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18-03-2020

Logistics IT: 5 Questions on Cloud Computing

In recent years, the migration from traditionally installed enterprise software to cloud computing has accelerated.

Logistics IT: 5 Questions on Cloud Computing

According to Bitkom's Cloud Monitor 2018, two in three German companies already use cloud computing, and 21 percent of companies plan to use cloud computing. However, the cloud-first IT strategy, which is mentioned more and more frequently, raises many questions regarding its implementation. 

What is cloud computing?

In the cloud computing model, the provider provides on-demand, web-based access to applications and IT resources they require. This means you don't buy licenses, but pay a monthly service fee based on the functional scope. The provider is responsible for everything, including servers, storage, backups, system updates, applications, databases and support. This eliminates the need for customers to purchase, deploy and manage the IT infrastructure. Cloud services are provided as software as a service (SaaS), infrastructure as a service (IaaS) or platform as a service (PaaS). 

What are the benefits of cloud-based solutions for logistics processes?

The most important advantages of cloud computing are the faster scalability of IT services, mobile access to resources and higher availability and better performance of applications. From a business management perspective, this is simply a make-or-buy decision.  

Some decision-makers in the logistics industry are still skeptical, even though mature cloud delivery models for warehouse management solutions are available now. In addition to reliability and availability, security plays a major role. For this reason, particular attention will be paid to the various cloud delivery options for these applications. There are three main options:

Public, private or on-premises?

In cloud computing, there are various ways to provide the infrastructure and services. The three main ones are the private cloud, public cloud and hybrid cloud: 

A private (or corporate) cloud is, as the name suggests, a closed platform that is used only by one company or organization. It is usually hosted at its own data center (which requires the appropriate hardware), but can also be hosted by an external data center service provider. The system is your "private" system, i.e. you can basically do the same things as with your on-premises system (especially in terms of customizing, extensions and modifications).

In the public cloud, different organizations or cloud clients share the same IT resources when using the services. For a warehouse management solution, for example, this means that you can use a pre-configured system with best practice processes, but they can only be customized to a very limited extent. On the flip side, the software receives regular updates that all customers can use.

A hybrid cloud is a combination of a private and public cloud, where each organization decides which services it wants to move to the public cloud and which ones should be hosted in the private cloud.
So, which option is right for you? As a rule of thumb: Continue to map mission-critical processes using specialized applications in a private cloud or on premises. Processes that do not provide competitive advantages can be supported by standard systems that are provided as public cloud solutions.

How much does cloud computing cost?

The procurement, support and maintenance of IT processes is a major challenge. With cloud computing, services are available on-demand, reducing costs. When considering them, however, it is essential to understand the total cost of ownership (TCO) - including direct and indirect costs. The following table provides a general overview:

An important effect when using cloud solutions: Your company can concentrate on its core business and invest its resources in new business areas or the education of its employees. Many companies spend up to 70 percent of their typical IT budgets on keeping themselves afloat, e.g. maintaining servers or implementing upgrades.

How secure are cloud solutions?

The security, reliability and availability of your data is critical whenever you run an application. With cloud computing, service providers bear many of the risks and liabilities. This is not the only reason most cloud providers have security policies in place that are far more stringent than those of many companies’ internal IT departments. When looking for the right provider, ISO/IEC 27001 (security management) and 90001 (quality management) standards should be taken into account. They are important seals of quality for cloud service providers.

Conclusion 

An enormous amount of resources can be necessary to maintain and expand the IT infrastructure that supports business processes. Ultimately, though, cloud computing is not just about data center technology. It's about optimizing business processes to make companies and employees more strategic, faster in responding to changes and more focused on their core businesses. When comparing cloud computing costs, it’s important to accurately assess the true costs of both options. It’s essential to classify your applications as either "mission-critical" or "not mission-critical." This provides a sound basis for deciding which cloud computing models are best for them.

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