Sustainable Cloud Strategy in E-Commerce

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Meet Magento Germany Sponsor netz 98 GmbH is sharing its knowledge about succesful e-commerce strategies.
This text got created by Ralf Lieser, Director of Quality Management at netz98.

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Buzzword and Reality

Cloud! A term that must not be missing on any of buzzword bingo card! And as with all buzzwords, everyone throws it around happily and claims it’s the solution to any problem. I would like to go over what is meant by a cloud strategy beyond the buzzwords and why the topic is especially relevant in e-commerce.
Unfortunately, the term cloud has been overused in recent years and every system and every service needed to be “in the cloud” in one way or another. In addition, we have very strict rules and laws in Germany and Europe, which made use of cloud structures and cloud services, as it has long been commonplace in the USA, almost impossible. In the meantime, there has been significantly more legal certainty, and above all new solutions that are optimized for German and European requirements.
Looking at the fundamental idea behind the cloud idea, it’s mainly about outsourcing structures and services that were previously built and maintained in monolithic structure and in-house to third-party services and thereby achieving significantly improved scaling. Opportunities for cost reduction should, of course, be utilized if they arise, but they should not be the main motivation for a cloud strategy. In our view, the main argument in favor of a cloud strategy is in the scaling.
If every business process and every service must be scalable today, the entire structure and service environment must be planned and implemented to be scalable as well.

From Structure to Service

We roughly subdivide the system environment of a company into the areas of the enterprise software, including the ERP system, the PIM system, the CRM system, and other systems, the data center systems, including the data warehouse and supporting data quality services, and in the area IT services, in which the company’s infrastructure and business processes are mapped. We are then able to find many large systems with claims for data sovereignty in their respective fields. Along with this data sovereignty, often comes the requirement to take charge of the management of this data and, consequently, the actual service provision.
If we consider a service-oriented structure, however, we still have to be the corresponding systems or services storing the data, but we have a completely new environment structure for the service provision: The tasks are stored in different XaaS systems, i.e. X as a service systems.

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Since there exist suitable XaaS systems for almost everything, it is necessary to create very strict evaluation criteria for the various services:

• Does the service support the objectives of the company?
• Is performance of the service of strategic relevance for economies of scale?
• What scaling must be considered and what limits are imposed by the service?

In addition to the specific requirements as a possible decision-making basis, there is the decision path across different regions: Are regional differences relevant in the current strategic decision? This would be the case if, for example, different data management systems are taken into consideration in regions, such as Russia, China, or the USA. This would then affect legal and technical aspects.
Central systems will continue to play an important role in the infrastructure of businesses – no matter what cloud services are available as alternatives. A decision for a cloud service should never be made just because the service exists. However, if based on this premise, good reasons for switching to a cloud service can be found – be it self-managed or ordered through a service provider – the cloud strategy is certainly on the right track.

Speed and Flexibility as Basis for Decisions

If cost savings should not play a major as a decision-making basis and scalability is already a given everywhere anyway, what reasons remain in favor of the cloud?
At this point, the individual business comes into play. How important are the factors of time and flexibility in scalability? There are certainly monolithic systems that are scalable to a certain extent. But how quickly can it be done? How flexible can your respond to individual needs? And might it be necessary to adapt or extend the infrastructure? These and other questions must be answered comprehensively in terms of a serious system strategy, as the following example shows.
Scaling needs often arise in expansion situations, for example, into other countries and in internationalization processes or due to the expansion of the service portfolio of the business. Consider the case of an internationalization strategy. Suppose, everything is already well set up for the domestic market. And since we have planned with foresight, the expansion into other European countries is not a problem: There is an almost identical legal sphere, there is a single currency, there are no restrictions on the movement of goods. But what if the company management decides to expand, for example, into the Russian market?
Suddenly, you are faced with a completely new legal situation as far as data storage and data transfer are concerned. It is important here to evaluate these areas precisely with respect to security, legal compliance, and potential impact on existing contracts and services offered.
In addition, the currency and the economic environment change, the logistics may need to be set up again, and it also raises the question of whether unrestricted movement of goods is possible.
But there’s more: How will the Russian employees access the system in the future? Will all company information be available in the same network in Russia? What will the infrastructure be like, if two different regions are combined into one private network?
The questions that arise are multifaceted and almost always go down to the detail level. If you have relied on a monolith at home up to now, you will certainly find it difficult to create a reasonable solution in terms of performance and cost for all employees and customers. But what if you have outsourced the systems performance as services? What if, for example, the Russian online store could work completely independently in its own cloud instance with its own database master? What if the systems and infrastructure used in the Russian and European markets were different and each online store would need only a single interface to “its” system? And what if all these satellite systems were to send transactions and final reports to the host system via a central interface?
Cloud systems in such a scenario offer not only much significantly more scaling options, they also improve the flexibility of the business in responding to new requirements, and increase the response time. Both will benefit the achievement of new objectives.

The Importance in E-Commerce

If you are sustainably positioned in e-commerce, you will already be used to having scalable structures all around. The e-commerce platform must be able to continuously adapt to the market, while the system environment of the company must change along with the current requirements.
Whether an established e-commerce business is undertaking the next growth stage or an e-commerce novice wants to take on the “E” in front of commerce, distributed systems will always make up a large part of the strategy. Simply put: There is no need for a universal tool. You need a tool tailored to the individual problem. The suitable system environment can be found by dividing the different systems into regions and markets according to their requirements. This creates an interesting three-dimensional decision matrix that takes into account all the requirements, regions, and markets. It shows vividly which system solution is needed where and what a setup to fulfill all requirements could look like.

Avoiding Dead Ends

Regardless of whether you build your system environment on such a basis or whether the system environment is planned as a distributed system from the outset, one must avoid that, in times of growth or change, something arises which can be described as a “grown system” a few years later.
The path to the cloud does not mean to “fire and forget,” and sustainability is the top priority here as well. Sustainability in distributed systems requires a complete documentation of the infrastructure and system environment and requires planning with regard to maximum, consistent flexibility. This will avoid dead ends in the system world.
Comparing the use of distributed and monolithic systems today, you will find a well-documented monolith in most companies. In distributed systems, especially in the cloud, it is necessary to invest at least as much in sustainability. Especially sinde you want to be able at any time to cut out a system and replace or supplement it with another, you must always be completely clear about the consequence of such an act.
If introducing a cloud strategy, the focus needs to be on sustainability, speed, and flexibility. As IT strategists, we may not know what business requirements are needed for specific upcoming challenges, but if you are dedicated to precisely these focus issues and master them, your companies IT will be perfectly positioned for the future and all the requirements that may come.
You can find more about e-commerce strategies in the Magazine (in German) on http://www.netz98.de/zukunftsthemen/ausgabe-2017/.