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Cloud hosting: Look beyond cost savings and weigh pros, cons

Transformation Network

By pwsadmin | May 15, 2021

The Achilles heel of every transformative business model is their reliance on ever increasing amounts of data that need to be transported quickly across wide area networks and processed at edge computing end points. To meet this expected demand, the global telecommunications industry is rapidly moving toward a future in which networks must have the…

Essential Characteristics of Cloud Computing as Digital Transformation

By pwsadmin | May 15, 2021

Hybrid IT blends traditional datacenters, managed service providers, and cloud service providers to deliver the necessary mix of information technology services. This IT consumption model enables a composable infrastructure which describes a framework whose physical compute, storage, and network fabric resources are treated as services. Resources are logically pooled so that administrators no longer need…

Transformation Innovation

By pwsadmin | May 15, 2021

4 Factors Driving Digital Transformation ROI The critical assessment factors for cloud ROI risk probability are the following:      Infrastructure utilization Speed of migration to cloud Ability to scale business/mission processes Quality delivered by the new cloud-based process  These four factors directly drive digital transformation ROI because they affect revenue, cost, and the time required to…

Transformation Frameworks

By pwsadmin | May 15, 2021

Digital transformation necessitates changes in an organization’s operational processes. According to Harvard, a focus on operations can lead to business process optimization and entirely new revenue streams. Three common routes for this are the following:      Robotic process automation (RPA) which uses artificial intelligence to automate routine activities      Remote worker enablement that uses workspace virtualization and…

Transformation Infrastructure

By pwsadmin | September 26, 2020

Hybrid IT enables a composable infrastructure which describes a framework whose physical compute, storage, and network fabric resources are treated as services. Resources are logically pooled so that administrators need to physically configure hardware to support a specific software application, which describes the function of a composable architecture. This type of transformative infrastructure is foundational…

Essential Characteristics of Cloud Computing as Digital Transformation

By pwsadmin | September 25, 2020

A survey of 2,000 executives conducted by Cognizant in 2016 identified the top five ways digital transformations generate value:      Accelerating speed to market      Strengthening competitive positioning      Boosting revenue growth      Raising employee productivity      Expanding the ability to acquire, engage, and retain customers   Digital transformation is also a cultural change. Cloud Computing as Digital Transformation Since cloud…

Embrace Transformation

By pwsadmin | September 22, 2020

From a business perspective, differentiating business processes and quality customer service are central to overall success. Business leaders must therefore clearly identify and measure how information technology contributes to the value of every key business process. They must also know how to most cost effectively use IT when the task is merely the management of…

Computer Vision Advances Zero-Defect Manufacturing

By pwsadmin | July 25, 2020

by Kevin L. Jackson Electronics manufacturers operate in a challenging environment. It’s hard enough to keep up with the ever-accelerating rate of change in the industry. Now customers want increasingly specialized product variations in less time and of higher quality. Meeting this demand for increased product variation can seriously impact the bottom line. Such variability increases…

Real-Time Analytics Power the Roadway of the Future

By pwsadmin | July 25, 2020

By Kevin L. Jackson The complexities of citywide traffic are pushing the limits of existing transportation management systems. Outdated infrastructure is based on proprietary, single-purpose subsystems, making it costly to acquire, operate, and maintain. And current roadways are simply not prepared for the future of autonomous vehicles. Enter the SPaT Challenge, an initiative encouraging cities and…

Thriving on the Edge: Developing CSP Edge Computing Strategy

By pwsadmin | March 6, 2020

Communications Service Providers (CSPs) are facing significant business model challenges. Referred to generally as edge computing, the possibilities introduced by the blending of 5G networks and distributed cloud computing technologies are redefining how CSPs operate, partner, and drive revenue. A new Ericsson Digital whitepaper entitled, “Edge computing and deployment strategies for communication service providers,” addresses these challenges…

Is your company struggling with the idea of using “cloud hosting” in order to save money?
Truth be known, using cost savings as the primary reason for moving to cloud will almost guarantee failure. Some reasons that typically lead to cloud computing costing more include:

  • Building and migrating to a private cloud, which will almost always cost more than staying in a traditional data center;
  • Migrating legacy applications that weren’t designed to operate in a virtualized environment or are tied to very specific environments run on older operating systems or require out-of-date drivers;
  • Special or very unique auditing requirements;
  • Failure to modify or update enterprise IT policies to reflect the new IT consumption model; and
  • Failure to modify operational practices in a way that takes advantage of the “pay-as-you-go” economic model.

With that said, however, over 82 percent of companies have saved money just by implementing cloud computing, 14 percent were able to shrink the size of their IT department and 80 percent reported extreme productivity improvements.[1] That means that moving to the cloud can actually make money!
An organization’s decision to move to the cloud is, above all else, a cultural change that could affect much more than the IT department.
First, using either cloud computing or traditional data center hosting comes with a decision to outsource all or a portion of your organization’s IT infrastructure. This should drive your initial decision of whether to consider cloud computing as a viable option. Although characterizing these observations as advantages or disadvantages depends on the enterprise’s specific situation, environment and requirements. Generally accepted views are reflected in Table 1.

 

Second, I’d like to point out that the term “cloud hosting” is very misleading. Even though it is broadly used in the marketplace to represent a fusion of cloud computing and data center hosting, the two business models are complete opposite.

  • In data center hosting, the customer dictates the hardware, software, security, and operational processes that will be used by the provider. The provider will customize the offering to meet those dictates. The customer bears the capital expense of doing this through a long-term financial agreement with the provider.
  • In cloud computing, the cloud service provider dictates the hardware, software, security, and operational processes that can be used by the customer. The provider typically will not customize their offerings to meet customer dictates. Because the capital expense of building the cloud offering is borne completely by the provider, it recoups the cost through a pay-per-use operational charging model.

This background is essential to putting the advantages and disadvantages of both into perspective because they are driven by their respective embedded business models. See Table 2.

The choices between outsourcing vs. insourcing or cloud computing vs. data center hosting are not a science, nor are they absolute. An organization of any significant size will most likely pursue an “all the above” strategy with constant corrections driven by cultural and business environments. As soon as you’ve made a decision you’ll probably start the process all over again.
So, my final piece of advice is to plan for and expect constant change because the most successful organizations have change management as a core competency.

For more views regarding this important decision, you should check out the following:

 This post was written as part of the Dell Insight Partners program, which provides news and analysis about the evolving world of tech. For more on these topics, visit Dell’s thought leadership site Power More. Dell sponsored this article, but the opinions are my own and don’t necessarily represent Dell’s positions or strategies.

Cloud Musings

( Thank you. If you enjoyed this article, get free updates by email or RSS – © Copyright Kevin L. Jackson 2015)

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