Understanding the Economics of the Cloud

Leading IT organizations are now viewing cloud computing as an investment in business transformation, not just a way to cut costs for IT. Because of the cloud, CIOs are no longer forced to make decisions between IT cost cutting and the addition of new business agility and value.

Companies today require the ability to quickly and easily adapt to changes in the business environment. Cloud computing provides CIOs the tools to deal with these situations and to avoid over-investing in technology to meet peak demand or scale for growth. With cloud computing technologies, you can now scale quickly and easily, while providing the necessary agility required for your business.

In today’s world, companies face challenges that can prove impossible to forecast. Economic uncertainty, market changes, and fickle consumer demand leave companies vulnerable to swings in demand for IT resources. Underestimating IT demand can lead to missed revenue, outages, and other major disruptions to your business. Conversely, overestimating IT demand can result in write-offs for unused capacity, equipment, and facilities.

Cloud computing can free CIOs from these worries, as cloud computing provides a more efficient way to manage demand. With cloud computing, you can rapidly move applications out to a public cloud for peak processing, while bringing them back in-house when it is more economical to do so. With cloud computing, you pay only for the IT resources you use, a key to both reducing costs and minimizing risks.

As CIOs consider cloud computing, a combination of the business requirements and existing IT investments should be considered. The approach should be flexible and meet the business requirements both now and in the future, as well as secure.

• Investigate the hidden costs. Some providers charge setup, transfer, storage, and redundancy fees, which may not be reflected in the “per month” subscription fee. Be sure to understand these costs clearly to determine your real investment in cloud technologies.

• You can’t manage what you can’t measure. Make sure that you maintain control over provisioning and management of cloud servers. The ease of standing up cloud infrastructure can lead to overspending if not monitored and measured.

• Leverage existing investments. Consider the depreciation and amortization of existing IT investments. Virtualization is the foundation for every cloud deployment model. Investigate virtualization technologies that allow for the ease of moving VMs to and from the cloud.

• Avoid selecting technologies that don’t integrate with your existing investments. You don’t want an isolated cloud environment that cannot integrate with your existing technology investments.

Cloud computing is a method to achieve real business transformation, enabling organizations to add new IT capacity and capabilities, control costs, and minimize the risk of over-investing or under-investing in IT. Cloud computing presents an opportunity to reduce IT costs, but also to increase business agility along with the revenue growth, profitability and competitiveness of your organization.