Cloud computing is known for its ability to lower operational costs for companies, but there's more to it. If customers want to increase availability, reduce risk and increase value, cloud computing can help with that, too. Here are four ways the technology can save money, as outlined by Mike Alley, director of managed services solutions for Logicalis.—Jennifer Bosavage, editor
There has been a lot of debate over whether or not turning to the cloud can really save companies money … and it’s a discussion worth having. Everyone’s pointing out that using cloud computing means you’ve turned a capital expense into a more manageable operational expense. That is true, and it has significant merit. But it doesn’t paint the whole picture. The amount of money a company saves or spends in the cloud is directly related to the level of services they employ, the increased operational efficiencies and risk reductions they enjoy as a result, and the ability to meet greater demands from the business units with the more effective IT delivery model.
Therefore, any discussion about cost savings in the cloud has to first consider the top four ways using the cloud can actually save a company money.
1. Shared Resources: Whether or not the cloud saves a company money is directly related to the level of services provided. Shifting the procurement of capital equipment to a third party will save some money based on the sheer volume of purchases the cloud computing provider makes and the fact that those purchases are then shared among the provider’s customers. Sharing the cost of basic system management, software installations, and other services, however, can reduce in-house costs even more. Step that up with a provider that offers high-end security and compliance support and CIOs will hit the jackpot in cost savings across the board.
2. Efficiencies of Scale: A serious cloud provider will have the tools on hand to automate patch, performance and capacity management – tools that are so costly that most businesses skimp on or take a pass on them entirely. But, when the cost is spread among multiple users in a cloud environment, it becomes not only cost effective, but compelling to take advantage of the risk protection that can be offered at a more affordable price point through the cloud.
3. Business Agility: When a business requires increased capacity to accommodate the needs of a new department or project, delays frequently occur throughout the process of getting a capital budget approved, procuring the equipment, and installing and bringing the new systems up to speed. With a cloud provider, gaining access to additional computing resources is as simple as issuing a change order; it’s the difference between having the requested resources up and ready for service in days versus weeks or months and paying for it through a slightly higher monthly operational cost instead of a significant up-front capital expense.
4. Same Equals More: What is the value of risk reduction? What if the IT department ran smoothly every day; patches, security and capacity issues were outsourced problems; and IT personnel could actually focus on advancing the business’ productivity goals rather than being firefighters? This is exactly what happens when businesses outsource everyday IT functions to a qualified cloud provider and have a well-defined SLA in place. The Catch 22 here is that, when things in IT go this well, demand for IT services may increase, which may diminish operational cost savings, but increase reliability and business productivity overall.
Don’t focus as much on whether you can save them a few dollars in operational costs monthly – even though you can. Instead, determine whether it is more important to demonstrate a reduction in overall costs, or to increase availability, significantly reduce risk and increase value, while maintaining your current expenditure?’ Invariably, they choose the latter. That doesn’t mean the cloud isn’t also saving the customer money: It simply means they’re getting the concept of choosing to eat filet mignon for beef stew prices.