Just when you thought you understood hosted solutions and software-as-a-service, the technology industry has moved on to cloud computing. Over the last two years there have been all kinds of announcements of cloud computing companies with a wide variety of capabilities, the most notable being Apple's announcement in May of its iCloud offering.

So, what is all this talk of "applications in the cloud?" What is it and, more importantly, what does it mean to brokers and our HR clients?

What's in a name?

In the simplest terms cloud computing is the delivery of services over the Internet. The term "cloud" most likely is derived from the widespread use in the past of cloud images in telephone network diagrams and, more recently, representations of the Internet in connectivity illustrations.

A commonly used analogy for cloud computing is electric utilities - with electricity, as with cloud computing, we don't necessarily know where the power is generated, how it flows through the grid to our homes and offices, and that we only pay for what we use.

Have you ever wondered where Amazon or Apple, or any Internet vendor for that matter, runs their software or stores your information? And do we really know how all of that data ends up in our browsers or on our smartphones?

It used to be that we had our applications loaded on our PC or laptop. A word processor, spreadsheet, or address book, for example, were software applications that were installed and ran on our own computer and stored on our hard drives. Even if your computer was connected to a LAN or the Internet, most of the processing was done on your local, physical device. This has all changed.


Today's technology

In the consumer world we now have smartphones, pad devices and computers with browsers that no longer have the applications or data stored locally. These are stored and accessed remotely. Availability of cost-effective broadband combined with free or low-cost applications has made the use of Web email, imaging sites and social networking nearly universal for personal use.

Businesses have benefited from the growth in cloud computing too but the drivers are almost purely economic, as one would expect.

Virtually every business has an IT organization that, in the past, had no option but to support all of the computing needs of the business with internally deployed computers and servers.

Cloud computing has changed that model. Now both hardware infrastructure and software applications are available in the cloud, thereby easing the burden on IT personnel to deploy and maintain the systems needed to support their internal customers.

IT departments have switched much of their technology expense from capital expenditures to operational expenditures. Moreover, they have become as much vendor managers as technology managers.

There is general agreement that cloud computing incorporates three layers or categories of services: software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS).

These services can be public (available to all) or private (available to a selected group like an employer and its employees). The distinction between the categories has become blurred (cloudy, if you will) and each has a high level of complexity, but a good, basic definition of each is:


SaaS model

In the SaaS model vendors will provide hosted services for clients that include all of the necessary hardware, software and data storage. All that is needed to operate the software is an Internet browser.


Iaas model

The IaaS model provides virtual servers and storage. Because the systems are virtual, a business can expand dynamically based on the needs of the moment. Additional capacity can be brought online in real-time.


Cost model

It is the cost model of cloud computing that is driving the changing economics of technology for businesses.

First, there is no hardware to buy and deploy. Second, there is no software to license and deploy. A company pays for use of the software and hardware on a subscription basis, often based on the number of users. For many applications users is equivalent to employees.

This is has become the standard pricing model for hosted or SaaS solutions.


Cloud computing price changes

The promise of cloud computing changes this pricing model, taking it to the next, logical level where pricing is based on consumption - pay only for what you use. Like electric, gas or water utilities, a business will pay only for the hardware and software utilized.

The cloud automatically accommodates fluctuations in demand, thus eliminating the need for IT to continually plan for infrastructure and software upgrades.

Gone are the days of waiting for those new servers or additional software licenses.

We are already seeing this model play out in the consumer world - more storage or more minutes typically cost more. Unlimited data and usage is not a sustainable business model.

Cloud options for businesses are becoming more prevalent. And the industry is dealing with issues of privacy, security and compliance, which, for the moment, are being solved with hybrid solutions.

The bottom line is that the promise of computing resources based on consumption is the next step in the evolution of enterprise technology. It's going to get cloudy, but the innovation that results will benefit us all.

Reach Lamb of Benergy Interworks at A.D.A.M. Inc. at jlamb@adamcorp.com.



Web, email now outdated in health e-communication

Email and websites are becoming outdated when communicating with health plan participants as social media moves to the forefront, said one industry expert at the annual International Foundation of Employee Benefit Plans Employee Benefits Conference in New Orleans.

If providers fail to use sites such as Facebook or Twitter they risk losing engagement with the 'Net generation,' or those born between 1977-1997, says Kevin L. Wolfe, vice president in The Segal Company's Chicago office.

Speaking at the 57th annual conference in late October, he said: "Think about this . . . we have this young group of people moving through the workforce and they've grown up bathed in bits and bytes," including broadband Internet access, iPods and iPhones.

The Net generation processes information so differently compared to those who were born before them, says Wolfe, who is in Segal's administration and technology consulting practice. "They want to customize things, they are not used to going to some website, they are used going somewhere and making it custom."

By using social media to engage them in health plans, it becomes more than pushing information; it's a dialogue that the Net generation relies on, he says, "an exchange between like-minded individuals."

Yet, Wolfe warns there are challenges, including legal ones, such as plan members sharing protected health information on the social networking sites. "Don't forget the information stays out there forever," he says. "Even if you delete a Facebook post, the information is still there."

But most important, he says, is getting the pages up. "If we don't start to adjust our strategic approach to electronic communication with participants . . . I believe we won't engage them," he says. "I believe we won't engage them by using the old methods we use now, email, websites, etc." -Brian M. Kalish

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