Welcome to questions and answers about cloud computing for construction, architecture and engineering. Louis Rosas-Guyon, president of R-Squared Computing names the top mistakes when moving backups and operations to the cloud, puts order to adopting the cloud and reveals how companies that don’t move to the cloud will become increasing less competitive.

From the perspective of a small construction firm, what’s the biggest mistake it could make when making plans to put its backups in the cloud?

There are several. First, it is easy to overpay. There are so many new online backup services that prices are all over the place. Your cheapest bet is still Amazon’s S3 service but it can be tricky for a beginner. Rackspace has a good offering for $4 per month for 10 gigabytes of online storage which is marginally easier to use. In either case, a reliable business technology expert can advise and guide you through this process.

Next, you need to be aware of the limitations of your broadband data connection. I recently set up an online backup solution for a customer on Amazon’s S3. They needed to backup about 500GB of data which would have taken a week over their wimpy DSL connection. To speed the process, I just sent Amazon a disk with all their files which they copied onto the S3 servers. Now all we do is backup changes every 4 hours. If you have a sizable amount of data to backup, it is possible your broadband might not be very happy with you for it. Again, a good business technology expert will be able to guide you.

Another mistake is to treat your cloud backup solution as a dumping ground for everything. Because these services work with utility pricing models (you pay for what you consume) it is easy to overpay for storage — simply because you are storing too much. I recommend only storing business critical information to your cloud backups. That means no operating systems, entertainment, personal files, etc. It doesn’t pay to be a digital packrat. It also means aggressively reviewing the data being backed up and removing non-critical items from the backup queue. To backup everything else, just use a local backup solution like a few external hard drives.

And whatever you do — don’t agree to long term contracts! I expect significant consolidation in the online backup market over the next 2-3 years. The last thing you need is to be paying 2010 prices in 2012, especially considering that the prices will only drop further.

What are some mistakes companies could make in moving operational items such as estimating and project management to the cloud?

The biggest mistake with any operational tool is to rush into a decision. You need to take time and explore the options. That means using free trials (or paying for short-term usage) and identifying which solution works best for you. No two businesses work exactly alike. The key is to find the software that works closest to your procedures and then adapt.

Don’t rush into anything. It is critical that you understand the business critical functions that you require from any new tool. Be specific too. Don’t just say, “I need estimating software.” Say, “I need to generate and store multiple variations of the same estimate for the same client based on various criteria.” The more specific you are in stating your needs, the greater the likelihood of finding the tools that will work.

The dark side is that you may not find one tool that does everything. That’s when you need to prioritize your needs. Then you pick the cloud tool that gives you the most flexibility, the most features and the best set of tools. The rest you can either retool or work around.

Chances are you will need to change how you work. Workflow process has a habit of growing organically over time in any organization. What started as a simple three step process when you were just starting out in business has become a behemoth hydra with forty-nine steps and thirteen process forks depending on customers and circumstances.

While making the shift to cloud services, its a good time to re-examine how you work. It’s a great opportunity to identify bottlenecks and problem areas in the orderly flow of work in your business. That means getting down in the trenches and actually seeing how people perform their jobs every day. It means counting steps, documenting procedures and drawing flowcharts. It’s a pain in the neck but it is incredibly worthwhile. And whatever you do, don’t make the mistake of believing that nothing has changed since you first delegated the job. That is never the case.

Sadly, most business owners avoid this step — which I think is dangerous. Whenever you implement a new tool in your business you need to make sure that it is being used properly and that it fits within the greater scope of your business goals. Sure, you can use a screwdriver as a hammer, but that doesn’t mean it’s the best use of the tool. Make sure you are getting your workers the tools they need — not just the tools you like.

The other danger is unwillingness to change. Cloud tools will work differently than the old desktop version you are used to. That is inevitable. The question is whether the trade offs are worth the aggravation. Typically, workers will hate anything new for about two months — then they’ll wonder how you did business without it.

Suppose one of these firms wanted to move everything to the cloud, over time. What function/s would it move first, and then next? What would a recommended order be?

Email, calendars, documents, customer relationship management (CRM), estimating, project management (PM) and accounting/ERP. The idea is to migrate non-critical tools first so you can start getting used to working in the cloud. Email is a great example because most people already host their email in the cloud (to an extent) so this is the easiest shift. Considering how often email services are interrupted or down, this transition is the least painful to implement. But, it can also be the most immediately valuable. If you are hosting your own internal email server, the cost savings are near instantaneous, starting the moment you turn that monster off. Support costs on email servers are among the highest in the industry simply because of the overall demand placed on the device. Do yourself a favor and outsource your email to the cloud today.

Obviously, I left the accounting/ERP for last. This is a tough one and I am not recommending it for everyone. Too many businesses are still very paranoid about protecting their accounting information, and for good reason. There are significant legal concerns that must be addressed before you make this move. The biggest legal issue is the question of discovery. What is the likelihood that your cloud provider will fight a court order demanding the release of your information? The answer is zero. If you are in a particularly litigious market then this might not be a good idea. While there may not be anything damning or illegal in your activities, you also don’t want the world looking into your finances either. Of all the cloud offerings, this is the one I am most hesitant to use.

Any ideas on when a construction firm of this size will begin to see its competitiveness erode if it doesn’t move to the cloud? What business areas might show cracks first? Or, will it make little difference if a firm just keeps doing business the way it always has?

I was having this conversation last week with one of my construction customers. It is his opinion that it has already started. Since I moved his company onto cloud services he has noticed an enormous difference. First and foremost, his business is now truly mobile — he has access to his data from any Internet terminal in the world. He is able to respond faster to customers which has improved their satisfaction with his work. Because he can respond to a question on a bid or contract within minutes, he proves his dedication to customer satisfaction which earns him more work. His competition is reeling after he managed to win 15 of his last 18 bids, simply because he was better connected to his data.

The first places you will see the cracks is in your customer satisfaction. How long do your client’s typically wait for a reply? How long does it take to respond to a problem? How quickly can you write up a work order for a sub-contractor to address a grievance? How many steps do you need to take to adapt a project timeline? Customers are far less patient with delays than they were even five years ago. If you cannot address their concerns in their time frame, you lose. Unhappy customers don’t come back.

The next place you will feel the pinch is in your profits. Companies that adopt cloud computing are reporting enormous savings. The aforementioned construction company is saving almost $30,000 per year off IT costs by switching to the cloud! That’s $30k more in profits every year. He would have to sell more than $300,000 in new work to even approach that recovered profit.

As operating margins get tighter and tighter, old technology infrastructure starts to decay. Eventually, what started as a time-and-cost-saving tool becomes a drain on both time and money. Old servers have more failures and more downtime, which means your technicians are working more hours. You can either spend a fortune and upgrade those systems or move it to the cloud for a fraction of the price. The cloud gives you better outcomes at lower prices which makes it the logical choice.

Louis Rosas-Guyon is a business technology expert, author and speaker. He specializes in helping small business executives choose the right technologies to enable growth. An 18 year veteran of the tech industry, Louis has seen how the right technologies can make the difference between success and failure. Ten years ago he founded R-Squared Computing (r2computing.com) to help businesses make smarter tech decisions. He is the author of two business technology management books, Nearly Free IT (nearlyfreeit.com) and Firm Wisdom (firmwisdom.com). Lou was the kid that always found the best way to get the job done.