Published in Telecom Lead – Cloud Computing – Show me the money!
A lot has been said about the merits of cloud computing and how it is going to be the technological choice of most enterprises in the not so distant future. But the key question that is bound to keep cropping up in the higher echelons of the enterprise is whether the cloud makes good business sense. While most know that cloud computing adopts a pay-per-use model similar to regular utilities like electricity and water and does away with upfront infrastructure costs to the organization the nagging question to most senior management people is whether cloud computing is prudent choice in the long term.
This is not an easy question to answer and depends on a multitude of factors. The alternative to cloud computing is to have an in-house infrastructure of servers, hardware and software, software licenses, broadband links, firewalls etc. All these will form the Capital Expenditure (CAPEX) for the organization. In addition to these expenses will be the Operational Expenditures (OPEX) of real estate to house the equipment, power supply systems, cooling systems, maintenance personnel, annual maintenance contracts (AMC) etc which will be recurring expenses for the organization.
Cloud Computing does away completely with procurement of hardware, software, databases, licenses etc and an enterprise should be able to host their application in a couple of hours provided they know ahead of time the resources their application will need.
Hence as can be seen while the upfront costs and the running costs of maintaining a data center will be high in comparison to the zero upfront costs of the deploying on the cloud the steeper operational costs of the cloud will eventually catch up with the in-house infrastructure.
Depending on how well the application is designed the point at which the cumulative running costs of the cloud breaks even with in-house data center can be made to occur a couple of years down the line after the application is deployed. Assuming that the break even happens in 3 years the advantage of cloud deployment is that the enterprise does not have to worry about equipment obsolescence, upgrading of software etc not to mention the depreciation of the equipment costs.
Moreover cloud technology is extremely useful to enterprises which are planning to deploy application in which there is difficulty in forecasting the type of traffic that will be hit their application. Where the traffic may be intermittent, bursty or seasonal then a cloud makes perfect business sense since can it scale up or scale down depending on the traffic.
Some typical applications which are prime candidates for the cloud are CRM software, office tools, testing tools, online retail stores, webmail etc.
One possible worry of the enterprise will be the security concerns while deploying to the public cloud. In such situations the organization can take a hybrid strategy where their sensitive data are hosted in in-house data centers and their main application is hosted on a public cloud.
Hence in most situation cloud deployments do have a definite edge for certain key application of the enterprise.
Giga thoughts ... 