Cloud vs. Colocation – From the Customer’s Perspective

Guest Blog By Jeff Mehrmanesh, Director of IT at Ocean State Job Lot

Editor’s Note: We asked Jeff Mehrmanesh, director of IT at Ocean State Job Lot, a leading closeout retailer with 116 stores, to share his perspective on cloud versus colocation services. This is his response.

How do you determine where your data should live?
We look at the content that is up for discussion. Are we talking about data, services, communication or really anything at all that the business needs? We start with the content. Is the content, and what you are proposing to do with it, a differentiating component that is core to your business? Is it a commoditized service that really isn’t directly going to add value to the main line of your business?

So we are retailers. Email is the perfect example. It is 100 percent commoditized. I can promise you as a retail company, we aren’t going to challenge the boundaries of email services provided in the cloud. In fact, it would be to our detriment if we customized email to oblivion and did it our own way. We could just put an exchange server in a colocation rack, but we still have to run it and manage it and we’ve only gone halfway to fixing the value proposition. None of the business leaders in my company are incentivized to invest in email management beyond the operational bare minimum because we are not providing email management services as revenue. It is a completely cost-centric operational component to our business. We are not going to beat other retailers because we do email differently. It is just not possible. So in that case, it is an obvious choice to go cloud and to totally disconnect yourself from the burden of maintenance and ownership.

Moving it to the cloud helps you avoid even the temptation of over-customizing an application that doesn’t warrant it. It is just not going to separate you in your line of business. So something that is that commoditized, that standard, that disconnected from your revenue and line of business is the perfect candidate for the full cloud. Somebody who does it for direct revenue will do it better than you because the incentives will work better for them. It is just pain for you. So that is the first evaluation that we always do.

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We also look at HR and other things that are not really retail differentiators, we want to save ourselves from ourselves in those areas as well and cloud services will do that.

There are also regulation and security aspects that need to be considered with the types of content you have. Beyond hard laws and regulation, we try and stop people from tapping into “perceived” security and stability and encourage them to have a more qualitative and objective conversation. I trust people who manage storage for millions and millions of people and secure more sensitive data than ours to manage our storage. Unlike them, we do not have direct revenue incentives to dump billions of dollars into doing it well. It is going to get secondary attention and typically the flaws won’t be corrected until after the crisis moment hits.

Don’t fall into the trap of perceived security
You cannot fall into the trap of perceived security and reliability just because the data is physically close to you. If you can shake that stuff, you are going to put things like document and email storage in the cloud.

Eventually, nobody is going to store stuff on file servers locally with few exceptions that will stem from either paranoia or some specific compliance issue. The cost of storage for a cloud service provider of scale is next to nothing. No one is going to beat that internally.

When we look at things that dictate how we do merchandising and promotions or the point of sale interaction with our customers, we are more likely to use a system that we have more control over in terms of change management and feature deployment or customization.

There is no risk by putting it [your business application] on a rack in a better room
If you have a business application that is a differentiator for you and you just want to run it on hardware and control it, yeah, put it in colocation. There is no risk by putting it on a rack in a better room. It is still yours, they just have a generator that can power a hospital for weeks that you get to borrow when the power goes out. What you give up with cloud is you basically fall in line with your peers for that particular system. Everybody kind of has to run it in a similar way and you don’t have as much control over changes to the system and feature sets. Some people pretend that they are using cloud services because someone is hosting something for them. But if you can run a different version of that application than someone else in that architecture, it is not SaaS. If you have any influence over when upgrades happen, how things scale or if there are any moments where you have to wait for a piece of hardware to be added to get you scale, it is not true cloud software. It is people trying to use the buzzword.

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So when you talk about cloud services, that is the commitment you are really making. You are giving up some control but, if used in the right scenario, something where that control does not pay you back in your business. The payback on the cost of ownership and the stability of it is well worth it to give up perceived control over something you really shouldn’t be messing with anyway.

Eighty percent of the stuff that we do is definitely destined for the cloud because it is all just the operational commodity stuff
In most businesses, there are a couple core things that are really essential to business, but everything else is just a burden of running a business. Eighty percent of the stuff that we do is definitely destined for the cloud because it is all just the operational commodity stuff. It is the stuff that we just have to do to run the shop. It is not the business differentiator. Most places are like that. Most people are doing one vertical along with a couple of core things that really make them unique and give them competitive advantage. But as you grow, you acquire all this baggage. That comes with being a business of size and that is the stuff that is just a necessary burden to operate at scale. That is the stuff where the cost benefit relationship is way in favor of the cloud and service architectures.

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