Cloud computing has become commonplace in a wide range of technical fields. How does it affect the supply chain, and what does it mean for your business?

Cloud computing is a method of providing a type of software, platform or computing infrastructure as a service disseminated over a network. The actual hardware and programs are maintained at a centralized location or in a series of hubs from which users, such as businesses or employees, can access the needed resources at a distance. Numerous computing concepts, including hosting third-party applications, accessing software through a Web browser or providing scalable business processes over the Internet are under the cloud computing umbrella.

“In essence, this is distributed computing. An application is built using the resource from multiple services potentially from multiple locations. At this point, typically you still need to know the endpoint to access the services rather than having the cloud provide you available resources,” Cloud Computing Journal explains.

Although there is a system of computers, servers and technicians that forms the operational background for a cloud computing process, the end user only deals with the cloud itself. Aside from specific business functions, day-to-day cloud computing is represented in Gmail chatting, uploading photos or videos online and similar tasks.

“Cloud computing really is accessing resources and services needed to perform functions with dynamically changing needs. An application or service developer requests access from the cloud rather than a specific endpoint or named resource,” Cloud Computing Journal notes.

According to research from Gartner, a consulting and analysis firm, global cloud computing revenue is estimated to increase by 21.3 percent in 2009, growing to $56.3 billion from the 2008 total of $46.4 billion. Gartner also predicts the worldwide cloud computing market will reach $150.1 billion by 2013.

Business processes accounted for 83 percent of the cloud services market in 2008 and are expected to grow by 19.8 percent through 2009. Increases in cloud-based advertising, software-as-a-service (SaaS) offerings and infrastructure systems are expected to drive the remainder of the forecast growth.

“While that growth for many of these cloud services will be relatively modest through the next two years, we expect it to accelerate as these approaches prove themselves and then benefit from increased spending levels as macroeconomic conditions improve,” Ben Pring, vice president of research for Gartner, said.

When implementing cloud computing technology, an organization typically purchases scalable IT resources from an external source and accesses them over the Internet or a secure network. This practice has proven popular among businesses that are able to offset the cost of outside services by reducing the expense of in-house software, processing and storage.

“Businesses are starting to deploy their services through the cloud on a wider scale due to a number of key benefits it brings, such as harnessing super-computer levels of power and making use of resources around the world from wherever they are more readily available and on a more cost efficient basis,” Mark Webber, a partner at Osborne Clarke law firm, told Lloyd’s insurance network.

According to Cloud Computing Journal, Microsoft, IBM, Google and AT&T are just a few of the major companies that have invested in cloud computing technology and adopted it for themselves.

“You get convenience. You don’t have to deal with servers, data storage or big expensive computers. The laptop accesses everything. You don’t have to worry about backup or security; it’s all being handled by the company that manages the cloud,” Andreas Bechtolsheim, the co-founder of Sun Microsystems and chief development officer for Arista Networks, said in a recent interview with the Los Angeles Times.

But cloud computing is not the exclusive domain of tech companies, as many manufacturers and supply specialists have incorporated the technology to deal with the increased complexity of the global supply chain.

“The supply chain world is experiencing a major structural shift as more companies rely on a community of partners worldwide to carry out the complex dance of designing, manufacturing, and distributing products,” Supply Chain Management Review reports. “Today, the majority of supply chain activity already takes place in a virtual, ‘cloud-like’ environment…”

In many cases, cloud computing complements the increasing abstraction and virtualization of international distribution webs.

“Intercompany supply chain communication, collaboration, transactions, and movement of goods are like the cloud itself: distributed, shared, in constant flux. Like a community of supply chain partners, the cloud’s shape and size changes frequently and dynamically with the fluid business environment it supports,” the Review adds.

A major advantage of cloud computing in the supply chain involves transparency among multi-stage processes, which allows partners to better coordinate their efforts.

“[A] particular area of the supply chain in which the public cloud is believed to have much potential, particularly in a globalised world, is that of boosting visibility in those processes where collaboration with and between third-parties such as suppliers and partners is key,” Computer Weekly asserts.

Cloud computing may allow suppliers to provide the status of products and parts being shipped, enabling a company and its partners to analyze the data and determine the specific issues that need to be addressed before they become supply chain problems.

However, citing the supply chain’s slow acceptance of enterprise resource planning (ERP), Computer Weekly notes that cloud computing services “are unlikely to be used to support non-commodity, core business processes for at least another three years.”

In addition, there are continued fears of security and privacy threats in cloud computing. Some believe that as more data shifts toward cloud computing networks, the risk of disruptions or stolen information rises accordingly.

Evaluating cybercrime threats for the near-future, assistant U.S. attorney Matthew Parrella said, “I’m thinking the attack is going to be on cloud computing centers,” CNET News reports.

It remains to be seen whether cloud computing will present a serious risk to data security. In the meantime, the technology continues to spread throughout the commercial and industrial world, with some of its biggest gains in supply chain management.

Resources

What is Cloud Computing?
by Kevin Hartig
Cloud Computing Journal, April 15, 2009

Gartner Says Worldwide Cloud Services Revenue Will Grow 21.3 Percent in 2009
Gartner, March 26, 2009

Does Cloud Computing Equal Sky High Risks?
Lloyd’s, July 15, 2009

An A to Z of Cloud Computing Companies in 2009
by Jeremy Geelan
Cloud Computing Journal, July 21, 2009

Internet Users Heavily into Cloud Computing, Most Unknowingly
by Alex Pham
Los Angeles Times, July 10, 2009

In the Cloud: Supply Chain Management for Outsourced Manufacturing
by Amar Singh
Supply Chain Management Review, July 23, 2009

Cloud Computing: The Answer to Supply Chain Woes
by Cath Jennings
Computer Weekly, April 15, 2009

Prosecutor: Cloud Computing is Security’s Frontier
by Elinor Mills
CNET News, July 10, 2009