In 1998, Bill Pantely began looking into the possibility of outsourcing the data center for Spancrete. But network speeds were too slow, and the cost of hardware too high, so the director of IT for the Waukesha-based precast concrete and equipment manufacturing company sat tight.

Now, 12 years later, Pantely and Spancrete are making the switch to a full-scale cloud computing model that outsources the company’s data center to Milwaukee-based Red Anvil, which will host the servers and take care of  IT functions that Spancrete lacked the necessary human resources to perform at a high level.

“We are at that point now — speeds are higher, and costs are coming down on the wide area networks,” Pantely says. “As I looked at the hardware, it made a lot of sense to outsource the data center. We don’t have the resources that you need — we need all of these different people. We were behind on updating our Microsoft networking software, and a lot of our hardware and smaller applications have suffered.”

A good example was the company’s Blackberry server, which was installed five years ago, but was never upgraded.

“We just don’t have the time,” says Pantely, whose company employs close to 350 people. “It became a case of, ‘If it ain’t broke, then don’t do the upgrade.’”

In the cloud service Red Anvil provides, customers don’t have to think about hardware, as it takes over all of the processing, memory, storage and network functions.

“We can take all of a company’s operating systems and the hardware, and map it to our cloud service and provide you with an IT environment,” says Alec Ellsworth, executive vice president for Red Anvil. “Then you can focus on IT becoming a strategic area for the business’s benefit, and not a cost center.”

This is part of a gradual shift in technology from capitalizing stacks of equipment and software, to one where an IT environment is hosted at a data center, Ellsworth says.

“By definition, we are driving them to focus on applications,” he says. “So, in some ways, we are pushing the culture change by how we get people to think about their environment. The IT culture is shifting from a kingdom of equipment that serves all of the customers in the company to being strategic.”

Breaking down the IT silo

At mid-size companies of 50 or more employees, there tends to be a disconnect between the CFO and the IT department, Ellsworth says. Often when company leadership asks for increased capability, the typical IT response is: If you want to do that, we need more money.

“We think things are headed for using the utility model, where the company focuses on what will make the business stand out, “ Ellsworth says. “It’s like plugging in for electricity. Instead of making your own power, in the virtualized cloud model, companies link up to the IT power grid and relieve themselves of the burden of maintaining it.”

Economies of scale

Because cloud computing providers maintain common infrastructures, costs are reduced, which allows the company to make it cheaper for the client, adds Ryan Brooks, director of research and development for Red Anvil. By aggregating the need — like any other utility such as electricity, or water — the cost goes down considerably.

For example, a small-to-medium-sized business that couldn’t afford to get into a full Microsoft environment can now have the very same thing for less than $1,000 in this public cloud environment, compared to $10,000 if it were to make the investment on its own, Brooks says.

Spancrete’s ERP system, which runs all of the company’s manufacturing software and accounting functions, will be fully outsourced by September. In the past, Spancrete upgraded the ERP system on a yearly basis.

“During this time, we were always running out of disk space, and people are screaming because the systems are running slow,” Pantely says.  “To spend tens of thousands for a three-week period is not easy to justify. We are always out of disk space.”

Now, Pantely is able to pay for additional resources, such as two gigabytes of memory and another terabyte of disk, for a set amount of time to cover the company’s needs.

“Then when we are done, I can tell them we no longer need it, and I just pay for the time frame I use it,” he explains. “You pay for it as you go. It’s a big savings for not having to pay for all of that up front. You ultimately end up with a much happier user base.”

Over a five-year period, Spancrete expects to save about $1 million by moving to the cloud. Pantely says this will allow the company to outsource its data base administrator functions along with maintaining the Windows server network.

“With the economy the way it is, we are understaffed and being asked to do more like everyone else is,” Pantely says. “By making this change, we are becoming much more efficient at servicing our customer base. A lot will happen behind the scenes that will make life better for our user base. For example, we will have people working on this who are a lot more versed in Outlook Exchange (the company’s email server) than we are. So, we are serving them better with faster servers, and it keeps all of our equipment up to date.”

Backup plan

An interim step that some cloud computing clients take to try out cloud services is backing up their data and implementing a disaster recovery system. For disaster recovery and backup, a company could establish a data restoration point, or go all the way to live mirroring where there is an exact duplicate so the system is running without a blip.

Spancrete will relieve itself of a considerable burden by moving its disaster recovery system offsite, Pantely says. In the past, when a power outage occurred, backup power was devoted to keeping systems running at the expense of the rest of Spancrete’s operations.

“Emotionally, people are still getting used to the idea — it’s a new paradigm shift,”says Red Anvil CEO Neil Biondich. “Businesses rightfully want to save their information and proprietary data. Internet speeds have dramatically improved over the last 10 years, but they haven’t matched the need and are lagging behind. As those speeds continue to get faster, you will see them emerge as a solution for companies that have a lot of data.”

While still in its early stages, businesses are starting to migrate their IT function to virtualization and cloud computing.

“In this economy, people need to be more efficient and spend less money on services, and cloud computing goes toward both of those things,” Biondich says. “When it comes down to it, people will make a decision that is right for the business. And this presents a very compelling cost-benefit ratio.”

By John Rondy

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