Jul 212010
how much money can we save on cloud computing

“Billions of IT savings in the Clouds” trumpeted the Australian Financial Review last week in a front page article on cloud computing that claimed moving services online could “slash technology costs by up to 80 percent”.

If nothing else, those lines lead any IT industry veteran to rise a wry eyebrow; a business that adopts a new platform, technology or vendor solely on the claim of massive cost savings is in for a world of pain, disappointment and heartbreak.

There’s no doubt that cloud computing and software as a service are the IT industry’s growth areas and there are many benefits for the businesses that adopt these technologies. Reduced costs is one of the attractions, but it isn’t the only factor a businesses should consider.

Other aspects are the flexibility of not locking yourself into specific hardware and technology platforms, reduced capital and labour commitments along with improved security, reliability and data protection.

This last point is probably the killer reason why you shouldn’t be looking for 80 percent cost savings with any product. As we discussed a while back, to go onto the cloud you have to trust your supplier has the utmost competence and integrity. A provider who offers nothing but slashed costs will struggle to provide peace of mind.

It’s likely in a few years time only the biggest of the biggest companies will have inhouse IT staff and servers as most business IT operations will run over the internet and through web browsers. Most businesses will think having IT staff on the payroll is as unusual as employing a full time plumber or electrician in the office.

Although we probably won’t get to bank those savings — as we’ve found with the roll out of IT services in the last 20 years, new industries will develop that will soak up the labour and create new cost centres. While today’s services may be 80% percent cheaper, just as today’s computers and mobile phone are 80% cheaper than those of 20 years ago, we’ll be using other services and the price of those will soak up a lot of those savings.

A bigger concern is for the cloud and software as a service industries themselves. If online services are identified as merely a cost cutting product, then these markets are going to be rapidly commoditised with a race to the bottom not dissimilar to what we’ve seen in the PC industry. Which will perversely mean security and reliability conscious businesses will keep their IT in house rather than risk it to a cheap charlie data service.

History’s shown that selling and buying cheap in technology is a mug’s game. So don’t get seduced by claims of ridiculous savings with any technology; be it cloud computing, telecoms services or any other line item. All too often that cheap price or massive saving hides some nasty traps.

Because of the compelling benefits cloud computing is the way businesses will go over the next few years but those who choose a platform simply because it appears 80% cheaper probably won’t be around to tell us about it.

  2 Responses to “Why cloud computing isn’t just about savings”

  1. Honestly, I think the big upside to cloud computing (at least from my perspective) is that it’s inherently scalable. With game development, we’re always torn between the inherent desire to get a lot of people looking at our product, and the concerns that the servers will fall over if they do. Having a real time scalable alternative in place makes a world of difference, and stops you having to try and do those launch day predictions.

    Nothing worse than drumming up a lot of attention and mindshare and then having everyone end up at a 404!

  2. […] That emphasis on cost needs to be treated carefully as well. As I’ve argued about cloud computing, it’s risky to overstate savings in a new industry as there’s a risk of commoditising the…. […]

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