According to a recent Rackspace survey of 1300 US and UK businesses, 66% stated that cloud computing saved them money (Published on Virtualization Review). While I don’t doubt that cloud computing can save companies money, I have to question whether the survey respondents have their IT Service costs unitized in a way that allows them to compare the cost of on-premise verses cloud services. Until you know how much a workload unit, such as a mailbox, server, or payroll-per-employee costs, how do you know if moving it to the cloud is saving you money?
There are many costs that go into IT operations that are hard to quantify and many times they are spread across the entire IT budget or in another department’s budget. Has real estate, power, generator, maintenance, HR, staffing, management, training, administration, hardware, software, and licensing all been accounted for in the unit price of an IT service?
There are also a lot of financial benefits included in cloud computing that are hard to quantify. Consider the following situations that are routine events in the the life of an IT Manager:
My points are simply that I am a skeptic when it comes to most IT organization’s ability to quantify a cost reduction or increase when moving to the cloud unless they have unitized and benchmarked their costs across IT operations, and that there are a lot financial benefits to the Cloud that are hard to quantify because it is really about business agility and flexibility, as much as it is about cost reduction.
Another way to look at it is that your on-premise cost model only makes sense if you can predict the future for your business. If we could do that with any certainty then we might be better off playing the stock market!
Schwartz, Jeffrey. (2013). Does Cloud Computing Reduce IT Costs? Retrieved from http://virtualizationreview.com/blogs/the-schwartz-cloud-report/2013/02/does-cloud-computing-reduce-it-costs.aspx.