Most corporations will be in the ‘Cloud’ primarily using a Platform [Paas] or Software as a Service [SaaS]. These 2 Cloud Delivery models are essential for using software applications and allowing the development and testing of applications running in the cloud. Many operational departments will use Infrastructure as a Service [IaaS]; to scale out and improve the reliability of the server and network infrastructure.
There are 5 main costs associated with Cloud computing:
- Sunk costs in my own infrastructure [a real cost and consideration, if I write off my existing infrastructure, what will that cost me since it must be written off as a capital write down?]
- Up front costs to move to the Cloud [Rack rental space pre-payments, deposits etc.]
- Capital costs [if I need to buy new equipment, Oses, application servers, databases etc. for a hosting firm which onlyprovides the infrastructure.]
- Operational costs to support the Cloud environment [includes staffing, skill development]
- Locked in Costs [How locked in am I with the Cloud provider, are there penalties, terms or conditions that might increase my costs including portability or the ability to integrate with other Cloud services ?]
Cloud Costs
Analyze costs carefully to understand total-cost-of-ownership (TCO). While most vendors offer pay-as-you-go pricing, an annual contract is often required.
- What is the minimum length of the contract for services?
- Are there termination fees? Built-in Yearly price increases?
- What happens if you want to add more users or reduce the number of users to the contract?
- What are cost estimates for a single user vs. fifty vs. thousand (bulk discounts are typically available and usually are not advertised)?
- Is technical support provided free of charge?
- Are there early cancellation fees?
- Are there any extra charges for upgrades or these included in the service?
- If the vendor raises its fees, are you locked in to the original price?
- What additional costs may be incurred beyond routine contractual expenses?
- Is there a fee to transfer data from another vendor’s application?
- Is there a fee to transfer your data from the vendor at the end of a contract? Is a free trial available?
Most of the time businesses will have a hybrid strategy depending on the workloads. So cloud costs can’t just be looked at in isolation but as part of the overall portfolio.
Cloud Performance and Reliability
- What percentage of the time is the data available (uptime)?
- What is its anticipated scheduled downtime, and how does the vendor notify customers about when it is taking place?
Check the vendor’s reliability statistics. You should be looking for one that is in the 99% or better range.
- Are there any guarantees for availability or credit for not meeting agreed-upon performance levels?
- How fast is the response time?
- What performance issues (if any) exist?
- How often are upgrades provided and what kind of advance notice and/or training is provided?
- Can customers control when and whether to tum those upgrades on?
- How often is maintenance performed?
- What happens in the event of a network or power outage? Is there a disaster recovery plan in case the service’s infrastructure is disabled or destroyed? How fast is disaster recovery?
Verify that a full daily backup of data is performed at minimum and that a redundant backup center exists in one or more locations (preferably in different states in case of a natural disaster such as a hurricane or earthquake).
Cloud Security
Your company’s critical data is being stored with a third party outside your office walls. Controls need to be in place for transmitting data to the provider securely over the Internet.
- Are controls in place for storing data, such as encryption?
- Is a strong user-authentication system in place?
- Has the provider had an audit engagement performed to verify it has proper controls in place?
Ask for a copy of the report and a copy of the vendor’s privacy policy. Also inquire as to how security breaches are handled, including specifically how soon customers are notified.
Cloud Support
- What technical support is available?
- Is there 24/7 live human support?
- Does the vendor offer assistance in making the transition (for example, data format conversion) from your current system to theirs?
- Upon termination of services, when the vendor no longer serves your company, what process will the vendor follow to return your company’s data to you?
Integration and Development
Ease of integration with your “behnd-the-firewall” Apps is an important factor to consider when making technology purchasing decisions. While some Web-based applications can easily build upon one another and seamlessly transfer and share data, that is not always the case. Evaluate how well the application integrates with your existing ones (both in the cloud and on-premise).
Some vendors offer application program interfaces (APIs) for your software developers (if you have any). This allows your developers to write custom applications that are hosted by the vendor and also allows developers to integrate those products with on-premise or other Web-based applications. The vendors may also allow for the sharing of applications between customers through an online shopping mall of sorts.
Benefits of Cloud could include:
- Improved flexibility, reliability and availability
- Removing IT details, hardware, upgrades, security from your cost base
- Cost decreases which are usually significant
- Domain expertise that your firm likely does not have
There is choice when moving to the Cloud [but no choice for most businesses to do so…]
The calculation supporting a move to the ‘Cloud’ is rather straightforward:
The organization will move from CapEx to OpEx ; pay a third-party vendor to run one or more of their systems, like CRM, email or HR, on its own servers. The organization will save a lot of money on hardware, software and personnel costs and can devote those resources to boosting revenue generating activities.
As with all new technology, cloud computing should be approached with enthusiasm and caution. Only when businesses are totally satisfied they actually saving money or that their valuable data is safe will they migrate to the cloud.
