A recent report issued by International Data Corp., stated that IT infrastructure spending for cloud deployments will top $40.1 billion this year. It’s a staggering figure, but one that accurately reflects the growing confidence in the cloud as the computing model of the future and the increasing number of cloud migrations.

There are many advantages to a cloud computing model. It promises massive computing power, better security, improved efficiency and transparency, all at a significantly lower cost.

For healthcare, the cloud doesn’t just hold the promise of massive computing resources at a lower cost. It also presents the industry with an opportunity to completely upend the way it thinks about and manages IT resources. And it does it in a way that will radically improve the way organizations can communicate, collaborate and conduct business.

Much of the data within healthcare organizations is siloed. Each system is like a box, making it difficult to share information within the organization, let alone with critical outside vendors and value-added partners. To share information, organizations essentially must “drill” into these boxes, align disparate data and build a semi-custom application.

Current on-premise systems are a huge capital expense, primarily because of the upfront cost and ongoing maintenance. Additionally, every couple of years, these systems need to be upgraded. While these systems are certainly driving a fair share of value, is it enough to justify the expense?

The cloud frees organizations from the restraints of legacy systems, and the costs associated with them. When an organization moves to a multi-tenant cloud platform, the model changes completely. The infrastructure no longer needs to be owned, and there’s no need to “drill” into systems to access data. The cloud helps organizations move to an API world, where they can more easily move data back and forth between authorized parties.

In this new healthcare reality, multiple users can interact with each other, in real time. Instead of an administrator overseeing every aspect of a system and acting as a buffer between groups, approved users can connect directly with each other. This brings real-time partner collaboration to the industry–something that’s never been experienced before. The result is cleaner, updated data that everyone can see. Authorized parties can communicate more effectively, internally and externally, to make more informed and timely business decisions.

The cloud is a game changer, for example, in enterprise resource planning (ERP) systems, which house a vast pool of information from financial and inventory management, to human resources, among others. The current generation of hospital ERP systems are not designed to efficiently have data pulled out of them. They are built to provide a reporting layer sitting on top to share information with hospital users only, and limited to information available only within the system.

When an analytics company works with a hospital and needs to pull out data from the ERP system, it must create a custom solution by working directly with the hospital’s system administrator and IT staff to routinely pull the data, normalize that data and then share it with approved participants. It’s time-consuming, expensive, lacks scalability, and the results are far from perfect.

Moving to the cloud enables much easier access to the hospital’s ERP system for system administrators, their vendors and trading partners and can enable interaction with other internal and external systems, such as supply chain management systems. In addition, building a custom solution to connect two or more siloed systems is no longer necessary, providing significant savings, with increased speed to develop and deploy. With a cloud approach, these systems can be connected seamlessly by a third-party app at lower costs.

We are already seeing major ERP system solution providers transition to the cloud. Eventually, they will halt support for their legacy offerings. With this in mind, hospital IT administrators should be out in front of this issue before it becomes a problem, looking for what their needs are, and will be in the coming years.

Many considering a move to the cloud often cite cost and privacy as major concerns. The capital-based model is replaced with a variable model typically based on monthly usage fees. In terms of spending, the cloud enables a more detailed and precise way of tracking costs and ROI, beyond allocation models. The cloud provides visibility into the cost relations between any application, network, storage, department or individual. This gives IT the information to make better decisions to support their business.

Hospitals may cite privacy concerns as the reason to keep their data housed in-house. Patient records and internal hospital data, if compromised, can lead to serious consequences. However, cloud environments have proven to be both scalable and secure. As data needs increase, the cloud can expand but its core security remains in place. Cloud service providers can continuously validate, test and exercise the environment on demand to ensure its security, updating quickly to the latest threats.

Moving to the cloud will dramatically shift how the industry interacts with its data, allowing healthcare supply chain to become a truly data-driven industry. By switching to a cloud computing model, hospitals and its vendors/partners will realize a more efficient way to share data and execute business transactions while saving on overall IT costs. The result will provide a modern, secure, transparent and cost-effective way to enhance communication, improve business transactions and ultimately deliver better healthcare to patients.

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