According to Randy George, author of the new Fundamentals: Cloud vs. In-House IT: Spend Smart in 2012 InformationWeek report, the decision to shell out big capex dollars to purchase new equipment or reduce costs by adopting an opex spending model with cloud services may seem like an easy decision, but there are a "staggering number of peripheral cost factors to consider, too." As George points out in his report, the accompanying cost-benefit analysis calculator details the other costs associated with adopting hosted cloud services.
Costs for hosted cloud services go beyond the monthly (or annual) fee linked to the subscription. When deciding to rent versus buy, as George puts it, IT must take into account additional cost factors like high availability, backups, Windows Server licensing, network and storage I/O, Internet bandwidth, staff training, and network monitoring and disaster recovery--all of which come with their own costs to the enterprise.
He outlines three factors to help IT organizations consider the costs and run the numbers. Key considerations are high fixed data center costs, the need to buy another virtualization host to support the business, and that the organization could benefit from storing user data on a server that provides more bandwidth.
According to analyst Jeff Kaplan, managing director for THINKstrategies, there are three key considerations that go into deciding where to leverage cloud services. First is the level of internal investment and expertise an organization is willing to make in its data center resources. Second is the scale and fluctuation of the organization's computing and application needs. The third factor is the ability of the organization to monitor the quality of services provided by the vendor.
Decision makers need to weigh the costs and the benefit to the business, he says. "The costs will vary depending on the level of hosting/cloud services procured."
Depending on the type of hosted service, there are different things to consider when quantifying the cost factors that go into the decision, he adds. Co-location services require the customer to acquire and manage the technology, which is hosted by the service provider. Shared or virtual private hosting services allow customers to use pooled resources at reduced costs. Managed hosting services offload the management responsibility and personnel costs, but the customer is still faced with managing the provider to ensure quality of service. Although cloud services eliminate hardware and software acquisition and deployment costs, those costs are replaced with pay-as-you-go service fees.
"These services can not only substantially reduce the capital investment, but also significantly reduce the deployment time while increasing the flexible use of the resources, which enables the organization to be more agile," says Kaplan.
Learn more about Research: 2012 State of Cloud Computing by subscribing to Network Computing Pro Reports (free, registration required).