May 27, 2010, 12:31 PM

Cloudy days ahead

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For instance, Google App Engine offers an Image Manipulation tool that lets users resize, crop, rotate and flip images. Another application is for sending e-mail.

Some of these applications can be quite inexpensive, particularly because each Google App Engine service offers a certain amount of computing power for free before beginning to charge. For example, after the free quota is reached for e-mail, Google charges an additional 1 cent per 100 e-mails sent.

“Any business can set up their entire e-mail infrastructure in a few clicks with these programs. You no longer have to worry about downloading viruses, installing e-mail servers or allocating I.T. resources towards e-mail,” Shah says.

For all the power and flexibility cloud computing promises, some retailers are leery of depending on an Internet connection to access vital data. Tony Burton, CEO of Wolfmont LLC, which operates The Digital Bookshop, an online retailer of print, e- and audiobooks, is hesitant to use cloud technology for fear an interruption of his Internet service could leave him in the lurch.

“As a small business in a rural area, Internet service is sometimes sporadic,” Burton says.

Disruptions do occur, and last summer such an outage affected e-retailers using the software-as-a-service-based site search program from SLI Systems. The vendor’s system went down for 37 minutes when SLI’s domain name hosting facility experienced a temporary failure of all its servers. SLI says it has since increased its number of domain name hosts to prevent future interruptions.

E-retailer Jelly Belly, which has worked with SLI for two years, took the outage in stride.

“We received a letter but honestly had no idea that we had experienced an outage so it appears to have had little impact on us,” says e-commerce marketing manager Jason Marrone. “I was relieved to find that SLI was monitoring the service closely and happy that they were proactive in informing us. Like any technology service, whether internally hosted or in the cloud, you are going to have down time.”

Indeed, Amazon has experienced outages. Customers trying to access e-commerce sites using Amazon’s EC2 services for computing power were shut out for at least a half hour in the peak month of December. The cause was a denial-of-service attack on Neustar Inc., a domain name infrastructure provider to Amazon. Hackers sent many requests to connect to web sites, overloading the Neustar system and causing it to function sporadically.

Amazon says it did not compensate EC2 customers after the attack. “Amazon Web Services provides availability service level agreements of up to 99.95% on services such as Amazon EC2,” an Amazon spokeswoman says. “In addition, we provide a Service Health Dashboard that shows the current operational status of each of our services in real time, so that our uptime and performance are fully transparent.”

Getting a guarantee
Such incidents make clear that retailers need to get guarantees before relying on Internet-based services. Brian Kilcourse, managing partner at retail consulting firm RSR Research, suggests retailers insist on detailed service-level agreements with cloud vendors. And because cloud-based services can vary widely, retailers need to develop expectations for each service they use.

“You may only be paying for a tiny bit of logic and data, such as fetch me the price, calculate tax or look for promotions, so you have to play really close attention to your requirements for each individual service,” he says.

Kilcourse also notes that taking advantage of cloud-based services from companies like Google and Amazon that grew up in the Internet era may be more difficult for larger multichannel merchants that often operate separate systems for stores, catalogs and the web.

“Unfortunately these types of retailers have systems that weren’t built for this kind of capability,” Kilcourse says. “Now they are staring at a fairly substantial re-focusing to become channel-agnostic to take advantage of the cloud. A lot of retailers are trying to think that one through.”

For example, it could take significant time and effort for a retailer operating a store-based inventory system separate from its web inventory system to implement a software-as-a-service inventory-tracking program that would encompass both web and stores, even though the new system might ultimately pay dividends. Kilcourse says retailers may spend as much revamping their organizational structure as paying for the new technology.

“Retailers are in this weird conundrum where they know moving to the cloud will lower their overall cost structure and that it requires very little capital, but they are still scared to make the change,” he says.

That’s just one potential stormy issue retailers must consider along with the reliability of cloud-based services. Those concerns are putting a damper on some retailers’ plans for moving to the cloud, despite the technology’s promise of flexibility and savings.

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