The real cost of cloud computing

Small companies are avoiding traps in case of a budget hole after moving to cloud services.





Most experts agree that the cloud has gone through a very hot phase and will begin to achieve tangible benefits.





According to executive executives of IT companies that have used or are considering using cloud services, moving to the cloud can lead to higher costs and some costs that are not predictable.


 


Although these costs do not affect companies profiting from cloud computing, they will have an impact on the overall cost-benefit analysis of cloud services.





transfer and storage data





transfer of large amounts of data to public cloud services and long-term data storage will cost thousands of of dollars a year. Many companies may not be aware of the costs involved.





"One shift will cost thousands of of dollars." Hernan Alvarez, senior head of it and Operations at Whitepages Inc., said. Located in Seattle, Whitepages Inc. provides online information links for more than 200 million individuals and 15 million businesses.





network bandwidth is the main cost of transferring data: Cloud vendors may change the charges for uploads and downloads. Even if data and systems are online, there is still internal labor costs. "People think that there will be no labor costs after using the cloud, but when you add more work, managing a large number of cloud devices will be complex, just like managing a bunch of servers." "Alvarez said. Another major cost is long-term data storage in the cloud. "Considering the rate of data growth over the next 3 years, the cost of storing the data will be very high," Alvarez said. When data is stored in the cloud, "you pay the money every month."





but these costs "will be overlooked if you don't fully understand the cloud model," he said. "If you take into account CPU, capacity, storage needs, and time charts, you will have a good understanding of these costs and consider whether you can reduce costs from within." ”





Whitepages considered using the cloud for data backup, but after a comprehensive assessment of 8 suppliers, the company considered it too expensive to move to the cloud, 3 to 4 times times the cost of storing the data internally, Alvarez said. So the company chose to store the data in the company's private cloud for a long time.





generally, the use of public cloud computing for non storage purposes eliminates the need for internal deployments and retention of applications. Whitepages has used the 2-year public cloud service and now uses 11 cloud-based applications from Salesforce.com, SuccessFactors, ADP, WebEx, Yammer, and other vendors. This makes the cost savings more than the expected cost, Alvarez said.





integration of multiple supplier applications





Pacific Coast Building Products wants to use cloud computing in a larger way, it has evaluated the services of a number of vendors. But Rancho Cordova, a supplier of construction goods and services in California, has limited its use of the cloud because it also benefits, Chief information Officer Mike O ' Dell said.





for two reasons, first of all because of the difficulty of integrating software from different cloud vendors, followed by the fact that Pacific Coast will cause costs to rise if it integrates itself.





For example, the company uses Microsoft Exchange for messaging, using Cisco's Unity Unified Messaging in voicemail, and it's like integrating the two into cloud services. "The integration of two applications, at least the last time we haven't found it," O ' Dell said.





If there is no integration, then users will not be able to use some of the features they now have, such as on the phone when they receive a message automatically delete the voice mail on the phone.





the consolidation of some big and complex applications is also a challenge, as Erp,o ' Dell says.





For example, "to put SAP on the cloud, we have to give up some functionality or spend a lot of money on consolidation," he said. "Maybe it's just a matter of technical immaturity, but there are a lot of hidden costs in consolidation." If you can't see the truth, the final financial situation may not be as good as you think. ”





Test Software





software testing before migrating to the cloud will cause unexpected costs.





"We will have an unexpected cost of testing and troubleshooting applications that are not running on cloud configurations," said Bill College, chief executive and vice chairman of the IT department of New York State Poughkeepsie Marist Thirsk.





The university is moving a large ERP system to a private cloud, using a vendor that has not yet recognized the server. Marist through this private cloud for students, faculty and research institutions to provide registration, billing inquiries and payment and other online services.





Thirsk said the school "99%" of the ERP transplant was going very well, and by using cloud configuration, we saved a total of a hundred thousand of dollars. "But he added:" The stable system in the cloud that has run 900 virtual servers has given us a big challenge. ”





the extra cost is to "fix which version of the operating system and the database can run," Thirsk said. "This problem requires changing some code and figuring out which code needs to be changed will take some time and effort." ”





when applications do not fully utilize cloud computing capabilities, stealth costs can also occur.





"We confirm that the ERP design is complex enough to take full advantage of the processor, memory, cache, hardware storage, and network connectivity provided by the cloud configuration," Thirsk said. But this is not done, and modifying the software code requires "a lot" of time for developers and system programmers. "We expect to improve performance by 30%, but it's not free," he said.





Rent and daily expenses





It executives may also encounter another cost in moving the system to the cloud, a cost they think should not be borne by them.





"Of course, there are a lot of costs that are appropriate for the hosting system, but not all of it, like electricity and rent are paid from my it budget," said Jonathan Alboum, chief information officer at the U.S. Department of Agriculture, Food and Nutrition (FNS). The cost of these infrastructure is subsumed into the total cost, so I'm paying for some of the costs that were not originally part of my IT budget. ”





from the summer of 2010, FNS used an Amazon cloud service to run an application to implement its Supplemental Nutrition Assistance Program (SNAP), which used to be famous for providing food stamps.





, a tool called snap retailer Locator, provides an online map to help people find retailers who accept snap debit cards. FNS decided to move the application to the cloud because the settings needed to be logged in quickly and highly scalable and for some other reason.





since he used cloud-based services, Alboum had to pay monthly fees and make a new budget. "In general, the cloud is manageable and lowers the government's spending," he said, "but it's different from our traditional experiences." ”





This is not a more expensive issue for cloud service hosting than for internal hosting. "I think it's a question of cash flow," Alboum explains. "If I have to pay a monthly fee, I need to have enough budget to pay when I need to pay." If it's the traditional way, I'll pay for the hardware and related services at once. The new model may be cheaper, but the budget mechanism needs to be changed. ”





many things about the cloud are new, and experts believe the company needs to consider two aspects of cost and potential benefits when evaluating cloud services. In a April 2011 report on cloud services, Gartner noted that it executives should take steps to manage inherent risks and unanticipated costs during the cloud services revolution.





Cloud mode "Immature writing is fraught with potential dangers", said Frank Ridder, a Gartner analyst, "The development of cloud computing has many opportunities and costly challenges." Companies need to understand these challenges and develop realistic cloud sourcing strategies and contracts to mitigate risk. ”




The
cloud procurement cycle consists of four elements: procurement strategy, supplier selection, contract development and management, Ridder said.