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Cloud computing savings: will IT budgets shrink as a result?
Gartner is estimating that cloud computing will reduce IT operating and infrastructure costs by 35 to 50%. If that's the case, will the money saved be reallocated inside of IT to be spent on other IT initiatives? Or should we expect to see a decline in IT budgets in the coming years?
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10 Answers
The cloud is inevitable. Fear is inevitable. IT budget shrink is inevitable... but it will be in the right areas.
The sooner companies find great "cloud based" solution partners and come to realize the value of having another company manage, support, provide, deliver, backup and protect their information the better.
Investing in technology which will be antiquated or replaced by newer technology which is twice as fast, half the size and less costly within an 18 month cycle is hard to justify in a CAPEX model.
For the biggest of companies the real tough part and where the greatest fear lies is critical content management. The need for a "code red" level of responsiveness they can have control over or have guaranteed form an outsourced vendor is crucial for mass adoption of the "cloud" model.
Not just the speed to respond to crisis situations but fear also surrounds security, and encryption of their data. That coupled with trusting the network to be up and ready to handle the mass amounts of content and data which will traverse it, are of utmost importance.
The telecom and AAP providers must improve their guarantees of delivery, redundancy, latency and jitter. When the prices come down a "wee bit" more, and the latter happens with improved networks...watch out for the adoption rate of the "cloud"!
End of Day...everything is just around the corner from happening…and for all the right reasons.
A move to the Cloud will (should) cause IT to shift focus. The less time spent managing an IT infrastructure, more the more time available for business support. The hope is that companies taking advantage of the Cloud will maintain sufficient IT staff to support the users AND work on innovation and improved efficiencies which undoubtedly would positively affect the business bottom-line.
I gave my answer to this conundrum at InformationWeek http://www.informationweek.com/cloud-computing/blog/archives/2010/05/cloud_co... . As Ben says, the unit cost of IT will drop. Rather than a reduction in spend, I believe elasticity of demand will mean that IT budgets will actually expand, as IT, delivered through a cost-optimized hybrid delivery model including the cloud becomes a more effective substitute for other expenses.
Substitute "wireless" for "IT" and you'll see what I mean. The price drop in mobile phones from thousands of dollars for a brick to (nearly) "free" didn't mean that enterprises' wireless spend went down, it meant that wireless technology became increasingly pervasive. Now, for example, expenses spent on deploying "meter readers" will instead be spent on wireless components and services for smart grid utilities. This is why wireless is about to become a $1T business globally.
The answer is "it depends." It depends on how fully executive leadership embraces the cloud and when in a business' life cycle it moves to the cloud.
For example, let's look at a SMB startup. They dob't have a lot of money to invest in an internal infrastructure so they may opt to go straight to the cloud. They'll have fixed costs with plannable expansion.
Let's say it's a large enterprise. There can immediate payback in server consolidation and disaster recovery initiatives. But not much in the long run if the enterprise fears placing missiong critical data in the cloud.
For a company fully embracing the cloud, you will see IT transformed. Developers, system admins, dbas, etc. will all work for the cloud provider. A company won't need these resources in-house because they won't have data centers to manage. In-house resources will shrink to project managers, business analysts, desktop support and quality control analysts. A lot will change from traditional IT management.
I agree with Victor. Well written. The last paragraph is significant as that is where cloud computing is taking IT and businesses. In my opinion
Good points Todd and well written too.
There's another point to be made about potential budget decreases...
There are things that the business needs to do from a technology perspective, that it cannot currently afford to do from a financial perspective. Proper utilization of the cloud and other emerging technologies could free up the necessary budget to pursue these other areas of need.
So, that budget could shrink for some organizations, while for others, it could remain the same, but support far more flexibility and value add than before.
There are lots of "it depends" variables to consider, but the potential is most certainly there.
-ASB: http://about.me/Andrew.S.Baker
Their all always "it depends" reasons for not doing something. Good companies and consultants find a way to bridge these differences and find a cost effective path whether it is cloud computing, virtualization or other ways to utilize their IT assests. What you don't want is to paint yourself into a position where your competition out-plays you with technology. That would not be prudent.
Their are always ... (previous comment, sorry about edit)
Well.... as per Joe Weinman's laws of Cloudonomics, the per-unit cost of infrastructure will drop with a move to the cloud. But that doesn't necessarily mean that total IT spend (or even an organization's total IT spend) will reduce - fact is that with an IT budget of X, and spare budget will be used on other stuff... and that's good, cloud as an enabler of the sort of quick-start trials that, under traditional IT, simply wouldn't get off the ground due to budgetary constraints..
So in some ways, Cloud not reducing IT expenditure is actually an indicator that good things are happening...
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