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

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:

• Outsourcing Vs. Insourcing: You Need Both
  
• Cloud, Colocation and the Transforming Data Center: What You Need To Know
• Colo in the age of cloud
• The Total Cost of Ownership: In-House vs. Cloud-Based Development Environments

 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.

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