I'm a Customer - Why Shift to the Cloud?

Almost every business has computers. Many have servers. Some have a dedicated IT person or staff. Their business runs smoothly, so why not keep their IT the way it is? The reason is because of the impact that cloud can have on your business both directly and indirectly. Economically, the cloud and "on premises" IT environments provide the same basic function, but beyond that, the cloud has a number of cost and business advantages.

Overall, the cloud will reduce total lifetime IT spending. Right now, a business may have multiple servers to store data and host applications. If the business grows, it will accumulate more data--it could be customer information, invoices, blueprints or other business plans & campaigns, or additional applications used by employees. More data means more server capacity. More server capacity means paying for additional servers, which also leads to more real estate for a server room, more hours for IT to service the devices & software, and maybe more electricity to keep the server room cooled. This means more money spent on IT regarless of whether the business is an IT company. If you are a general contractor, a restaurant owner, a hotel or any other business, do you want to spend more money on IT or do you want to use those funds to fuel your core business that drives revenue?

Going to the cloud enables businesses to do just that. IT is not required to do server maintenance or many of the "routine" tasks, freeing them to do more projects that add value to the business. The use of the cloud from a large IT provider can also improve the quality of IT since cloud companies employ and continuously train IT experts--more so than a non-IT company would typically do. Leveraging the cloud also enables businesses to avoid catestrophic disasters that could cripple their IT, such as floods, fires or other disasters--the information normally kept on inhouse servers can now be kept offsite using multiple geographic locations for redundancy. It also means that downtime is near zero because of redundancy in cloud datacenters. In other words, the cost to running IT's basics become a lot easier and cheaper for businesses because cloud companies have greater economies of scale when compared to non-IT companies of almost any size.

But what if a company has already invested in "on premises" technologies? Finance and accounting professionals know that the depreciable, useful life of a server is 7 years.  However, most businesses will not replace all of their servers simultaneously, nor would they purchase all of their servers at the same time. The purchase of servers is based on current needs and not based on buying servers in bulk that would be used three years in the future--this would tie up capital that would be unused and would forego the benefit of future server technology advancements. This purchasing behavior staggers when servers need to be replaced. If a business isn't going to go "all in" to the cloud, they still maximize the return on assets in their current IT infrastructure. As servers need to be replaced, workloads could be shifted to the cloud and the servers can be retired instead of buying replacement servers. If a business's server utilization is at 100% and they need more servers, instead of buying more servers, smaller amounts of incremental capacity can be purchased in the cloud at a lower cost.

One of the top concerns of customers is the cost of converting their IT environment to the cloud. What if you could amortize this cost over time? Yes, there is an upfront investment, but it is not so different than when companies must make an investment in more hardware and installation. The cost may be greater, but when examined over time and compared to the cost of the set up of individual servers on a per-server basis, these initial cloud-se-up costs should be substantially lower. It is similar to a lease/purchase decision. If you make the decision based on short-term financial impact, it could end up cost more in the long run. The concept of the cloud is that over the long-run, total cost of ownership will be reduced--an important calculation in the decision to move to the cloud that needs to not only include the current IT environment, but also future IT growth expectations.

The cloud is much more than IT cost reduction--total cost of ownership and opportunity costs must also be factored into decisions. As noted already, the IT staff would have more manhours available for higher value-add projects. Perhaps at a general contractor they would have more resources to work on CAD projects. Any business could ask, "What are the last three IT projects we rejected because we didn't have the IT resources?" and determine whether a move into the cloud would enable them to take on these previously rejected projects. In addition to this, lower spending on servers, server rooms and other incidental expenses frees up money to invest in the core revenue-generating functions of a business. For the general contractor, perhaps this means being able to upgrade more equipment at a construction site. For businesses with a substantial IT environment, it could even mean the difference between being able to bid on one more project or not.

Information in this post is the opinion of Rob Sternowski and not reflective of any other entities.