Does moving your company to cloud really save you money?

Cost-savings, reliability, agility, security and the ability to scale up are traditionally some of the attributes by which information communications technology (ICT) vendors like to sell their new wares. With the cloud it’s no different, and into the frame comes the increased importance of availability and uptime. One shouldn’t therefore be surprised to hear these attributes being touted when cloud providers talk about the benefits of moving over to the cloud.

Not everyone though agrees that the cloud will always save organisations money. Forrester Research published a report in April 2011 by analyst James Staten, which discusses ‘The Three Stages of Cloud Economics’,  pointing  out that moving to the cloud can actually increase costs. Much depends on what organisations deploy in the cloud and how they go about it.

Forethought required
Staten says that the cost-savings can be up to 70 percent with the right application of cloud technologies. “Cloud computing can save you money with the right application, but with the wrong application it can cost two to three times more”, he explains. This means that some forethought needs to be applied by organisations that are thinking about moving over to the cloud.

Customers should therefore gain a complete understanding of the baseline costs and consider how the cloud will be used (including by how many people over the course of time).  They shouldn’t just look at operational or capital expenditure in isolation. There are a number of variables that they need to consider in order to work out whether the cloud is right for them.

“If we are talking about consuming infrastructure as a service (IaaS), the cloud will be cheaper if they don’t plan to use it all of the time and if the organisation’s application is good for the platform”, he says. For software as a service (SaaS) he argues that there is a need to examine the organisation’s expectations and what it is trying to achieve.

“If you are simply looking to outsource a commodity application, SaaS can often be cheaper because it frees up internal resources that are to be put on to a higher a priority task, but even if SaaS costs more the opportunity expense is greater”, Staten adds.