Cloud Services Can Save You Money -- If You're Careful
Calculating the real ROI of cloud apps requires the analysis of a lot of factors, and cutting corners on that process means you might not save money.
Wed, March 13, 2013
Sounds like many of the other IT projects you've shepherded, right? But it turns out it's incredibly complex to determine whether a move to the cloud will pay off for a given application. When done in haste, that analysis can lead companies to adopt the cloud for the wrong reasons, leaving them with higher costs or an inferior product when compared to an on-premises installation.
The good news is that despite all the hype around the cloud, it appears that many businesses recognize the dangers and are proceeding with caution.
"It is significant that the enterprise market is really moving to the public cloud at quite a glacial pace, and I think it's because they know ROI is much more complex than just the avoidance of hardware and software costs," says Marc Brien, vice president of research for Domicity, a consulting and IT analysis firm.
It is significant that the enterprise market is really moving to the public cloud at quite a glacial pace, and I think it's because they know ROI is much more complex than just the avoidance of hardware and software costs. Marc Brien, vice president of research, Domicity
There aren't comprehensive estimates for how many enterprises are using cloud services. Amazon Web Services, the most popular IaaS offering on the market, doesn't reveal such detailed stats. However, Cloudyn, a company that monitors AWS usage for customers, says that just 11% of Amazon's AWS customer base around the world has more than 1,000 employees.
Software-as-a-service offerings from certain providers like Salesforce are much more popular in enterprises, with niche or legacy app cloud services a mixed bag in terms of enterprise adoption, Brien said.
Among those businesses that are using cloud services, there are plenty of success stories showing that the cloud can significantly cut costs. Nucleus Research examined 70 case studies of companies adopting SaaS and found that the services offered 1.7 times greater ROI than on-premises apps, largely due to their ability to offer increasing benefits over time without a proportional increase in costs.
But there are also some businesses that are adopting cloud services and regretting it. Nucleus Research found in a survey that 52% of cloud CRM customers were willing to consider switching vendors within six months. "What we saw was that companies had often been sold aggressively and they spent less time on due diligence and planning," says Rebecca Wettemann, an analyst at Nucleus, which offers IT research and advisory services.