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Cloud Computing

Are cloud benefits being outweighed by the rising costs associated with cloud implementations?

7th March 2016

Businesses all over the world are benefitting from cloud computing, by driving up efficiencies, productivity and reliability, allowing new digital products to come to market at accelerated rates, and perhaps more importantly, driving down costs. The affordability of the cloud computing subscription model, particularly for organisations that may not have the capital to handle large up-front costs, is often cited as one of its major advantages.

Surprisingly, however, businesses have begun noticing that cloud implementations are not as affordable as they once thought. When commodity cloud, as delivered by suppliers like Google and AWS, reaches a certain threshold related to capacity, usage and billing models, the prices charged to businesses often increase. However, even when business receive managed cloud services, they can be hit by unexpected costs. Evidence collected by our Cloud Hangover survey found that costs surrounding staff training, internal maintenance, systems integration and general IT complexity can all increase cloud expenditure. The question that businesses must ask themselves, therefore, is whether the benefits of cloud computing are substantial enough to outweigh rising costs.

Cloud benefits

For many organisations, minor cost increases will be considered a small price to pay for the many advantages provided by cloud technologies. Firstly, cloud computing has enabled businesses to be more mobile than ever before. Software is now independent of the device that it is being accessed from, freeing employees from traditional working methods. Coupled with the rise of smartphone technology, this means that staff can remain productive wherever they are. Cloud technology has also enabled colleagues based in disparate locations to collaborate more easily, leading to information sharing and innovative new ideas.  Businesses can also now introduce new products to market at a much faster rate through agile technologies, rather than having to overhaul their entire IT infrastructure.

Cloud technology has also given businesses the freedom to grow at their own pace. The scalability of cloud software and infrastructure means that businesses can utilise IT resources as and when they need them, rather than leaving technology underutilised for long periods. It gives businesses the ability to flex up or down during seasonal peaks without needing to invest in new infrastructure. With security concerns on the wane, many organisations view cloud computing as about more than just efficiency and flexibility – it is integral to their core business processes and essential to delivering the products and services that their customers have come to expect.

Price increases/Rising costs associated

To evaluate whether the cloud remains a worthwhile investment, it helps to understand the reasons behind the rising costs. Although, some external factors such as exchange rates have affected the price of cloud services, other unforeseen costs are often at work. Whereas a few years ago, businesses might have relied on a cloud vendor for additional storage, now organisations are outsourcing their entire infrastructure to third-party providers. For vendors this means that the feature-rich services they are providing are, naturally, more financially draining. Our Cloud Hangover survey also revealed that handling the complexity of these additional services provides further strain on organisation’s IT budgets. Even if commodity cloud prices remain low, being able to manage these services and integrating them with existing systems provides unexpected costs that some companies struggle to cover.

It is also worth noting that although some suppliers like Microsoft have recently increased the price of their cloud services, this trend is not seen across a broad spectrum of providers. Instead, with the cloud landscape continuing to mature, pricing models are beginning to change. Recently, for example, Amazon announced it would be changing the way it bills its Elastic Compute Cloud Services, making it cheaper to run workloads at certain times. Customers will need to consider how pricing models are changing and how this affects their cloud expenditure in the long term, before committing to restrictive contracts. As more providers alter their cloud billing, customers should be cautious of the impact this will have on their finances, if they are to avoid the kind of unexpected costs we reported in our Cloud Hangover Whitepaper.

Why the cloud still makes financial sense

One of the main reasons why rising prices should not lead businesses to abandon cloud computing is that it is still more affordable than alternative methods of working. Cloud subscription models often provide significant savings compared with traditional software distribution packages, where large up-front costs can prove prohibitive for smaller firms. Companies should also not think of cloud technology in terms of a cost, but in terms of a business asset. Although monthly subscription fees may increase, it is difficult to put a price on the financial gain generated by the cloud. By increasing an organisation’s reliability, productivity and agility, the cloud provides long-term financial benefits that far outweigh its costs. At Sungard Availability Services, we offer a full range of private and public enterprise cloud services that allow businesses to shift to operational cost models that provide better value for money than traditional IT solutions.

Businesses that are thinking of adopting cloud services, or those that already do, may be concerned about recent price increases, but they would be better served analysing the net gain that the cloud delivers to their company. Whether it’s by enabling greater workplace collaboration, freeing employee time by outsourcing business processes to cloud vendors or simply through being more cost effective than traditional technological distribution methods, cloud technologies have proved advantageous for many businesses. Companies that choose to work with Sungard AS will not only receive expert consultancy on how to implement the IT infrastructure they need, they’ll also have access to a range of cloud services to suit their budget, no matter how big or small.

 

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