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Justifying the Cloud

Often times when companies contemplate the decision between On-Premise vs. Cloud it becomes difficult to convey the justifications of moving to the cloud because they lie between a mix of technical and financial reasons. In general, the people presenting the arguments have expertise in one of these areas, but a difficult time tying the two together. The key to justifying any cloud implementation from IaaS to SaaS is to take a two pronged approach: Focus on the financial benefits, and show how the technical advantages are reinforcing those financial benefits.  Listed below are some approaches and guidelines towards approaching this critical discussion:

Economies of Scale

Similar to utility companies, the main arguments for cloud focuses around the financial benefits it provides. These financial benefits are mainly driven by the concept of economies of scale.  Simply, this means, that as the size of an environment increases the cost inversely decreases. A cloud gives users the benefits of sharing resources on the backend, including: Facility, Hardware, Software and People.  Using the example of a power company, as with a cloud there is no need to create separate resources for each additional customer that is added; the same resources are shared amongst all customers. This allows the power company to maximize the usage of their existing resources giving them the ability to drive the cost per unit down across the entire consumer base.

On Demand

In the current economic situation it is more imperative than ever for companies to have agility and flexibility into their technology direction. On Demand/Pay per Use is an inherent technical feature of Cloud that can be correlated with the financial benefit of removing a commitment to any specific technology solution.  Revisiting the comparison to the power company, a consumer is billed on usage which can be varied based on need month per month. Additionally, there is no long term commitment required. (E.g. The consumer decides that they would like to move to solar power, there would be limited financial burden in moving power sources)

Industry Guidance

Currently, the cloud landscape is extremely diverse. From IaaS to SaaS, there are an endless number of options with varying standards and limited interoperability.  This has been a key discussion point and reasons for remaining on premise, companies are afraid of vendor lock-in (financial implications). To address this issue the Cloud and IT industries have come together to develop “Open” standards, methodologies and technologies. Examples of these include: The Open Datacenter Alliance (technology and business models), Openstack (Cloud Management Platform) and CloudStack (Cloud Management Platform). With major vendors backing each of these programs, it becomes easier to justify a move from On-premise to Cloud.

Operating Expenses

Managing capital expenditure is a key task for any small, midsize or large enterprise company. This has been the main financial burden presented with the implementation of a technology. (i.e. the funds required to build out the resources to support that technology). When justifying cloud, it needs to be made clear that the organization is transferring from capital expenditure to operating expenditure. The advantage of this is the ability to manage and control that operating expenditure based on the growth and revenue of your own company month to month. In other words, the company can now react to a changing economic environment based on its needs.

When faced with the decision of On Premise vs. Cloud, each company must evaluate the situation based on its own specific needs. It is clear that the discussion must be tailored towards the specific background of the audience. However, there are basic financial and technical reasons that one can use to justify a move towards cloud.

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