Cloud services can save you money -- if you're careful

Determining whether using the cloud will pay off is an extremely complicated process.

Businesses also should thoughtfully consider costs over time. It turns out that the price for SaaS apps in general aren't coming down the way that many people once predicted. Historically, the thinking was that with more users of cloud services, economies of scale would reduce costs for users, Sullivan says.

Some providers like Salesforce have true multitenant cloud services and are benefitting from scale. While Salesforce is passing those savings on to customers, it is also continually adding new features, which cost extra for users. "People want those new functionalities and so the cost to the end user hasn't gone down," Sullivan says.

"The message we've been drumming is it's all about scale," Fino Consulting's Eisenberg says. "If your business problem is not about scale, cloud is in all likelihood not your ideal solution."

But even the scale issue depends on the company. "You get all these Netflix, Web 2.0 apps that are going onto the cloud not just because it makes sense but because their investors aren't willing to fund the capital expenditure for computer equipment," says Domicity's Brien.

Just as in the on-premises world where capacity is kind of an art more than a science, it's the same in the cloud. Mark Eisenberg, Director, Fino Consulting

Large companies, on the other hand, likely already have their own data centers -- and all the fixed costs that implies. "If you aren't going to turn off your servers and lay off people, you may not save any money by going to the cloud," Eisenberg says.

That is, unless a new workload is so variable or short-lived that expanding a data center doesn't make sense. He remembers a case study Microsoft did about a customer that needed 4,000 servers for just six hours a day for a few days each week. That workload was a perfect candidate for the cloud, where the customer paid only for the time its app ran.

If the shoe fits

The type of workload an organization hopes to move to the cloud will also determine whether the transition makes sense economically. "We have paid close attention to what sort of circumstances make for a successful cloud deployment," the GSA's Coleman says.

For instance, legacy apps that run on unique hardware platforms, apps that are highly transactional so can't tolerate latency and apps with very complex business processes that are specific to an organization may not be appropriate for the cloud, she says. This doesn't necessary exclude all these apps from the cloud, "but it's something to consider very carefully," she explains. In some cases, careful engineering might make shifting these types of workloads to the cloud make sense, she says. But ultimately the performance might not match an in-house installation or the cost could be prohibitive.

Underlying the decision factors is the pressure on IT managers from their bosses, "who are looking at the success of Amazon and saying, 'why can't you take 10% off your budget?'" Domicity's Brien says. At the same time, those IT people don't want to rush into using a cloud service for the wrong reason only to see it cost more or impact their service levels.

All those pressures mean that enterprises are taking it slowly. Larger businesses are still at the stage of "primarily playing around" with the cloud, Brien says, in the process of trying to decide which of their apps make sense there. "They're just moving slowly, doing it bit by bit," he says.

"It's really early days, even though all you ever read about is the cloud," he says. "The overall economics of the cloud are that it will ultimately absorb most machine cycles, but it will not happen as fast as people tend to think it will."

Nancy Gohring is a freelance writer covering cloud computing, mobile phones and wireless networks. Follow her on Twitter ( @ngohring and contact her at ng@ngohring.com.

Read more about cloud computing in Computerworld's Cloud Computing Topic Center.

This story, "Cloud services can save you money -- if you're careful" was originally published by Computerworld.

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