A Profitero study showed Target’s online prices were 25% more expensive than Wal-Mart’s, which were just slightly more expensive than prices on Amazon.
Cloud computing offers high capacity for little investment, a boon to fast-growing e-retailers.
Today’s increased bandwidth has made the shift from retailer-owned hardware and software to pay-as-you-go cloud services possible. These cloud services, whether they are for infrastructure or software, provide their users with many of the benefits that traditional pooling of resources can provide, such as lowering risk and costs and improving performance.
But first, there are so many layers of what people are calling cloud computing that I’d like to explain my use of the terminology. Cloud computing is the most general term, meaning a style of computing provided as a service over the Internet. Those individual services are generally referred to as “cloud services” and are available on-demand.
Most of us are already familiar with the idea of software as a cloud service, such as Salesforce.com or Google Inc.’s Gmail, applications which can be used with just a web browser. In this case, computation and data storage take place on the application’s web servers, allowing us to access all our data from wherever we are.
Filling the void
Infrastructure as a service is a concept that is less well known and frequently misunderstood, leaving a void which has hindered widespread adoption. Taking advantage of these infrastructure services, however, offers benefits that can affect a retailer’s business profitability.
Utilizing infrastructure as a service lets retailers run applications or store data on servers that they do not actually have to manage. On the surface, this may sound similar to running servers in a data center, but in practice it is very different.
With a traditional local infrastructure, there are a fixed number of servers running at all times. Adding a server costs both money and time immediately, as well as in the future for maintenance. Also, retailers relying on their own server infrastructure cannot adapt rapidly to sudden spikes in traffic, which often results in them having to pay for far more capacity than they would normally need. Cloud-based infrastructure services eliminate this problem, especially for growing or enterprise e-retailers, which might have large swings in their site traffic throughout the year. Their worries about handling peak-load capacity and the scalability of their system can disappear.
A cloud-based infrastructure service, such as Amazon.com Inc.’s EC2, has the elasticity needed to respond within minutes to a spike in traffic by adding as many servers as required. When the spike is over, any excess servers will be shut off. Since these types of infrastructure services are billed by usage like a utility bill, the cost savings can be enormous when compared to having to pay for excess server capacity. For small or early-stage e-retailers who need to plan for explosive growth, this is a huge advantage. If you are planning for explosive growth, consider a large, reputable provider where capacity is not going to be an issue.
If the tangible benefits of integrating with cloud services weren’t enough, the intangibles themselves are equally important. Using cloud services for storage means that the files are not at risk of being lost. The nature of the cloud is that data can’t be harmed by potential data center disasters such as fire, hurricane or flood at the facility. That kind of loss of information could close down an e-retailer for good. Using the cloud removes the fear of a single point of failure that could result in a service outage or loss of data.
Another benefit is that certain types of security risks may be reduced when utilizing the services of large providers in the cloud. This is because those large providers, such as Amazon, Google, Yahoo and Microsoft, offer a kind of data security, based on redundancy, reliability, improved data recovery and automated upgrades, which may not have been as available to a particular business before. On other security issues such as privacy and confidentiality, they can and do devote many resources to technological advances and investigating inappropriate activities.
As plenty of instances over the years have shown, criminals are relentless in their efforts to break into secure data centers, no matter how small or large the organization that manages the data. Retailers should ask prospective providers for a written overview of their security processes (see box).
Infrastructure services in the cloud aren’t limited to just virtual servers. An example of a different kind of infrastructure service is that offered for data storage. This type of service offers virtually unlimited capacity and complete scalability for using data. Again, pricing is determined by how much data you actually store, not the capacity for what you might need in the future or only temporarily.
If there is any question about the service provider’s ability to store extensive amounts of data, ask up front. And any retailer considering such a service should also ask about data management. Is the data secure both at rest (physically secure and encrypted) as well as in transit? Ask specifics about the physical security of the data centers used by the provider and how the data is actually backed up.
The storage-access dilemma
The issue of data storage is a major concern for some e-commerce initiatives whose entire business plan revolves around the successful handling of large volumes of data.
Such was the case for online baby photo products retailer Our365 Inc., which retained Parse3 as a software development partner to address some unique and multi-layered challenges in its effort to become the first online baby photo sharing web site offering complete privacy. The key to getting in front of this relatively untapped market was devising a way to share images online by invitation only.
As the anticipation of success became a reality, a second challenge emerged-how to store huge quantities of images efficiently, economically and securely-while presenting users with a welcoming and easy-to-navigate site.
The three options for Our365 were simple: buy and maintain the storage for millions of photos themselves, lease it from a traditional data center, or find a way to use the next generation of virtually infinite storage in the cloud. All would require an upfront investment, but only one would deliver a long-term solution with more predictable future costs.