Making Sense of Terminology

One of the biggest challenges for business leaders to get their heads around when dealing with IT issues is terminology. Different people often use the same words to mean different things. And when it comes to marketing jargon, there is no way to settle the issue. There are more definitions for cloud computing than one can keep track of.

One confusing buzz word is solutions. “Complete solutions ” means nothing. Is the provider really talking about handling everything from power gene ration, bandwidth, hardware, software, maintenance and everything else required? Probably not.

Almost all providers fall into one of the following three broad categories. The main differentiators are the amount of equipment a firm owns and the amount of time required to manage IT.

1. Software-as-a-service (SaaS)

  • Equipment ownership: Medium (end-user devices and local network)
  • IT management effort: Medium

Most people in the general public are familiar with SaaS, even if they do not realize it. Gmail, Facebook, LinkedIn and Microsoft 365 are commonly used SaaS products. Most organizations also utilize industry specific web based software to handle document generation, case management, time and billing, data backup and other crucial business processes.

In a SaaS environment, which is generally used by smaller firms, the organization is ultimately responsible for the management of the local IT setup (including end user devices and the local network) using the software provide r’s server infrastructure. The firm must also maintain local hardware and operating systems on individual laptops, desktops and mobile devices. This includes the necessary updates to operating systems, spam filters and anti-virus.

2. Managed service provider (MSP )

  • Equipment ownership: High (servers, end-user devices and local network)
  • IT management effort: Low

When a small or medium enterprise engages a managed service provider, the organization purchases the infrastructure that will power business activity. The capital expense frequently includes such items as servers, storage, routers and other hardware and software necessities. The MSP handles the management of the hardware infrastructure—either remotely at a datacenter, or locally. Depending on the contract, a business may still be required to maintain service and support for software, local hardware, and mobile devices.

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3. IT-as-a-service (I TaaS)

  • Equipment ownership: Low (local network only)
  • IT management effort: Low

The third option is for a business to outsource its entire IT process to be built, owned and managed by a third party provider that absorbs all capital expenses and a preponderance of the risk. An ITaaS vendor serves as the single point of contact for all things IT, and can reduce a business’s total cost of ownership by leveraging economies of scale. The organization can then concentrate effort on revenue generating activity rather than staying abreast of the rapid pace of technology and corresponding regulatory change.

There is a fourth option, which entails the most risk and expense. Some larger firms maintain most aspects of their IT function in-house, with the obvious exceptions of such large scale public items as the internet connection and power generation. A quick web search will reveal that the highest number of data breaches (in government, banks, retail, education, not or profits, legal practices and others) have occurred at organizations that maintain proprietary IT systems. There is only so much capital for upgrades and world-class technology talent to go around, and those firms that have made do with less than state-of-the-art systems have paid a heavy price in both financial and intangible costs.

As small and medium enterprises examine the evolving landscape, from the security and audit requirements of their clients to multi-jurisdictional regulation and compliance, they must determine what level of managerial effort they wish to dedicate to IT, how much capital they wish to invest in technology, and how much risk they are willing to take on. When expense, risk, and effort around technology are examined holistically, the right strategy based on the organization’s needs is more likely to be a prerequisite for growth if not survival.
flickr photo by Moyan Brenn shared under a Creative Commons (BY) license
flickr photo by John Morrill shared under a Creative Commons (BY) license

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  • Vadim Vladimirskiy

    A creative technologist with a mind for business, Vadim Vladimirskiy is the head honcho at Adar. Vadim’s the brains behind the evolution of Nerdio, bringing Streaming IT to the masses – that is, small and medium sized organizations. When he’s not continually pushing the IT envelope, Vadim’s at home with his loving wife and four boisterous kids.

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