloud offering, Quickbooks Online. At the same time, accounting software startups like Xero, built from the ground up for the cloud, are growing rapidly due to their advantages in flexibility, user interface, and developer APIs. Meanwhile, Salesforce.com and Oracle are fighting for their share of the financial market with cloud-based packages.

Consider the example of Jeff Bezos again. Before launching EC2, he bolstered his reputation internally at Amazon by sending a memo mandating that every department write all software to be accessible to every other department in the company via API. This resulted in a cloud-based interoperable platform that is the envy of the industry. So, why not emulate a bit of Amazon's cloud strategy and see your own business leap above the crowd?

Matt Gross is an NCMM contributor and principal and founder of Mobile First Software, a focused consultancy that helps companies with mobile strategy, product design, product management, and application development. Circle him on Google+