THINKstrategies recently participated in research conducted by North Bridge Venture Partners aimed at capturing current industry perceptions regarding emerging trends in cloud computing. This “Future of the Cloud” study did a good job revealing the good and bad of cloud perceptions and areas the industry could improve. While the respondents believed overall in the viability and benefits of the cloud, they struggled with costs and how to manage total cost of ownership.
Overall, most companies believe the cloud is a vital part of their overall IT operations.
Half of the 785 respondents stated they are confident that cloud solutions are viable for mission critical business applications, and two-thirds of the respondents expect Infrastructure-as-a-Service (IaaS) solutions to grow significantly over the next five years.
The North Bridge Ventures Partners’ “Future of the Cloud” study found the top areas in which “cloud formations” are coming together are:
- backup and archiving (43 percent)
- business continuity (25 percent)
- collaboration tools (22 percent)
- and big data processing (19 percent)
It’s hardly surprising that data backup and archiving ranked first, as the volume of digital data is exploding and nearly all of this data needs to be stored someplace. The reason for this explosive data growth is multi-fold, from the fire hose effect of new data being generated by Facebook, Twitter and other popular social networks; new demands created by online video; and the duplicative data caused by a more highly dispersed workforce depending on a widening array of mobile devices, among other sources.
While the cloud seems a great way to store this data, and we are seeing cloud storage costs starting to come down, the survey also found a declining belief that the cloud can actually reduce total cost of ownership (TCO). The number of respondents who believe the cloud reduces the TCO of IT dropped from 57% in 2011 down to 53% in 2012.
What’s driving this negative TCO perception is the reality that the cloud can be more expensive than on-premise IT. The good news is there are a growing number of cloud storage providers offering services at a fraction of the cost of traditional on-premise storage systems, if properly employed. But we still have a ways to go.
The cloud introduces multiple direct and indirect costs that need to be anticipated before moving to the cloud. These include:
- Misunderstanding or underestimating the fee structure
- Under or over utilization of cloud services
- Compliance or security costs
- Service disruption costs
- Data growth forecasts
- Integration issues
The ‘consumerization of IT’, or ‘shadow IT’ effect, is not only fueling the growth of cloud services, but often opens the door for inexperienced users to incur unanticipated costs, because they don’t fully understand how the service fees are structured. So, services which are aimed at augmenting traditional system capabilities on a periodic basis might be even more expensive if utilized for ongoing production purposes. For example, let’s say pricing is structured for utilizing server capacity in an IaaS platform for a few hours, but you end up using the servers 24×7. It’s like forgetting to turn the lights off, and then being surprised when you electricity bill ends up skyrocketing,
Compounding these direct costs are the more significant affects of potential compliance and security issues, as well as costs associated with service disruptions. Quantifying these direct and indirect costs is essential to fully measure the total cost of ownership (TCO) and return on investment (ROI) of today’s cloud services.
In the past, organizations adopted telecommunications cost management solutions to manage the expenditures associated with their communications operations and third-party service providers. Today, a new group of Cloud cost management and optimization vendors are beginning to gain attention, including Cloudability, Cloudyn, Cloud Cruiser and Newvem.
These companies can help IT and business executives better understand and anticipate their Cloud costs. They can also accumulate utilization data from across their user base that can provide useful industry benchmarks that can help IT and business executives make better Cloud procurement and utilization decisions.
Enlightened IT professionals expect these new solutions to make it easier for them to do their day-to-day jobs. This combined with innovative new cloud solutions that help IT leverage existing infrastructure better or that provide a more cost-effective cloud services structure will bring down costs and complexity.
While the promise of the cloud being cheaper may not always be proving true, most IT managers do still believe the cloud can cut complexity. In fact, over half (53%) of the survey respondents said they believe the Cloud makes IT manageability less complex, up from only 39% in 2011.