Cloud vs. On-Premise: Why Not Both?

Wherever supply chain folks gather, be it at a seminar, a trade show or over drinks at a networking event, the talk eventually will turn to risk. Maybe it’s shoddy work from a supplier, IP theft, climate disaster or political unrest. More and more, though, cyber security is dominating the conversation.

According to the latest Global Risks Report by the World Economic Forum, cyberattacks are perceived as one of the top 10 risks in more than 140 countries across the world, including the UK, Germany, Japan, Singapore, Switzerland, and the United States. The 2015 Fortune 500 CEO survey revealed that data security is the second biggest challenge for business leaders at large global companies (rapid pace of technological innovation was the top challenge). And, a recent report from Grant Thornton estimates the worldwide financial impact of such security breaches on business at more than $315 billion.

It’s no wonder that companies are wary of moving their data to the cloud. While it has been around for a while, it’s still a scary proposition for some folks who view it as another risk. Sure, if you’re not in the cloud, you’re looked at as “behind the times.” If you want to move to the cloud, you’re often fearful about putting critical information — like customer accounts — “up there.” And what are you going to do about your legacy applications?

There is a solution — hybrid cloud, which Gartner defines as a cloud computing service composed of some combination of private, public and community cloud services, from different providers. It’s kind of a best-of-both worlds function that allows the user to combine the best of cloud with their own data centers. A hybrid cloud service crosses isolation and provider boundaries so that it can't simply be put in one category of private, public, or community cloud service. It allows companies to extend either the capacity or the capability of a cloud service by aggregation, integration or customization with another cloud service, making it ideal for those who acknowledge the value of the cloud, but are unwilling to move all their data there.

Issues like power outages, natural disasters, viruses and malware potentially can have a large impact on business operations. Applications hosted on premise inevitably face downtime until issues are resolved. On the other hand, cloud solutions typically are hosted on multiple servers across multiple data centers, eliminating downtime risk and allowing business to function as usual.

Some systems can be in the cloud, while others remain in the company’s data centers. More and more enterprise software functionality now is becoming available in the cloud — CRM and HR for example. Source-to-Contract already is ruling the roost and a large chunk of procurement technologies now are available in the cloud.

Large companies, having invested heavily in supply chain technologies, won’t be abandoning them in favor of cloud solutions anytime soon. But there is no reason for them to wait until all functionality is available in the cloud. They could look for “bolt-on” technologies that can work with legacy applications. A great example is procure-to-pay platforms, which can take some or all of the functionality in the cloud while continuing to work the ingrained inventory and demand management functions in their local environment.

Data privacy and confidentiality are equally vulnerable on cloud or in private data centers. The fault lines lie with the people and processes. A competent, trustworthy cloud provider can bring in the required discipline and resources to take care of your data. On-premise solutions allow businesses to physically control the levels of security, however, the additional IT infrastructure requires time and money to add those additional layers. On the other hand, securing data in the cloud by dividing it into separate network segments, ensures categorization of data similar to how it would be in a local data center. This enables enterprises to benefit from the scalability, flexibility and cost benefits of the cloud, without sacrificing the advantages of effective multilayer security.

But the biggest challenge are those applications and the servers, which haven’t been touched since Cray machines ruled the earth. Enterprise software is complex and having all that business functionality available in the cloud is a pipe dream. But you don’t have to wait until everything can be moved. That’s the beauty of the hybrid cloud.