Put aside, just for a minute, the many benefits of a public cloud. Here’s the real reason so many companies are migrating (or considering a migration) to this model: money. With this move, companies can save money.
But can they?
Here’s the more complicated reality, for some organisations, a public cloud can save money when compared to a private cloud or in-house IT data centre. For larger enterprises, however, it’s a completely different equation. There are many potential benefits, but straight up cost savings usually isn’t one of them.
The arrangement can be tricky to compute. The initial start up costs are low, so it may look like there are savings to be had, but then the bills come in fast, and they keep coming.
The first and most important variable is management—too many companies think that moving data and operations to a public cloud means not having to worry about it at all. The reality is that without strong, hands-on management, this model is essentially doomed to fail. Just because it’s largely out of sight doesn’t mean it should be out of mind.
Next, think of the day-to-day issues in a traditional, in-house data centre or a private cloud: security, governance, lifecycle solutions, etc. They’re all necessary, and they all come with a price tag. This is typically not what public cloud providers focus on, which means that companies sending data and services to a public cloud have to, and there are definitely expenses involved.
Economies of scale also matter, and they get talked about a lot. Having a relationship with a public cloud provider allows companies to scale up instantly when they need to, in response to market swings and other business priorities, without incurring the hassles and costs of preparation. But here’s a contrarian thought: many large IT organisations are already massive—they have data centres that are measurably larger than those belonging to most public cloud providers. Are companies so often in a situation where they need so much more capacity, and so suddenly, that they need to call in a third-party provider?
Staffing is another issue entirely. Sending everything to a public cloud doesn’t mean disbanding the IT function; companies still have databases to run, helplines to answer and applications to develop and manage. In-house or out, private or public, the costs don’t just disappear.
For our book Visible Ops – Private Cloud: From Virtualization to Private Cloud in 4 Practical Steps, my co-authors and I interviewed many CIOs, and we repeatedly heard they can deliver the same or even better service internally for 30 per cent less cost than public cloud providers. In fact, quite a few are actively working to create their own version of a scalable model, one that can be built up fast to manage growth when needed.
There’s actually a wealth of research on this topic, even though it seems to go against the grain. The idea of moving to a public cloud in order to cut costs has become so ingrained in the business consciousness that it’s almost sacrilegious to suggest otherwise.
So let’s be contrarian again. Each company has its own priorities and challenges, but for many, choosing a public cloud option is often a good idea. In fact, moving to a public cloud with a strategic mix of the right services and the right users (and in the right business environment) might produce significant savings.
However, predicating this decision entirely on cost savings is usually a bad idea. The greater benefits—and they are more often quantifiable—come from solid business issues such as competitive advantage, faster time to market and enhanced customer retention.
Moving to a public cloud is just an option, often a good one. However, companies reflexively looking to cut costs will usually not get what they’re after. Meanwhile, forward-thinking enterprises that look at the entirety of the situation (rather than just hardware costs and staffing issues) and build on a hybrid model that optimizes both in-house operations and the public cloud will realise the biggest benefits.