March 28, 2012

Cloud Computing Potential for E-Commerce

It’s no surprise that e-commerce and cloud computing are starting to gel together. As companies online are looking for more and more flexible platforms to sell to customers, cloud computing seems to provide the immediate answers. However, the platform comes with critical security risks.

Basic Definition Applied
An actual cloud computing platform does need to meet certain requirements for a retail website to qualify. These include:

Consumer control. The customer is completely in charge of choices, selection, and navigation. This is usually provided via some sort of website control that the consumer can manipulate.
Pay to Play Features. Any services a website provides are scalable to only charge the consumer exactly what he wants to use at the time and no more.
Everything Involved is Automated. Consumers using the website are engaged entirely in an electronic, virtual environment. There is no need for human interaction from a service person at all.

A regular retail website does not meet this criteria set. Instead, it typically has infrastructure or personnel involved which in turn increases the operating cost for the business involved.


The primary benefit online business enjoys the most from cloud computing is the clear scalability of the platform. Retail business doesn’t follow standard, predictable schedules of when consumers buy goods or services, and online retailing is no exception. Business goes up and down seasonally. A company maintaining a full-size retail website (like this one that sells
wristbands) with personnel and system support year round is going to lose money during down-times. With cloud computing, this problem disappears.

Using a cloud platform, the retailer can scale up and demand additional services and support when seasonal traffic is climbing. Then, when the holiday depression kicks in and people’s wallets tighten up, the same business can trim off those same services without worrying about handing out pink slips and delayed reductions.

E-commerce Cost Savings

Online retailers also realize significant savings with a cloud system. Unlike the heavy season of the holidays, when great demand occurs and a business needs extra server capacity to handle the shopping, the non-holiday season can be considerably slower. Using the cloud, the business can offload the need for labor costs for system support personnel. Additionally, they’re no longer paying for ongoing large website infrastructure hosting, and can eliminate those costs as well. Websites such as Groupon (here's an example of their
daily deals website in Australia-which is only a portion of their needs as they are present globally) that have large number of customers and affiliates will be the first in line to open up to the cloud.

The hardware expense is another big source of savings. Traditional websites within a business includes operating multiple servers, software, integrated networks, multiple Internet accesses, and tons of cabling. With the cloud system, all of this equipment is the cloud provider’s problem. The website business just needs to pay for and spell out the size of website desired at different times.

The question of data and customer information security, however, creates a problem for retail cloud computing. The fact is, the store doesn’t actually control the information in a cloud system. Instead, the transaction information and sensitive customer data sits on a third party’s servers and storage system. While a cloud provider can make lots of promises, a retailer’s security of customer data will never be as completely secure as if the data was inside the business entirely.

Second, the exact location of consumer data within the cloud platform begins to get lost in big systems. Not only does the data sit on a third party’s system, the retailer loses the ability to track where it is saved even under the third party’s control. Unless a retailer specifically forces a cloud provider to specify how data is collected and saved, it’s quite possible a third party could farm out data storage outside of the country to save on costs.

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