Hidden behind the clouds

Will a move to cloud save you money on your IT budget, or could hidden costs wipe out the benefits?

Many businesses have become disillusioned with the cost of software license renewal and hardware that takes up valuable space and requires endless maintenance. They are increasingly choosing a different model when it comes to paying for their IT resources.

Head in the clouds 

The cloud model of applications – which is held securely in a remote data centre, is accessible through a simple browser, and is paid for only when used – has obvious appeal, particularly to a small or medium-sized business that doesn’t have much in-house IT expertise or the budget to keep up with each new generation of technology.

Alternatively, small businesses might be drawn to a software as a service (SaaS) contract, where centrally held applications are charged monthly or annually by user, making software costs predictable well in advance.

If you like paying for exactly what you need and use, with the capability to scale IT resources up and down at will, then either of these models could be the answer.

A done deal? 

However, before you go ahead and sever all ties with your existing IT solutions you need to carefully consider the options. Are cloud-held applications really so much cheaper than traditional alternatives? Are there hidden costs that the service provider doesn’t mention in the sales pitch? Are there tips to ensure you come out of a SaaS migration in pocket?

The quickest way for your cloud migration to burn money is to give in to the temptation to customise the basic solution to individual user requirements – perhaps as a dangling carrot to employees who are unsure about losing desktop power. This leads to development costs you may not have forecast. It is therefore best to train employees to use the basic solution as it comes, and learn how to maximise the benefits themselves.

Pay as you go

If you are paying for applications on a per-user basis, you will need to keep an eye on the number of users on the system. As your company grows, so too will this aspect of your IT expenditure: this may not be a bad thing but it should be accounted for in your estimates of IT overheads.

"If a cloud platform is chargeable only when on, don’t leave it on when it’s not in use – just as you wouldn’t keep a minicab waiting on the off-chance you want to make a journey later that day."

If you are leaning more towards a pay-by-use model, you may have reasoned that this is the fairest way to pay for IT, as you are not penalised for growing your employee base. However, costs here can vary greatly, depending on how the service is deployed day to day. If a cloud platform is chargeable only when on, don’t leave it on when it’s not in use – just as you wouldn’t keep a minicab waiting on the off-chance you want to make a journey later that day.

It is important to remember that many cloud-based services charge for the volume of data they need to store on your behalf – probably more for data that is needed close to hand and less for data that is not in constant use. Stored data will only ever grow and it must be managed: cache or delete the data you don’t need.

One size fits all 

Not every application your business requires will fit the cloud model with equally good results. The best value will be achieved from applications in continual use, where that usage scales up and down unpredictably. An application you only need on an intermittent basis might not be appropriate on a pay-per-month model. Some applications are seasonal, some are for occasional heavy use, and some are highly specialised to your industry and best licenced from an expert developer and hosted locally.

A lot depends on how you measure the comparative cost of locally hosted applications against those held in cloud and used at will. A cloud migration will save capital expenditure (CAPEX) on hardware upgrades but will probably have short-term cost implications, such as consultancy fees to get the system up and running.

A radical shift in how IT resources are consumed will probably necessitate an inventory of the investments in existing in-house equipment and resources. If you can come up with a strategy that maximises usage of existing resources, and minimises outgoings on new technology, so much the better.

Measuring results

Going forwards, you will need to choose a suitable term to measure the cost-effectiveness of a cloud migration. If you break down the costs to your cloud provider over two or three years, it may not seem like you saved much, if anything. However, costs over a five or seven-year period might put this model well ahead of traditional IT sourcing.

You need – as much as possible – to be in charge of these ‘return on investment’ calculations, and the same goes for the detailed terms and conditions that will be part of any agreement with a cloud service provider.

Finally, there is the human element to consider. It can be complicated and time consuming to change employee perceptions of a model that might be seen as a major shift in their working practices. This is where choosing the right partner to help with your cloud migration is essential. You will pay for their advice but if they can deliver the training and consultancy that makes the difference between success and failure, it is money well spent. The unpredictable human element has put paid to many evolutionary IT steps.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK