Cloud Computing and its attendant services are not a fad that will fade anytime soon. CIOs will be asked to examine how to use them and there will more direct pressure from CFOs and CEOs to bring down the cost of computing by using the cloud. Trying to equate the cost of the in-house infrastructure versus cloud computing can quickly become a zero sum game.
Enterprises will be pushed into being more fluid as more on-demand computing will be required over time. This is already partially being met with server and storage virtualization and as more companies strive for shared infrastructure supporting multiple businesses or application solutions. Enterprises need to evaluate functions first and cost last, as a selection criteria for placing their applications into the cloud.
Gmail from Google or other public resources such as Amazon Web Services (AWS) have a different cost profile (i.e., Total Cost of Ownership – TCO) and a different risk profile than internal computing resources. The Cloud Computing environment is generally an OPEX based proposition and in-house is a combination of both CAPEX and OPEX. Anytime CAPEX enters in the financial picture the fixed portion of the TCO will raise the overall cost picture higher than the transaction based costs associated with cloud computing. A cost analysis alone will give only a partial answer. The two services models are different.
Other factors to consider are those of features and functionality required for an organization’s data center needs.
- Are those needs for higher performance, tighter security levels, and more manageability going to push the overall costs up and increase business risk? There are business risk models that can help derive possible costs to risk exposures.
- Since you have to get to these remote cloud servers remotely, will communication costs eliminate any cost advantage? Does communication have to be encrypted?
Comparing the value propositions can be like comparing apples to oranges.
Basing your decision on cost alone without examining all the features and functionality will only set the wrong expectations for the CFO and CEO. It’s necessary to highlight all the advantages and disadvantages of both in-house and cloud options, followed by an all-in cost analysis or TCO.
Let Daniel L. Ruggles and the team at PM Kinetics, LLC help you navigate the complexities of Cloud Computing, Sourcing and Capital Planning, Vendor Management, IT Security, Infrastructure planning and execution.