The cloud is a resource that easily allows data and software to be accessible through an internet connection rather than a localized computer. It provides a real-time extension of IT capabilities including Infrastructure –as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS). A growing number of companies are leveraging the cloud to enhance customer experience and deliver higher quality services in a more timely fashion. Moreover, one of the largest advantages to relying on the cloud is the rapid access to updated software and applications at reduced costs and investment.
Observers in the loyalty marketing segment are seeing a boom in loyalty offerings. Customer experience management in the form of highly customized and prompt services is being deployed to retain customers. But the big question is, when or will loyalty marketing move to the next level and embrace the cloud?
Amazon has effectively used and offered cloud services such as Amazon’s Virtual Private Cloud (Amazon VPC) since 2009 and it continues to introduce new services. One of its most popular cloud services, Amazon Elastic Compute Cloud (Amazon EC2), is an infrastructure as a service (IaaS). While Amazon EC2 is easy to use and is relatively inexpensive when compared to traditional infrastructure models, it also has its downfalls. It is believed that hackers were able to use Amazon’s EC2 platform to gain access into the Sony PlayStation Network. Like most systems, security threats are an issue in the cloud. But many companies, including Amazon and Sony, are taking action to further secure its systems in the hopes of preventing additional or future security breaches.
Issues that hinder loyalty marketing from leveraging the cloud
Clearly, security is a major issue that deters loyalty marketing from fully relying on the cloud. Most of the customer information deployed in loyalty marketing is both highly confidential and required to be legally secure. With data maintained on external servers, as the case of the cloud, companies fear data loss as well as hacking. Some companies go as far as having security policies in place that prevent integration of on-premise applications with external third party applications.
The inherent difficultly in integrating home grown applications with third party applications is another issue for loyalty marketing. These integrations require extra time and revenue in the form of moving legacy documents, training staff, etc. Few companies feel comfortable in incurring the large costs associated with integration and preparation.
Customer experience management, is fairly new from a strategic marketing perspective, and is only just gaining popularity. While many companies are still understanding the concept and integrating it into current processes, completely embracing the cloud is still a ways off.
Locating the right vendor is a dilemma that many companies face when leveraging the cloud. When a company agrees to make a large investment and integrate its existing loyalty solution with a third party vendor, the company needs to be sure that the right solution and partnering organization have been chosen. The massive changes that occur as companies set out to leverage the cloud in turn may make most of those companies think twice about its decision.
Another concern specific to loyalty applications is that of vertical scaling. As the number of concurrent requests increase, constant performance level maintenance is required. If an aspect of the internal loyalty application, such as a database table or Structured Query Language (SQL), has been poorly constructed, it can destroy the vertical scalability and actually increase the cost of deployment in the cloud. It is therefore important for companies to know the weaknesses within its systems and then make knowledgeable decisions on whether or not to opt for cloud computing.
Movement toward the cloud
While some argue that the cloud is being oversold like a magic bullet, it does have numerous benefits, especially for small companies with limited access to revenue. These companies can now reduce involvement in technical maintenance and lower fixed costs while dramatically increasing productivity. The companies can also access updated cutting-edge technology, which was once only affordable to large companies.
The advantages of the cloud also include:
- increased access to storage
- highly automated systems that reduce human effort
- easy access to solutions
- simplification of processes
- uniformity for employees across locations
- management of customer feedback
Although there are hurdles to cloud based loyalty marketing, namely security concerns, this service still has a strong future ahead. According to research by IDC, some companies prefer adopting private clouds while they resolve issues related to third party solutions. IDC’s 2011 predictions show that public and private clouds will drive approximately 15 percent of IT spending, growing at a rate five times faster than the overall IT market. Additionally, IDC estimates that by 2014, 80 percent of software services will be available as cloud services, and one-third of actual software purchases will be through the cloud.
Despite the many obstacles, the trend in loyalty marketing is towards cloud computing and companies need to start preparing and revamping their solutions to handle an integration with the cloud. Those who don’t start adopting their practices into the cloud will surely be missing out on the benefits and timeliness of this movement.
Bhavana Yerrumreddy is the Global Head of Loyalty Solutions & Innovation at ITC Infotech.