More companies reach for the clouds
Form of computing gains ground in county, but it’s not for everyone
Tuesday, October 19, 2010
As software companies in Clark County expand, many are looking to the clouds.
Cloud computing — when companies deliver their services through the Web instead of requiring customers to install software on a computer — is so successful that the Washington Department of Commerce has designated it as one of four technology areas of competitive advantage for the state.
Storing software and data on servers that customers access online provides cost savings for companies and their clients. It also makes it easier to store and share data, and lessens the need for computer maintenance and software updates. That’s why many software companies are jumping on board with cloud computing. State officials expect the trend will contribute significantly to economic development in the state’s high-tech hubs, including Southwest Washington.
“The more that small software companies decide to deliver their applications online the more they’re contributing to the expansion of the cloud and the more Washington stands to gain because we have a significant presence in the ecosystem of cloud computing at a national and global level,” said Karl da Gama Campos, who leads business development in the technology industry for the state Department of Commerce.
But the much-hyped technology is not for everyone, as Vancouver-based iSupport has found. Even as other local software makers have moved their services to the cloud, iSupport is staying grounded, in order to remain profitable.
Two take plunge
Vancouver companies Convergence and Office Ally have both started offering cloud-based services in the past two years to help accommodate their growth. They’re using a blended model, offering some services the old-fashioned way via DVDs or CD-ROMs, but also making some of their services available online.
Office Ally sells software that helps doctors send patients’ bills or claims to their insurance providers through an online service. Instead of downloading the data, it all lives in the cloud and is accessed electronically by the doctors or the insurers.
The service is free to doctors, who upload patient billing information. Insurance companies pay to access the electronic data because it cuts down on the cost of processing paper filings.
Operating from the cloud also allows Office Ally to more easily scale its processing to the size of data filings. That’s important to the company, which has seen 20 to 30 percent growth per year for the past five years, said Brian O’Neill, President and CEO of Office Ally.
“Expansion is so simple, we could double capacity,” O’Neill said.
Convergence, which sells 3-D safety training videos and the software to manage training compliance, also offers its clients the option of traditional installed software or accessing its services over the Internet. Cloud computing saves the company money by cutting the hardware and maintenance costs of running its own servers. It’s also easier to scale up as the company grows — they’re on pace for 25 percent growth this year — and it’s easier for customers to access the programs.
“It works well for us as a supplier, and we certainly have customers that like that option,” said Randy Kohltfarber, a product director at Convergence. “It’s a growing segment of our business, too.”
Cloud computing doesn’t always save money, especially for large or well-established companies that have invested heavily in installed software, said David Mitchell Smith, an analyst with technology research firm Gartner.
“In fact it can drive cost up if it is used simply to replace on-premises work with an exact duplicate of that work in the cloud. Knowing when to redesign or when to avoid using cost savings as a justification for cloud computing is critical,” according to a recent Gartner report.
Vancouver-based iSupport, known until recently as GWI Software, considered moving to the cloud after falling sales forced the company to reduce its work force by ten employees, to 25. The 18-year-old company develops software to help large corporations such as IBM and SAIC manage technical support. Its sales climb when its customers hire new workers, and that business fell flat during the recession, said founder Daren Nelson.
The company was intrigued by the potential benefits of offering its software as a Web service.
But after careful consideration, Nelson realized that switching to the cloud would mean starting from scratch. iSupport has already sunk hundreds of thousands of hours of coding and millions of dollars into its software. And its business model is based around its ability to charge a large lump sum for its software. On a cloud-based model, the company would instead be charging $9 to $25 per month per user.
“The volume of users we’d have to sign up to generate enough revenue to be profitable, I can’t reach enough people to sell it to them,” Nelson said.
That’s why, now that business is picking up again, iSupport is taking a pass on the new trend for now.
Someday in the next few years it may make sense for iSupport to add cloud-hosted offerings alongside its traditional software, Nelson said. But the business case isn’t there yet.
“Will software as a service replace installed enterprise software? Sure, maybe someday years from now,” Nelson said, “but probably not for the life of this company in 10 to 20 years out.”