How can cloud-computing help my business reduce costs?

Good comments above and I particularly agree with Andrew in that you "pay for cloud computing resources on a usage basis" which helps to contain unnecessary IT costs and also make them variable instead of fixed.

Two other comments:

1) A "usage" basis can also mean "user" basis, like in the case with software-as-a-service like Salesforce.com or Quickbooks.com. You pay per employee.

2) Read the book "The Big Switch" by Nicholas Carr. It provides a great parallel between the rise of the industrial revolution where all factories had their own power plants to the IT revolution, where enterprise companies have internal data centers.

First off, let's make sure that we're defining the cloud as a managed service offering which is designed to eliminate the investment in an internal infrastructure made up of a network tied to a set of servers.

While most companies approach the cloud with the hope of eliminating their infrastructure investment, I've often found that this type of cost savings only comes after several years of deployment. Key to the success of a successful deployment is paying equal attention to the People, Process, and Technology for cloud computing. In a nutshell:

1. PEOPLE - determine which of your stakeholders has the most to gain and conversely who would be threatened by a cloud migration. The senior leadership commitment is important but often it takes a lot of marketing, candid conversation, and a deep understanding of the key business drivers - essentially, ask your teams the key question - WHAT KEEPS YOU UP AT NIGHT? - and use the cloud strategy to directly address those issues.

The People side also needs to include an in-depth review of your internal IT infrastructure teams - everyone from the NOC, Server Services, desktop services, and customer delivery. The cloud can be used to replace/supplant many of these folks, but a more transformational strategy would be to redefine and retrain for the new arrangement.

2. PROCESS focus. Provisioning and Procurement processing for the cloud needs a lot of attention - be attentive to the way in which annual budgeting is currently done. Since the cloud is often a "fee for service" arrangement, the blanket purchase order processes need to be re-examined to better align with the new delivery method. Also, pay particular attention to the processes associated with data sharing, security, and privacy protection. The more you examine your existing processes in terms of their level of maturity, the better off you'll be in terms of deploying a cloud strategy. For me, the lack of structured processes always represents a YELLOW FLAG for moving ahead since that usually translates to an inability for the organization to shift this accountability to another organization.

Best practice - leverage your cloud vendor to accelerate your legacy processes - for example, can you speed up the refreshment of your legacy applications by moving towards a managed service?

3. TECHNOLOGY considerations. Usually this is the easiest, less challenging part of the equation for determining the cloud ROI. If anything, make sure to pick a cloud vendor who offers much much MORE than you are able to provide - focus on the refreshment cycle for the cloud vendors' data center, telecommunications, and management platforms. If the cloud vendor does not have at least what you currently are able to provide, then why bother? For my money, a key consideration is not so much the storage architecture and/or server space but more important are the NOC monitoring capabilities - what triggers an alert, how is this managed, and how skilled are the onsite teams in understanding what is actually happening to my applications?

I have often found that this framework of People, Process, and Technology serves as a foundation for a wider discussion - I tend to focus on these items as a whole and the cumulative benefit of doing so enables you to better communicate with your vendors.

The bottomline is that you are trying to save money by managing the expectations of your stakeholders, technicians, and future customers. Good luck!

Stacey,
Moving IT functions to the cloud has to be reviewed functionally and fiscally. One example of a way that cloud-based computing can save you money is in the realm of hosted email. In most cases it is cheaper to pay a per-user, per-month fee for hosted email (such as hosted Exchange) rather than spending the money for the computing resources, software licenses, and IT people needed to deploy and maintain that email server in-house for three to five years. But, before you move an IT function to the cloud you must make sure that you do not lose any needed functionality or performance. Some IT functions are well suited for the cloud and others may be better in-house. . Review the functionality you require from an IT function to see whether going hosted will solve problems or just create new ones.
The next time you are looking at an IT upgrade, such as an email server, take the time to calculate the cost of deploying it in-house versus the cost of using a hosted solution. Depending on the size of your company you may find that the cloud can save you a decent amount of money and may even give you a more reliable and robust service than you can provide in-house.

Jay

Stacey,

Cloud Computing provides you with access to resources that are off-premises, rather than in-house. This reduces or eliminates (in special cases) your reliance on servers, plus ALL of their associated infrastructure and costs. Additionally, you can pay for cloud computing resources on a usage basis.

Typically, if you are starting up an environment which needs to host websites or email or ecommerce, you will need XX number of servers, plus redundancy, plus cooling, plus power, plus bandwidth. Many of these are fixed costs. For instance, you have to size your data center in advance -- it is not something that you try to grow as you go.

Cloud computing has a number of options and categories, but the basic premise is that you pay for what you need as you go. Thus, your expenses -- both capital and operating -- would be reduced.

Need more users on an application? Add them when you need them, and pay for them at that time.

Need more server capacity or storage? Add it on the fly, and pay for it as you go/grow.

This can help you manage your costs more effectively.

-ASB: http://xeesm.com/AndrewBaker

We need to clarify a couple of things first.
1. We can have public and private clouds. I don't like the names, as they refer actually to clouds on the web and clouds on premises. Not the same thing.
2. The question is not about cost reduction, but about improvement of profit. That is, the cloud may increase the cost but if it increases the income and you get a better ROI and revenue, then you are better to go that way.

Now, can a cloud solution really cost more? It depends on the cost we are talking about.
Take into account that cloud may offer some standard processing power, large storage (in case of IaaS), proven architectures (in case of SaaS or PaaS), but you still need consider your application and see if it fits.

Your application is moving to one environment that may be different to what you have now. There may be more space, but communication costs are added. There may be more boxes, but they are fixed or reduced in processing power. You may not need replication, but you may encounter restrictions for processing in shared environments like PaaS. The system may need changes, as communication and paradigms, apis and security change. Actually, the cost model changes as it may be based now on transfer bytes and storage in time. No, moving is not just installing what you have in the cloud, it is a more complicated thing.

What I mean is, it is not a yes or no question. You need a full architectural study to determine if the reduce or increase in the cost by moving to cloud will impact the system, for good or bad, and how that impact will affect the revenue. It may required the work of all architects (business, infraestructure of course, software and information)
And, it is different for each system out there.

Cheers.