At the Dreamforce conference last December, Salesforce.com released the White Paper “5 Reasons CIOs are Adopting Cloud Computing in 2010.”  It’s a great read, so I decided to sparse the article together with how I feel it applies to hospitality CRM and related technologies.

For years, companies such as eBay and Google have used cloud computing to bring easy-to-use services to consumers.  Salesforce.com has been a pioneer in bringing cloud-based applications to users as well. 

Cloud computing is transforming the way IT departments deploy custom applications during lean times.  By offering a fundamentally faster, less risky, and more cost-effective alternative to on-premises applications, cloud computing will forever change the economics of hospitality information technology.  Even though we are experiencing one of the most difficult economic situations in 50 years, CIOs must continue to deliver additional business value in the face of consistent budget cuts.  The old models increase complexity and generate additional cost.  IT departments of all sizes are now looking to the cloud to break the cycle.  I find this to be especially true with hospitality IT departments worldwide, as they are reevaluating their strategies and looking for innovative ways to create competitive advantages.  CIOs are redefining their value to the enterprise by looking for new, cost-effective alternatives for application enhancement and development, including cloud computing.

IT projects have always been judged by three financial criteria: initial capital expense, ongoing operating costs, and time to value.  In 2010, while planning for gradual recovery, IT projects will continue to be evaluated rigorously by this criteria. 

Many hospitality organizations have already made, or are in the process of shifting to cloud-based solutions.  However, for those that are still on the fence, here are five reasons why companies are betting that cloud computing is the right technology strategy for 2010 and beyond:

1. Delivers faster time to value
2. Requires no up-front capital expense
3. Minimizes operational costs
4. Requires fewer technical resources
5. Simplifies integration
   
   

1.  Delivers faster time to value

Many organizations are delaying projects that won’t deliver a return on investment within weeks.  With cloud computing, companies can speed up time to value.  Cloud computing streamlines all stages of the application development cycle – requirements gathering, design, coding, testing, application delivery, and training – with a fully integrated development environment.  This environment provides complete, prebuilt applications and project management services.  Instead of spending weeks on the project and administrative setup for each new application (including authentication, globalization, workflow, mobile device support, and much more), developers can get to work immediately on value-added activities such as defining the data model or business logic and creating the user experience.  For example, once Libra OnDemand applications are built, they are automatically supported by the Force.com platform with world-class security, sub-second performance, full disaster recovery, and instant access to multiple production-quality environments for development, training, and testing.

One of the most overlooked advantages of cloud-based applications is how much faster and less expensive it is to scale to multiple applications.  Because cloud development is based on subscription pricing, there are no additional costs to deploy additional applications to existing users.  And because all applications are built on the same platform, pre-existing application services such as authentication, data objects, UI layouts, and logic can be reused across multiple applications.  This approach results in economies of scale in which each additional application deployed decreases the overall costs of the applications.  This model is the inverse of on-premises development, in which each additional application increases costs because it requires additional infrastructure and resources over its lifetime.  To take advantage of the cloud-based approach, Libra OnDemand now builds and deploys its entire application portfolio on the Force.com platform.

2.  Requires no up-front capital expense

Cloud computing platforms are based on subscription pricing.  This approach is a major departure from the traditional IT procurement process.  With subscription-based pricing, no capital expenses are required to kick off projects.  Companies can start small, with virtually no up-front costs, and instantly scale to meet broader business needs.  The ability to pay-as-you-go is expensed as a service or operating expense rather than a capital expense.  This difference makes it a compelling option for CFOs who are intensely focused on financial predictability and project accountability.

The pay-as-you-go model minimizes both project and financial risk because organizations can scale the project based on business results and also ensure that vendors are held accountable over the project’s lifetime.  There are no large up-front investments that lock a project into a specific technology.  That means CFOs can account for the business value generated by the service during the same financial period as costs are incurred.   In other words, cloud computing provides a better way for IT departments and CFOs to match investments in a project with business value or return.

Because there is little risk and no up-front costs, cloud computing helps hospitality companies attain better technology despite reduced capital budgets.  And because charges from technology vendors usually go in the column of business expenses rather than capital expenses, hotels can invest in cloud-based projects even when IT budgets are slashed.

3.  Minimizes operational costs

With cloud computing, there is no software or hardware to purchase initially.  Perhaps even more important, cloud computing reduces overall application maintenance and support substantially over time.  With cloud computing, multiple environments are immediately available to developers, testers, trainers, and end users.  And all environments are vertically integrated with ready-to-use services for project managers and administrators.  These services include user administration, security, globalization, and centralized governance, all of which help to reduce project time and cost.

Once the application is built and deployed, the vendor manages the burden of operational maintenance.  Performance tuning, patches, and upgrades are delivered as part of the service, with minimal demands on the property’s IT team.  As a result, your IT team can focus on delivering business value instead of keeping busy with standard maintenance and administration tasks.

Such operational efficiencies are the result of a true multitenant architecture.  Multitenancy is a key Salesforce.com innovation that’s at the heart of the Force.com platform.  Multitenancy makes possible a pace of innovation and collaboration that’s simply not achievable with on-premises platforms.  For example, instead of providing an upgrade every other year, at considerable expense to the customer, Salesforce.com delivers three or four major upgrades every year that cost customers nothing.  Every time a major innovation is released, every customer instantly benefits.

Multitenant applications are designed so that users share the application’s physical instance and version.  Individual “deployments” of those applications occupy virtual partitions rather than separate physical hardware and software stacks.  Multitenant business applications built on the Force.com platform, which run on the same proven platform as the packaged applications from Salesforce.com and its ISV partners (such as Libra OnDemand), benefit from the highest levels of security and performance.

The multitenant architecture makes possible the quick deployment, low risk, and rapid innovation for which Salesforce.com is known.  The Force.com platform passes on this architecture’s operational efficiencies to customers, including automatic upgrades and lower costs.

4.  Requires fewer technical resources

Because the concepts and technologies used to develop Force.com applications are similar to those used for on-premises development, developers trained in Java, .NET, or PLSQL can ramp up in just a few days.  And because performance tuning and maintenance are handled by the vendor, resources that would be required to support the applications are freed up for other projects, improving the overall productivity of the IT department.

Force.com provides a more agile development environment, based on configurable metadata, in which changes can be made, tested, and deployed in a fraction of the time of on-premises platforms.  One of the advantages of this environment is that, once applications are built, they can be rapidly changed to adapt to shifting market demands.

5.  Simplifies integration

Gartner estimates that up to 35 percent of the implementation costs associated with on-premises application development is for integration.  In comparison, cloud computing makes integration faster, easier, and less risky than ever before.  In fact, more than half of all transactions supported by the Force.com platform today are Web service integration calls to the Salesforce.com API.

By making it easier to integrate and extend legacy environments, and with built-in toolsets for connecting to other cloud services including Amazon, Google, and Facebook, Force.com delivers a new level of integration across the enterprise.  To ensure customers can integrate to any endpoint, Force.com provides comprehensive technologies that offer maximum flexibility while dramatically reducing the integration effort.  Force.com has proven integrations with every major enterprise application and middleware solution in the market, including SAP, Oracle, Microsoft, IBM, Informatica, and many more.  Because the Force.com API is based on a multitenant architecture, integrations no longer “break” during upgrades, require intricate technology dependencies, or lead to vendor lock-in.

With Force.com, the multitenant model makes an ecosystem of partner applications available on Salesforce.com’s AppExchange.  The AppExchange is a marketplace similar to the App Store for the iPhone.  Here, customers can find, test drive, and install solutions from major applications business categories, including ERP, SCM, HR, IT, Finance, and many others with just a few clicks.  The applications are automatically installed and integrated in customer environments and instantly deployed to users, either as part of a custom application (such as Libra OnDemand) or on their own.  The AppExchange connects customers with thousands of commercial application developers who are constantly building new and innovative solutions for the Force.com platform.  To date, more than 800 applications and components are available on the AppExchange.  Recently, Libra OnDemand was named one of the “Force.com Top 40” applications on the AppExchange.

Summary

In today’s economic climate, with limited budgets and a highly dynamic market, it is critical to be able to refocus an organization and its systems quickly, with minimal resources.  With cloud computing, hotels can extend the life of their existing systems with new innovations, improve time to market of new systems, and create competitive advantages faster than ever.  If you are considering cloud-based technologies, the time is now to make your move.