Building an economic case for cloud

Experts say we’re all destined for the cloud, so why has adoption been slower than expected?

There’s a paradox at the heart of cloud computing. Every vendor, consultant or industry analyst with their finger on the pulse has said that cloud computing is set to dominate the business landscape in the future. Gartner famously said that by the end of 2012, 20 percent of companies would have no IT assets and even companies like Microsoft, grown huge off their efforts in on-premise software, have claimed the future is cloud-based.

Yet here’s the paradox: Despite all this interest, there are still large swathes of companies not yet prepared to move to cloud-based delivery. How does this interest in cloud technology marry-up with the lack of action in moving to the cloud?

According to survey carried out last year on behalf of BT, there’s a simple answer – 56 percent of business managers were struggling to articulate the business case for cloud computing. And as these were the people who were controlling the purse strings within organisations, take-up of cloud was likely to stall. There’s another paradox at play here: the people who are best placed to make the call on the possible impact of cloud computing on a business are the IT staff and, in some cases, they are often the same people who could have a vested interest in cloud not happening.

How then does a business make the judgment call on whether or not to go down the path of cloud computing?  Making that decision involves a finely-balanced assessment of different factors – not all of them related to IT.  It’s true there are decisions to be made about replacing servers (not forgetting the cost of support and maintenance), moving legacy software to the cloud, managing the amount of power required to support those servers, managing the software licensing and, finally,  controlling the cost of the real estate – is there a need to build those giant data centres?

It also shouldn’t be assumed that it’s always the case of moving everything to the cloud. There are some applications that sit far more happily within the cloud than others.  For example, any site that has to deal with bursts of traffic either planned (for example, retail sites at Christmas) or unplanned (a music site that has an unexpected hit) would sit far more happily in the cloud.

But there are additional factors – some of which are not so easy to quantify. How do you assess the effect of a business transformation which could be brought about by a move to cloud? There are many variables at play here because cloud could have the effect of disrupting a business in so many ways.

The talk has all been about IT but that’s the wrong approach. Although IT may seem like an expensive resource it generally represents no more than five percent of the average company’s expenditure. However, cloud computing does offer several hard-to-quantify advantages for any organization: Greater efficiency in working, the ability to monitor departmental expenditure better,  the means to bring products to market quicker and the ability to implement new projects quicker.

That’s why calculating the return of investment is a difficult call to make. There are plenty of calculators available to work out whether moving to cloud computing is financially viable but there are plenty of drawbacks about their use. That’s because so many of them are focused heavily on IT equipment – but as we’ve seen, that’s not always the best guide to what’s best for the business or not.

The other factor is that most of them are produced by vendors and are geared towards that vendors’ product. Microsoft has a good calculator – provided you accept that it’s going to be aimed very much at prospective Azure customers – so have Amazon and Google. To be fair to all these vendors, there’s an acceptance that this isn’t the whole story and the decision involves a lot more than crunching numbers – although these tools do give some idea of the factors to be considered,

The other strand of ROI tools are from other software vendors. These are not aimed at driving support towards Virtual Cloudsviders’ products but are seen as offering an easy path to those software companies’ paid-for products. For example, companies such as Apptio have released tools that offer a way to assess the cost of moving to the cloud and the value of any savings.

In truth, such calculators provide a back-of-the-envelope guide but won’t provide any real help in making the decision.  The choice of whether or not to move to the cloud is a decision that has to be made by a group of people: The IT staff (both infrastructure and development people), the finance director and the CEO would generally need to work in parallel on it.

The move towards virtualisation and cloud computing has broken up IT silos within companies; much the same effect has to occur throughout organisations as a whole. It involves a radical new way of thinking but then cloud computing is going to effect a radial shake-up of business processes so companies should start as they mean to go on. Without such discussions, the chances of building an economic case for cloud are going to be slim.


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