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Analyzing costs in cloud business models

By James Parker, senior vice president of sales, Savvis, special to Network World
December 07, 2012 09:55 AM ET

Page 2 of 2

However, it's important to not go into cloud thinking it's all about cost savings or that cloud will be the remedy to all IT issues. More accurately, think of cloud as a tool to help optimize spending.

MORE: Gartner: Hype could hurt cloud adoption

The financial model for cloud revolves around moving to an operating expense model instead of one based on capital expenses, shifting to services from subscriptions, aligning costs with outcomes instead of technology and, of course, paying only for what you need when you need it. The move to cloud-based infrastructure means you can focus your efforts and resources on managing and growing your business.

As cloud changes your IT purchase plans, here are some of the cost factors to consider when evaluating options:

• Hardware and infrastructure. Cloud's obvious advantages lie with server consolidation and resource management. But don't forget to look at cost savings related to reduced data center space, power and cooling, and any networking costs. Hybrid and public cloud options, for example, may involve more extensive wide-area networking than that of private clouds.

• Lifecycle costs. Lifecycle costs lower dramatically when you're not relying on in-house infrastructure. Nevertheless, when negotiating cloud contracts, executives should examine implementation options with an eye toward future growth, basic versus advanced services or a blend of services, service-level agreements, security, and even compliance assurances and monitoring you may need over the course of the agreement.

• Budget and billing arrangements. Flexible billing and service-usage metering are cornerstones of many cloud agreements. These arrangements make it easy for IT organizations to bill business units for resources like a utility company would. This also provides greater visibility into resource usage so that CIOs can effectively forecast their budgets. Public and hybrid cloud providers may also offer pay-as-you-use services, requiring no long-term commitment.

• Long-term strategy. Cloud's promise of compute power flexibility and scalability can enhance the way companies develop and market successful products and services and innovate. Of course, these are not easy to quantify. But they do need to be a part of the equation.

Whichever route to the cloud you take, the approach needs to be carefully measured. To realize cost-optimized cloud computing, you must weigh each application's requirements against existing costs and factor that into long-term IT and business goals.

Cloud isn't a one-size-fits-all proposition. Your service provider should know this and work with you to develop a solution set that meets your specific needs.

Savvis, a CenturyLink company, is a global leader in cloud infrastructure and hosted IT solutions for enterprises.

Read more about cloud computing in Network World's Cloud Computing section.

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