The Cloud Question: Native or Hosted?

Today’s digital-first economy presents challenges and great upside for IT leaders, many of whom have chosen to move to the cloud. For greater flexibility, customization and real-time innovation, moving to the cloud gives businesses the agility they need to capitalize on opportunities and spur growth. In fact, Gartner forecasts that cloud-based offerings spending will grow faster than traditional IT offerings through 2022. The logistics of the transition, however, are much more nuanced.

Once committed to the transition to the cloud, IT organizations typically choose between cloud-native versus cloud-hosted applications. Cloud native allows for a multi-tenant environment where shared code enables users to benefit from timely, seamless updates. A cloud-hosted approach usually means there’s a single-tenant on-premise application hosted in the cloud.  There are benefits to both, such as different levels of flexibility or customization, and it can be difficult to know which route is best. Before making the decision, IT leaders need the facts and the criteria to choose the one that’s best for their business, operational and financial goals.

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Increasing efficiency and cutting costs

Like any member of the C-suite, increasing efficiency and cutting costs are significant priorities for chief technology officers and chief information officers. This has many organizations transitioning from a capital expenditure model (Capex) to an operational expenditure (Opex) financial model, emphasizing more stable and predictable expenses as opposed to larger upfront costs. This is where the choice between cloud native and cloud hosted is important.

The multi-tenant environment of cloud-native applications means you’re sharing the financial burden of keeping infrastructure up and running. And, unlike the hosted model, investment is flexible, so you’re not locked in and don’t end up paying for licenses and seats that aren’t being used. For businesses where seasonality impacts growth, that scalable nature of cloud native is a powerful benefit. Spikes during holidays, campaigns, and seasonality are easily addressed with cloud-native applications. Consider, for example, that summer is here, which means grilling season is in full swing. Grill makers can easily scale up their sales and support staff during the summer months, then back down as autumn approaches. That flexibility means optimal resource usage while maximizing revenue and customer loyalty during priority time periods.

On the other end of the spectrum, is data privacy and protection. For industries such as healthcare or financial services, protecting customer data is paramount. This is one of the biggest draws for organizations who opt for cloud hosted, given the perception that data isolated within a single-tenant environment is more secure. While achieving that desired level of security may be possible with a fully dedicated staff of in-house experts to that particular instance, this is less efficient and requires additional resources and budget. The processes and architecture for the hosted model is, in reality, not that different than on premise.

Driving business innovation

IT organizations are no longer cost centers: they’re innovation drivers and change makers.IT’s mandate is broadening. Gartner predicts that by 2021 CIOs will be just as responsible for culture change as chief human resources officers (CHROs). As CEOs charge IT leaders to be agents of innovation, it requires agility, flexibility and speed to capitalize on opportunities as they arise.Perhaps there’s new functionality that would better support customer service and enhance loyalty. The shorter the time to implementation, the faster you’re contributing to the success and bottom line of the business.

The choice between cloud hosted and cloud native will dictate your overall flexibility. Hosted models are inherently much more static than their native counterparts. Updates, hotfixes and other changes require much more of a time and resource investment for hosted infrastructures because they resemble legacy on-premises architecture in many ways. Hosted models often put the negatives of on premise in the cloud, as you’re simply changing the data center and operating equipment.

Cloud-native applications, by contrast, are designed to evolve on an ongoing basis as the needs of the business and consumers change. For example, new features for a hosted system might be implemented once per year, which is a lifetime in the fast-paced digital era. Whereas a cloud-native provider might have regularly scheduled updates throughout the year. Cloud-hosted models don’t necessarily free up IT to be agile and innovate to drive business outcomes. IT shouldn’t just be keeping the lights on -- they need systems that enable the team to reach its fullest potential.

Optimizing the employee experience

While the conversation around infrastructure and system usage is traditionally held by the IT organization and business unit leaders, don’t discount its impact on the wider staff. The employee experience is a powerful factor in weighing the decision between cloud-native and cloud-hosted applications. Cloud-native benefits may even manifest in ways outside immediate objectives, such as powering the ability for staff to work from home. This is an important thing to consider, since, according to Gallup, employees are more engaged when offered flexible working options.

This benefit extends even further for global organizations, keeping far-flung employees on one unified cloud-native platform. Rather than having to invest in individual systems for each location, everyone works off the single, flexible solution. And, cloud-native applications give multinationals global visibility across the enterprise.

Furthermore, cloud-native providers are always thinking about ways to evolve the user experience (UX). UX is continuously improving since cloud-native applications deploy new releases on a regular clip. This empowers customers to have a greater say in how applications are designed and customized. Rather than keeping the power in the hands of IT, the entire organizational community can help shape the development of applications to help serve their individual needs.

Right fit for the long haul

As CIOs shift away from managing infrastructure, IT organizations need to be constantly evaluating how they can drive business outcomes and strategy. Rather than keeping the lights on,  IT can generate significant value throughout the business. The decision between cloud native and cloud hosted directly impacts that. That said, every business is unique. Conduct a thorough audit of the opportunities, and ensure it aligns with how you can optimize for sustainable growth.

Jeff Canter serves as Chief Operating Officer at NICE inContact, where he leads Cloud Operations, Customer Experience, IT, Partner and Customer Success, and the Trust Office. Prior to NICE inContact, Canter was CEO and one of the founders of Uptivity, where he helped grow the business at a 50% CAGR over 10 years, leading to the company's successful sale to inContact. Prior to co-founding Uptivity, Canter built his knowledge of the contact center industry while working as a senior software engineer for a large outsourcer, where he architected and launched the organization's key software infrastructure, including several critical voice and data applications.