Feb 2, 2012

Cloud Economics: How Savings Go Beyond the Price Tag

Let us offer up this typical scenario. You’re an IT manager who is seriously considering a move to the cloud. How would you go about your cost benefits analysis? What you might do is compare the capital expenses associated with your on-premise IT needs against the monthly operational expense of hosting your data and applications in the cloud over a period of, say, three years. To do this, you would simply add up the price tags for servers, network hardware, server racks, and so on. If you were more comprehensive, you’d factor in replacement hardware, the cost of your floor space, the power bill, and the staff needed to manage everything. If you were a big enough business (read: big IT budget), you’d also factor in your server room features, such as special cooling units, redundant power sources, power backups, onsite generators, around-the-clock armed security, and an overnight admin to monitor the servers. What you would see, in just about every case, is that the cloud offers up substantial cost savings and frees up your capital for core areas of your enterprise. But sometimes, those cost savings might not be enough to motivate you to deal with the ‘hassle’ of migrating your services. The problem with that, however, is that the true cost savings of the cloud goes well beyond price tags for equipment. Perhaps the biggest benefit of hosted IT, specifically with cloud computing models, is that it offers true cost transparency. You’re provided, in most cases, with a monthly bill, and that includes the whole shebang – servers, network, monitoring, racks, power, OS licensing, support, multiple connectivity providers, diesel generators, etc. With on-premise IT, it’s not nearly as transparent, which is why you also need to consider the not-so-obvious costs associated with owning your own infrastructure. Here’s a checklist of considerations:

Specialized IT staff (network pros, system admins)
Time and other resources from management away from the core business.
IT resources spent focusing on infrastructure versus the business applications hosted on them.
Never-ending procurement of infrastructure, replacement hardware, and new technologies.
On-going maintenance of servers from a hardware and software perspective.
Around-the-clock monitoring.
Disaster recovery plan.
24/7 armed security, surveillance
Software licensing.

You’ll also need to ask yourself these questions:

Can you support your solution around the clock with your current staff?
Do you have expertise in all areas including software, databases, load balancing, caching, security, and so on?
Is your IT budget adequate to keep staff current?
How strong is your physical and data security?
Who is trained to configure and maintain your firewall?
Can you afford to carry multiple connectivity providers?
What system is in place to ensure uptime during general power loss?
Do you perform daily backups and store securely in an offsite location?

When looking at the bigger picture, the cost benefits of moving your IT needs to the cloud begins to swing overwhelmingly in one direction. What’s your big picture IT costs? Need help figuring it out? Give us a call.