The Great Cloud Computing Scam

I worked in the IT industry for a long time, eventually running the cloud computing division for a relatively large IT company. I can tell you with absolute certainty and from first hand experience that we’re sleepwalking in to a situation that will be massively detrimental to small businesses. If your business relies on software of ANY kind, which is essentially everyone, then this article is relevant to you. It’s your duty as a business owner to understand these issues and plan ahead accordingly.

You can watch the full video here or, if you prefer, read the article below:

The Great Cloud Computing Scam? FAIR WARNING!

Watch this video on YouTube.

Cloud isn’t completely evil… it’s just misunderstood

Before I start I need you to understand that I don’t have some giant grudge against cloud. It would be incredibly hypocritical of me to say ‘cloud is bad’, after all I spent several years of my life being truly evangelistic about the topic. This was a long time ago when cloud was in its infancy and it was my job to explain to customers why it no longer made sense to host their own e-mail and file storage services. Certain aspects of cloud are just a natural evolution of technology and, well, they make perfect sense.

If you run a relatively small business with, say, 10-20 staff you’d be INSANE to attempt to host your own e-mail server these days. Unless you’re a closet geek with literally nothing better to do. E-mail servers take a LOT of effort to manage properly and it’s way easier to let someone else look after that. Services such as Gmail on the Google Cloud G Suite or Microsoft’s Office 365 make e-mail a doddle.

Back in the dark days, pre-cloud, if you had a business with 5 users and you wanted to host your own e-mail and file services you’d probably need:

  • 1 x Physical server – £1,000
  • 1 x Microsoft Small Business Server software – £400
  • 5 x Microsoft Office – £1,000
  • 1 x Backups, Anti-Virus and other stuff – £500
  • 1 x Installation – £500
  • TOTAL:  £3,400

You’d then need someone to maintain all this stuff. It was pretty complex and not something to be messed with if you didn’t know what you were doing. Not to mention management of backups, anti-virus etc.

Flash forward ten years and you now need:

  • 5 x Office 365 Business Essentials – $5/user/month

…and that’s pretty much it. E-mail is now provided ‘as a service’ and you pay for it as you go depending on how many users you have etc. E-mail is a very natural product to sit on cloud. The front-end (user) side of e-mail is very simple but the back-end (server) is complex. By buying e-mail ‘as a service’ it makes very little difference to the user experience but all of the complicated back-end stuff is looked after by someone else. You pay on a per user per month basis and the platform can be scaled from 1 to 100,000 users and back down again, whenever you like. It’s a WAY more sensible way of doing things.

However a much more deceptive side of cloud has been evolving since I left the industry. I’m sorry, obviously if I’d hung around I would have fixed this long ago. But more and more vendors are using ‘cloud’ to describe their licensing model without actually giving you any of the benefits of cloud. In fact their solutions have little or nothing to do with cloud or make the final user experience worse. They’re just switching to a rental model for their software that ties you in to using their services, forever. This is known as ‘vendor lock-in’ and it’s a bad thing. They’ve effectively removed the ability to STOP using their software. In certain scenarios you could literally be stuck paying a monthly fee forever. Even if you move off their platform. In this article I’ll be explaining the dangers of this vendor lock-in model and what you can do to avoid it.

A little secret about the computer software industry

Let me start by letting you in to the best kept secret about computer software industry. Most software that we will ever need has already been written! Now, before there’s utter outrage from all of the software developers out there, I’m obviously not saying there’s no longer a need for new or bespoke software. That’s not what I’m getting at here. My problem however is with giant conglomerates pushing users on to subscription-based licensing models for additional ‘features’ that they don’t need. Once they start using software on these platforms they can ONLY open the files they’ve created while the subscription continues to exist… in perpetuity. Stop your subscription and you can no longer open your files – even files you created years ago.

There’s very little innovation in the software industry these days – the reasons behind this are complex. But look at Microsoft Word and Excel as prime examples. The core functionality of word processors and spreadsheets hasn’t changed since Microsoft Office was first released almost 30 years ago. Most updates have actually been quite annoying and new features are only used by a tiny percentage of people. I can’t think of a single functional update in Word in 30 years that I couldn’t live without. The biggest innovation in PhotoShop was the introduction of Layers back in version 3.0… that was in 1994. I’m still quite happily using my old version of Microsoft Money 97 released back in 1996. It does everything I need it to do and way more. All the complicated work has been done and the sky hasn’t fallen down due to it being ‘no longer supported’.

This commodification of the software industry should bring the price of software down over time to almost zero. You can push back on this all you like but it’s what will happen and to be honest has been happening for years. Similar to what’s happened to the music industry – don’t believe me? Watch this video. Some of the software you can now get completely free is really incredible. Just look at DaVinci Resolve for video editing, GIMP for image manipulation and OpenOffice instead of Microsoft Office. Don’t feel guilty about this. The hard work was done and paid for years ago. Plenty of companies made a LOT of money out of this and continue to do so. You know, the whole Silicon Valley thing? The people who made the software you rely on are, on the whole, very, VERY rich.

But as corporate greed continues to plague the planet, the big players are pushing us more and more down the route of subscription licensing for software. It ends up costing significantly more and there are some serious disadvantages for your small business. This isn’t what cloud was designed for. We’re on an endless merry-go-round of pointless software updates and unnecessary security patches. It’s the musical equivalent of an artist re-releasing the same song over, and over, and over with a minor tweak to the album artwork each time… meanwhile charging more and more for each new release. I do feel sorry for the music industry where actual effort is put in to writing and releasing new material and it’s literally worthless these days. How the software industry has got away with this for so long is beyond me.

A brief history of SketchUp… just as an example

I’m going to pick on SketchUp, just as an example since I know that software pretty well. SketchUp is software used for 3D modelling. If you want to make something 3D on a computer, like a house or a table, SketchUp is probably going to be your tool of choice.

It was released by ‘@Last Software’ back in the year 2000 after a couple of years of development. @Last were a small tech startup with around 70 staff based in Colorado and their software sold well to architects and designers. They charged around $495 a pop. Google then got interested when @Last started developing plugins that allowed models created in SketchUp to be imported in to Google Earth. Cue Google buying @Last for an undisclosed sum in 2006.

Google, being Google, wanted to make SketchUp available to anyone so they released it for free, with some more advanced functionality only being available for ‘pro’ users. In 2012 Google sold SketchUp to Trimble… for an undisclosed sum. Trimble is a publicly traded company with over 11,000 employees and a net worth of over $11bn. Coincidentally, their CEO makes around $11m a year . So they’re not short of a bob or two.

The core functionality of SketchUp hasn’t significantly changed in the last 20 years. It’s very likely that the lion’s share of the work needed to write this software was done by the team at @Last. Yet Trimble now charge $299 per year for the cheapest version of this software that can be used offline. Bear in mind this used to be free! So over the course of 5 years that would cost you $1,495. Over 3 times more than it would have cost you to buy the software outright when it was first released. And those costs will go on… forever. Or at least for as long as you want the ability to edit the models you’ve spent hours, days and weeks creating. Does this sound right to you? Because it doesn’t sit well with me.

Trimble aren’t the only ones doing this. Adobe controversially switched from their traditional licensing model to ‘Creative Cloud’ in 2013. This has been met with significant backlash but they continue to push a licensing model that ties users in to paying for the software on a monthly or yearly basis, forever. Stop paying and the software just doesn’t run any more. Switch to a different vendor and you can’t open your old design any more.

What software is bad for cloud?

As briefly mentioned early, cloud can be great for software that’s relatively simple in terms of front-end processing. Accounting software, word processors, e-mail, spreadsheets and the like all generally run fine in cloud. However, in my view any software that involves significant amounts of creative time on behalf of the user, should stay well clear of cloud. I’m talking about things such as image manipulation, 3D design software, desktop publishing software, audio recording, video editing and anything else where the end product is born out of a deeply creative process.

Your final files on these platforms could take anything from a few hours to literally months of work to create. The file formats are generally proprietary and, due to the file sizes in question, are massively impractical to run ‘online’. These programs generally rely on fast user-side processing and as such work best on a nice fast machine with local storage. They’re just not cut out for cloud.

What software is good for cloud?

Cloud is great for things like e-mail, backups, general data storage and more generic application use. Anything where vendor lock-in isn’t an issue and worst case, changing platform would be more of an admin task than a creative task.

Let me explain that. Let’s say you’ve got all of your accounts in spreadsheets using Google Sheets. You then decide you want to ditch Google and switch to on-premise Microsoft Excel instead. For starters, Google Sheets lets you save spreadsheets in Microsoft Excel format. No catches, no sneaky vendor lock-in. It’s right there – first sub-menu in the ‘Download as’ menu. They’re openly letting you switch to a competitor, and I appreciate the transparency of this. At the end of the day Google Sheets won’t be for everyone but it’s not pretending to be anything it’s not. Take it or leave it and if you’re not happy here’s your get out.

Google Sheets
Google openly let you switch back to Microsoft Excel

On the flip side, if you create a complex 3D model in SketchUp you’re probably only ever going to be able to open that file in SketchUp. Bear in mind that 3D model could have taken weeks to make. It’s a highly creative process that can’t easily be repeated. As it currently stands, if you ditch SketchUp and switch to (for example) Fusion, you’re almost certainly going to need to continue paying for SketchUp so that you can continue to edit your old models. Obviously this wouldn’t be the case if you’d bought the software outright, it almost certainly is the case if you bought the software through their subscription licensing scheme. In many cases the software ain’t going to work if you don’t have an active subscription!

The vendors on the whole are switching to the cloud model for one reason and one reason only: TO MAKE MORE MONEY! They know that when you’re tied in to a creative platform it’s very hard to move off it. By switching to subscription-based licensing they know they’ll have a customer for life, whether you like it or not.

It’s not all it’s cracked up to be!

Even for really simple cloud-based services such as file storage, you can be bitten if you’re not careful. Lose your internet connection and you’re stuffed. The cloud provider’s services go down and you’re stuffed. Want to transfer all of your data to a different provider and you’re stuffed. Even basic file services provided via Google Drive can be problematic.

Google Drive running Slow
Google have been ‘zipping’ the files for a very long time!

On several occasions now I’ve tried to download a bunch of files off Google Drive only to be presented with a ‘Preparing download’ warning sitting on the screen for hours:

Google Drive Preparing Download
6 files, 20MB, still waiting…

The above is for a handful of files that are very small. Imagine what it would be like trying to download 200 files totalling several GB? In the above example it was quicker to find a cable for my phone and do a direct USB transfer than it was to wait for Google Drive to spring in to life. Don’t get me wrong, generally Google Drive is very good but when you have a problem that prevents you from working it can be very frustrating.

Where on earth is your data?

A lot of folk take this one for granted. Your cloud-based data is… where exactly? Why should you care? Well there are many reasons why you need to be 100% certain about where your data is physically stored. What if you have a disaster and need to do a physical transfer of hard disks to restore your data? What if you have customers who insist on their data not leaving the UK? What if there are compliance regulations regarding where your data is stored?

Keep your eyes wide open

I’m not saying don’t use cloud. I’m saying keep your eyes wide open. Work out the risks for yourself. Stop pretending someone else is going to explain all of this for you. As a business owner YOU need to get your head around this. YOU need to assess the risks. YOU need to take responsibility. If you don’t understand something, you’re not the only one. Just ASK!

  • What happens if the internet connection goes down?
  • What happens if I want to cancel the subscription?
  • What happens if I want to change supplier?
  • Where will the data be stored?
  • Who has access to my data?
  • Can I use the software offline?
  • How long can I use the software offline?
  • Can I export my data in a standard format?
  • If I cancel, what happens to my old files?

This is all stuff you NEED to understand. Failure to do so could be genuinely catastrophic for your business. What do you think? Disagree with my views? Let’s have a chat about it over on Twitter @smallbusinesstb

Andy Mac

Andy MacLellan has been self employed for over 20 years. In that time he's established a number of successful businesses and worked alongside some of the biggest corporate blue-chips on the planet. Now his life mostly revolves around YouTube and Podcasts.
Andy Mac