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Cloud Costs And Other Conundrums

Jan 31 2014, 1:54am CST | by

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Cloud Costs And Other Conundrums

There has been a whole lotta brouhaha recently about public clouds – that is, the cloud services provided by such tech heavyweights as Amazon, Google, IBM, Hewlett-Packard, Microsoft, Oracle, and Rackspace. They theoretically represent a less-expensive way for enterprises to provide computing infrastructure without actually spending on hardware and management. They are not to be confused with SaaS applications, which theoretically represent a less-expensive way for enterprises to provide computing infrastructure without actually spending on software and management.

I say theoretically, because cloud computing has not always been shown to be cheaper (it does, however, provide more flexibility). Arthur Cole addresses this conundrum in his IT Business Edge post this week insisting that no, the cloud is not always cheaper

“Spending on IT is dropping while spending on cloud services is increasing,” he acknowledges, but correlation does not equal causality. “[R]ecent analyses show that once internal infrastructure begins deploying cloud services of its own, it can meet enterprise needs for about $100 per user while Amazon and other providers come in at around $200 per user,” Cole writes.

Independent industry analyst Rob Enderle also noted in CIO last week that there are major misconceptions about the cost of the cloud (Cole also cited Enderle’s story), which becomes a problem when IT lets business units acquire it on their own.

“Users don’t buy at enterprise volumes; often, IT can actually provide equivalent services for less,” Enderle writes. “Why? Enterprises operate at huge scale. They buy their hardware for much the same cost as Amazon does, and they don’t have to maintain the sales and marketing overhead. IT also doesn’t charge sales tax for what it provides to its customers. However, this lack of sales and marketing staff means an IT department can’t present its offerings in a compelling fashion, so IT generally lags behind a service such as Amazon when it comes to ease of use.”

Interestingly, cloud consultant David Linthicum significantly disagrees with Enderle. In an InfoWorld piece earlier this month, he writes, “Public clouds have matured a great deal in the last few years, and the truth is they’re more than ready for prime time than most private clouds. In addition, they’re more cost-effective and do a much better job of providing time-to-market advantages, business agility, and scalability.”

Man, when the really smart experts disagree so definitively, which path is a poor CIO supposed to take?

The answer, I believe, comes from an issue I wrote about late last year in It’s 10 O’clock – Do You Know Where Your IT Costs Are? ), which is also embodied in Enderle’s key takeaway: “If you IT folks haven’t conducted a cost analysis of your service providers yet, it is well past time. If IT wants to compete with Amazon, it needs to fully step up.”

That is, CIOs need to understand both their costs and their value to the enterprise. Certainly, few CIOs have had to spend much time thinking about their IT departments’ competitive advantage, but the time to start is now.

Email CIO Next Community Manager Howard Baldwin if you’re a CIO who wants to spout off in an opinion piece on a technology-related issue like cloud computing.

Source: Forbes


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