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Medical management firm turns to cloud computing

The Schumacher Group moved much of its IT load to SaaS providers to mitigate risk.

The Schumacher Group has turned to cloud computing to supply much of the IT needed to manage over 2,000 doctors working in emergency rooms in twenty states.

With good reason.

The Lafayette, La. medical practice management firm switched its IT focus to the cloud after hurricanes swept through the Gulf Coast in 2005, narrowly missing its data centers.

"We weren't directly impacted by the storms, but had we been 40 to 50 miles to the west, it would have been a different story." said Schumacher's CTO Doug Menafee.

Schumacher was also heavily involved in the rescue and relief efforts after the storms, and Menafee said that experience convinced him to distribute as many of his IT operations as he could to mitigate risk and get more functionality with less equipment on the ground. He also said it was an opportunity for him to bring the firm, founded in 1997, up to date technologically.

"The company was behind the technology curve, so a lot of what we brought on was net new." he said., Google Apps, Workday and Tangierweb now provide the company's CRM, office productivity, HR and scheduling respectively.

About "70% to 80% of our processes involve some kind of cloud service -- the remainder lives in two multimillion dollar data centers." he said. His biggest chore is connecting patient records, which Schumacher still stores and handles itself for compliance and security reasons, with affiliated physicians. He uses data integration software from Cast Iron to handle that task.

Schumacher handles more than three million patient records and houses more than 65 million images in its own infrastructure, Menafee said. Aside from housing that data, the biggest benefit to using Software-as-a-Service (SaaS) was financial. "It's the reduction in staff needed to manage infrastructure -- the biggest benefit is to my wallet." he said.

The SaaS model allows the company to make changes quickly, too, by shuffling services around. Menafee said if he proposes or is directed to make a change that could have a million dollar impact, he'd better be able to execute.

"If I have to tell the CEO it's going to take six to seven months to do that, that's a pretty big deal" he said. It's being able to pick and choose from available services rather than developing applications in-house and integrating them.

SaaS doesn't necessarily yield huge cost savings
Despite the benefits, SaaS is not necessarily a magic money saver. For one thing, cloud computing's heavy connectivity demands drive bandwidth costs up. Schumacher had fiber run to its operations center. That's not cheap.

And, despite the marketing hype, cloud-based services can actually be more expensive to run compared to buying infrastructure and applications in-house.

Nobody should look to SaaS or other kinds of cloud computing to cut overhead, because that's not happening, Menafee warned. What customers will find, if their business needs are right, is a long-term return that will justify pay-as-you go services.

"If you look at a three-year ROI on cloud it's going to be break-even" he said. "If you have it over five years, you're going to come out ahead" he said, for a simple reason. Three years is the average lifecycle of data center hardware- at that point, companies will not have to invest capital in new iron; they will just continue to pay operational costs.

Menafee said he constantly compares in-house solutions to cloud solutions and will always go where the financials add up; he's not philosophical about his technology. "For us the whole cloud side the equation -- the vendors say you've got to be in the cloud, but I say it has to be business need." he said. "I look at both options; I don't say I'm going to look outside first."

Balancing on-premises, cloud IT
It's going to be a hybrid world" said Chandar Pattabhiram, VP of product & channel marketing at Cast Iron Systems, the data integration specialist Shumacher users. Established businesses already have working IT operations and aren't racing to put everything into the cloud, even if they like the possibilities. "The same companies that like the cloud have already made investments in on-premise; they're not just going to throw that way," he said.

Pattabhiram said that while not all his customers were going to be cloud-centric, all of them were moving to cloud computing at least to some degree in the near future.

Informal research bears him out: A recent survey by venture capitalist organization the Sand Hill Group said that 80% of respondents expect to spend between 7-10% of their IT budget on cloud services. Avanade reports that more than 60% of respondents to its survey are planning to use cloud services, and 23% of enterprises are already doing so; the vast majority using SaaS.

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