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Beginning of 2011 we´ve been asked to come up with a business case that shows whether it pays off to move everything to an external cloud, instead of building a new datacenter.

In a nutshell and from a pure financial perspective our finding is to not move 7x24h datacenter production services to an external cloud as in our case, it will be simply too expensive in the long run.

However, the tricky part of  this statement is, that it depends on the size of your IT Organization and existing datacenter operations (economies of scale).  So if your datacenter is below 1 MW (one mega watt) of power consumption and you would need to build a datacenter, than a cloud operation may pay off. If you are operating on a larger scale (e.g. > 1,5 MW of datacenter capacity) like SAP (actually we are above 19 MW of data center capacity), than it is better to operate IT by yourself, leveraging the economies of scale.

Another hurdle is, that you usually only get virtual instances in the cloud. Should you for whatever reason need to run an application on a physical server (e.g. risc based Unix systems), this might simply not be a service offering of your cloud provider.

Additionally, depending on the country where you are running your business, you have to be very sensitive where you physically store your business data due to existing challenges with the  USA PatriotAct  (what is this all about? -> see : http://en.wikipedia.org/wiki/Patriot_Act) and other US and EU regulations on data privacy.

Services like test and demo systems, any scenarios with crash and burn systems that require less than 25% uptime (this is only valid for our business – not a generally proven ratio) are a definitely a great use case for leveraging the external cloud (that’s why SAP Global IT offers such external cloud services using public clouds like Amazon Web Services).

I would be interested to know how your organization looks at the topic of cloud vs. own datacenter and what your opinions and findings are.

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