Pros and Cons of Public CloudsBy Tony Kontzer | Posted 2012-04-23 Email Print
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By Tony Kontzer
It took Schaeffer Manufacturing 168 years to become a $60 million company. Then, over the past four years, its revenue shot up to $100 million. While pretty much everything else about Schaeffer had remained the same—save increasing the 180-employee headcount by a single person—one change may have been the most important enabler of the company's biggest-ever growth spurt: a move to cloud computing.
By 2007, the company's technology needs were far outstripping the capabilities of the home-grown order entry system it had long depended on to process and fulfill orders. The AS/400-based system was bursting at the seams, and St. Louis-based Schaeffer—whose industrial lubricants once greased the axles of covered wagons heading West to join the California Gold Rush—was scrambling to come up with programming tweaks that would keep it running. But it was clear to Will Gregerson, the company's CFO and de facto CIO, that a new solution was in order.
After evaluating several alternatives, Gregerson settled on NetSuite and its suite of software-as-a-service (SaaS) business applications, opting to move Schaeffer's order entry and financial systems into the public cloud. The decision proved to be a wise one. Since going live on NetSuite in 2008, Gregerson says Schaeffer has seen notable improvements in the efficiency of its order fulfillment processes.
For instance, because salespeople could suddenly submit orders electronically, removing the need to enter them manually, the company's two-person order entry team increased the number of orders they could process each day from 75 to 200. And the time it took for a processed order to be loaded onto a truck was shortened from an average of three days to one-and-a-half, with half of all orders on a truck ready for delivery within 24 hours.
Gregerson also points to numerous IT cost savings, in addition to the unknown sum the company would have spent on hardware had it chosen to keep things in-house. Both of the IT employees that reported to him have since left the company and he hasn't had to replace them, saving at least $100,000 annually. He estimates if the company had migrated to a new in-house technology platform, it would have had to spend at least another $200,000 annually for additional IT staff to keep the company competitive.
All that, and the company also filled its long-standing need for a disaster recovery solution, which had previously consisted of an extra, dormant AS/400. The new backup plan? "Go into the nearest Starbucks, plug in and go," says Gregerson.