Cloud vs. On-Premises IT

Is “the cloud” a new solution for renting IT services, or is it just a trendy concept depicted as blue skies with some sparse cotton-like puffs?

Whether your first experience with leasing computing resources was based on Application Service Providers or one of its predecessors, such as the time-sharing of mainframe systems, the concept of paying another party for these services has been around for more than fifty years. Outsourcing, renting, time-sharing, or otherwise paying for the computing resources of an external entity isn’t new by any means.

What has changed dramatically over the years is the resources available and the target market for these services. While the time-sharing of IBM mainframes was largely targeted at college students (dare we call them geeks?), today’s cloud providers have been focused on the small business market. The exact definition of that market varies, but typically the sweet spot for cloud providers is fewer than fifty or sixty employees.

JD Helms, president of nGenx, a cloud desktop solutions provider, agrees that his company has achieved the most success selling services to businesses with fewer than sixty employees. In December 2014, nGenx and IndependenceIT partnered not just to offer applications and desktops to users, but to enable a full Platform as a Service (PaaS) solution.

Last week, it was announced that GoldMine had selected nGenx/IndependenceIT as the provider for its cloud offering, in a co-branding relationship. Like any CRM solution, and unlike the traditional fast-provisioning virtual desktop, GoldMine does require considerable setup. As a result, JD now foresees that the average size of businesses that outsource their IT operations will grow to somewhere from 100 to 300 employees.

There is no doubt that Microsoft hit a home run with its Office 365 cloud offering. In June 2011, a cultural change was started with the concept of renting Office applications rather than purchasing them. Office 365 now includes an à la carte menu offering everything from Office apps to Microsoft CRM to email to Skype for Business for up to 300 users. The Radicati Group recently reported that “cloud-based business mailboxes offered through Microsoft Office 365 and Microsoft Hosting Partners today account for 20% of worldwide Microsoft Exchange Server mailboxes.” However, that still leaves 80% of the Exchange mailboxes hosted on-premises.

Citrix and VMware are both talking up their cloud offerings, and the market is cautiously optimistic as to what business problems they will address, as well as what exactly the final products will look like. Citrix Workspace Cloud was shown at Synergy, and customers can sign up for a pre-release view. Similarly, VMware has Project Enzo in the works.

No doubt, many service providers of all types—hosting, desktops, applications, and even mainframes—have attempted to tackle the packaging and delivery of leased computing services in many ways over the years. Today, the costs for hardware, data center space, highly technical professionals, support staff, salespeople, monitoring, and other items can exceed business projections. Consequently, some providers have fallen by the wayside because offering and maintaining these services can be much more difficult and expensive than originally anticipated.

As a result of those providers that have achieved success in the market based on up to 300 employees, JD Helms of nGenx predicts that the market will flush itself in the next eighteen to twenty-four months, and that only the strong will survive. That seems quite logical based on the events of the past several years.

What is not getting massive market attention is that most of the virtualization market comprising medium and large enterprises uses on-premises solutions and is self-maintained. Many companies of this size may partake of a SaaS app or two, but to them, the cloud is largely blue skies with some sparse cotton-like puffs.

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