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

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

By , Computerworld |  Cloud Computing

Architecting scale also is a challenge that comes with cost repercussions. "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," Eisenberg says. "It's easy to say 'I'll just have more capacity than I need,' until you find out the high costs associated with doing that."

SaaS deployments come with their own set of potential cost overruns. SaaS providers often offer their best deals to customers that sign on to multi-year contracts. "So now you have this three-year contract. Maybe you outgrow it or maybe you find another app that does a similar thing but better," explains Connor Sullivan, an analyst at IDC who follows cloud computing. Businesses then feel trapped with an app that's not the best fit or they end up "double dipping" -- signing up for a new service for additional cost, he says.

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


Originally published on Computerworld |  Click here to read the original story.
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