Public Cloud Computing: Cost Reduction or Cost Transfer?
Despite cloud computing being gradually adopted into various enterprises, a number of misconceptions are still causing doubts. Among these can be found the question: is cloud really bringing real cost reduction or simply a cost transfer?
Several cost-cutting corporate decision-makers have reportedly succeeded in using cloud technology to reduce overheads. Can this claim be taken as read?
Firstly, some background.
Depending on the size and nature of operations, companies normally establish in-house IT systems that handle a list of on-going activities including – but not limited to – e-mail, data processing, data storage, communications, e-(electronic) publicity, decision-making methods and IT marketing Applications. All these functions are primarily hosted in-house which, in most cases, costs a lot to implement, maintain and customize if productivity is to be optimized.
A public cloud is one type of Infrastructure as a Service (IaaS) which allows business managers to have their IT managed by external providers. In practice, this can allow companies to reduce expenses for purchasing, implementing and developing software (required at end-user workstations and server-level), servers and their accompanying hardware, firewall infrastructure, media outlet, storage facilities (which include a series of hardware back-ups and related servers for security), facility accommodation, and concurrent personnel expenses (that is, salaries, benefits and consultancy payments). Utilizing a public cloud service should lift the above responsibilities from the shoulders of corporate IT managers, allowing them to focus on their core business.
In principle, cloud computing provides a “buffer experience” for corporate executives. They need neither expend themselves on managing complex in-house IT systems, nor agonize over whether their IT structures are securely hosted in an external and non-intrusive environment with unrestricted access to IT infrastructures. Although this practice seemingly helps business managers save cost on IT applications, some pundits have argued this is not always true, believing instead that hosting a company’s IT systems in a public cloud denotes a “mere cost transfer” from the company to the external cloud-technology providers.
So, what do the stats say?
Typically, a mid-size company is expected to spend between $130,000 and $200,000 a year on its IT set-ups. Here’s an important breakdown of likely yearly capital expenses.
| Description | Cost ($) |
| Software & Hardware (purchase, implementation, customization) |
50,000 |
| Servers and Server’s maintenance | 40,000 |
| Personnel Expenses (salaries etc) | 40,000 |
| Total | 130,000 |
Post-Cloud Technology Adoption Expenses
| Description | Cost ($) |
| Software & Hardware (purchase, implementation, customization) |
30,000 |
| Servers and Server’s maintenance | None |
| Personnel Expenses (salaries etc) | None |
| Public cloud hosting & other services | 60,000 |
| Total | 90,000 |
Taking these figures into account, it does appear possible for businesses to save on their IT infrastructure costs through the use of public cloud services. With cloud, they only need pay for resources actually used, rather than purchase additional capacity which is permanently paid for but used only in times of peak access.
Public cloud computing provides an opportunity for an “agile IT” system, which allows businesses to increase or decrease resources (processing power, memory and storage capacity) based on their business requirements. This flexible scalability is not possible in a rigid in-house IT structure.
Above all, optimized use of resources can only be achieved by identifying the particular needs of the organization, during which a public cloud-based structure to reduce waste can be created.
There are several ways on how to configure the public cloud, including: examples of public cloud configurations commonly used by business users.
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About the Guest Writer:
Jerry Olasakinju (BTech) is a passionate researcher and writer whose interest in everything computing seems unparalleled. He blogs about his literary works at http://jerryolasakinju.blogspot.jp/
