Cloud Computing Economics: 40-80% Savings in the Cloud?

Cloud Computing Economics: 40-80% Savings in the Cloud?

Given the state of the global economy and the increasing adoption of Cloud computing it’s no surprise that lately there have been a number of articles on achieving Cloud computing savings ranging from 40% savings according to an EEOC case study to as much as much as 80% savings according to Microsoft.

However, not everyone seems to believe that they can save money by migrating to the Cloud. A common conversation that I often encounter with business owners is that they have done a “direct” comparison, and don’t see how they can save money migrating to the Cloud. One of those points is addressed in Sourya Biswas’ post, “Looking Back at Joe Weinma’s 10 Laws of Cloudonomics”

Utility services cost less even though they cost more.

When a company goes on to the cloud, it may pay more per unit of the service than if it owned the resources itself. But, with cloud computing’s on-demand revenue model, it doesn’t pay anything when those services are not required. This works out much cheaper in the long run.  (See: How Cloud Computing Can Save You Money)

Though aside from scaling down and turning off your highly virtualized environment when not in use, in my years of working with IBM I noticed that even the most sophisticated customers often don’t account for all their costs.  A common scenario is the 3 year comparison. So what are you going to do after 3 years? You don’t plan to refresh your hardware? No software upgrades? Flat labor costs? No increase in healthcare costs for that labor?

I have seen many comparative analysis ignore labor costs altogether and account only for hardware costs; or compare an on-premise VM to a VM in the Cloud with some going as far as to create VM sprawl in order to get the cost of a VM unit down to match a Cloud Service Provider.

Sure, with a narrow analysis, if you take your $100,000+ system and divide by hundreds or thousands of underutilized VMs, your IT shop may artificially look competitive, though I doubt your CFO will be fooled by such a comparison.

There is an inherent conflict of interest when a CEO / CFO asks the CIO to show them how they can migrate significant portions of the IT business unit to an alternative provider. Without a doubt you’ll need your CIO to navigate your business through those tricky Cloud waters, but in my opinion, you’ll also need an independent analysis by an objective 3rd party.

Preferably, that 3rd party is not a legacy IT vendor who will persuade you into building the largest Private Cloud your business has ever seen, nor should it be a Cloud Service Provider touting a Hybrid or Public Cloud that may gloss over the complexity of managing distributed applications on cloud infrastructure, securing your data, and Service Level Agreement (SLA) considerations you should weigh carefully. What good is an SLA that waives the cost of the service, if your business being down will cost you 10 times that amount?

A move to the Cloud doesn’t just mean shifting your IT infrastructure. It will mean a change in the way you do business.

If you want the business agility and savings that the Cloud provides, you have to be prepared to change your processes. It doesn’t do much good to be able to bring up a VM in seconds or minutes if you have a 4-12 week legacy procurement process that no longer involves acquiring physical hardware, but VMs, while still requiring numerous management and finance approvals for what may be a temporary VM instance (and amount to a small expenditure).

In my experience, the process at many enterprises take the same length of time whether it’s a 5 or 50 server purchase. Those processes will have to be re-engineered if one is serious about conducting business in the Cloud.

You’ll also have to contend with managing a change in human behavior. To maximize the benefit of your IT resource shift to the Cloud you’ll have to get IT used to shutting down VMs when not in use, not just firing up a physical server and monitoring it for problems.

In his Cloud Connect keynote on Wednesday, Forrester Vice President and Senior Analyst James Staten told a capacity crowd that to save dough with the cloud, it’s important to be able to scale usage back and turn off the cloud when it’s not needed.

The power of cloud computing comes through these two words: Down and off,” Staten said.

If you have a small shop where no one works on the weekends or holidays, you want to inactivate those VMs over those periods. Compare that to turning off that $5000 on-premise server. You still have a $5000 hunk of metal in your datacenter capital expenditure, even worse, it may be financed, and that interest meter certainly doesn’t stop running.

You don’t have to believe the Cloud can deliver savings, you just have to conduct a proper comparative analysis – the savings will be there waiting for you.

-Tune The Future-

By Ray DePena

Sorry, comments are closed for this post.

Comics

At CloudTweaks, we're plugged into the cloud, the internet of things and all that the web has to offer. From wearable technology, to mobile computing, cloud computing and big data, CloudTweaks is your source for updates and news on the most innovative technology.

Popular

Top Viral Impact

Cloud Infographic: Cloud Public, Private & Hybrid Differences

Cloud Infographic: Cloud Public, Private & Hybrid Differences

Many people have heard of cloud computing. There is however a tremendous number of people who still cannot differentiate between Public, Private & Hybrid cloud offerings.  Here is an excellent infographic provided by the group at iWeb which goes into greater detail on this subject. Infographic source: iWeb About Latest Posts Ray Latest posts by…

Technology Advice Report: 2014 Business Intelligence Buying Trends

Technology Advice Report: 2014 Business Intelligence Buying Trends

Technology Advice Report: 2014 Business Intelligence Buying Trends For nearly every business, the concept of business intelligence is nothing new. Ambitious organizations have been searching for any type of data-driven advantage for some time now – perhaps for as long as they’ve existed. However, the historical use of competitive intelligence pales in comparison to the…

Five Signs The Internet of Things Is About To Explode

Five Signs The Internet of Things Is About To Explode

The Internet of Things Is About To Explode By 2020, Gartner estimates that the Internet of Things (IoT) will generate incremental revenue exceeding $300 billion worldwide. It’s an astoundingly large figure given that the sector barely existed three years ago. We are now rapidly evolving toward a world in which just about everything will become…

Cloud Infographic – Cyber Security And The New Frontier

Cloud Infographic – Cyber Security And The New Frontier

Cyber Security: The New Frontier The security environment of the 21st century is constantly evolving, and it’s difficult to predict where the next threats and dangers will come from. But one thing is clear: the ever-expanding frontier of digital space will continue to present firms and governments with security challenges. From politically-motivated Denial-of-Service attacks to…

Featured Sponsors

The Internet of Everything Opens Up The World

The Internet of Everything Opens Up The World

Shaping The World With New Technologies As a connected collection of intelligent objects, the Internet of Everything promises to open up those areas of the world hardest hit by economic, political and agricultural blights. Relatively inexpensive devices, paired with revolutionary energy sources and unprecedented access to information offer great promise to farmers and workers in…

Sponsors

What To Do When You’ve Outgrown Your Basic Business Software

What To Do When You’ve Outgrown Your Basic Business Software

What To Do When You’ve Outgrown Your Basic Business Software You know that feeling. You have multiple business products that aren’t communicating, meaning your employees are doing more work, uploading redundant data into different systems. The software is sluggish and can’t be accessed via browser. You’re paying per user, which is starting to get painful.…

Placement Opportunities - Find Out!

Established in 2009, CloudTweaks is recognized as one of the leading influencers in cloud computing, big data and internet of things (IoT) information. Our goal is to continue to build our growing information portal, by providing the best in-depth articles, interviews, event listings, whitepapers, infographics and much more.

You can help continue to support our community by social sharing, sponsoring, partnering or contributing to this great educational resource.

Contact

CloudTweaks Media
Phone: 1 (212) 763-0021

Join Our Newsletter