Saturday, February 13, 2010

Shedding Light on the Cloud Phenomenon

The last few years in the technology sector have been in a perfect storm based on a weak economy, high unemployment and Cloud Computing. That’s right, Cloud Computing! Many business leaders concerned with the bottom line have been looking at the various aspects of Cloud Computing as a way to reduce headcount and therefore fattening the bottom line.

Cloud Computing in its various forms like Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) can reduce costs normally associated with setting up a company’s technology infrastructure base. The key area the business executives immediately draw attention too is the reduction or elimination of IT personnel and the associated savings saved by not investing in servers.
It is true, putting key services in the cloud can have an impact on head count but you will pay subscription fees for every service you sign up for. We’ll come back to subscription fees shortly. An area most companies forget to address as they move more services to the cloud or bring on additional staff is in the actual technology infrastructure needed to get everyone out to the cloud provider(s)! That’s right, we’re talking bandwidth, switching and routing. Go cheap on equipment and bandwidth you choke productivity and create problems you hadn’t expected.

Back to the cost savings by reducing headcount, licenses are less expensive than personnel but there is a breakeven point and it’s not the typical support person salary vs. licensed seats. The breakeven point will occur when your business needs to make a change and the current subscription/Service Level Agreement does not cover changes you want/need to make to your business. This becomes very evident when you have several different SaaS applications from different venders and you need to move data and/or expand a key application or add something else to your cloud infrastructure.

Cloud based computing can save dollars via headcount but has associated costs to purchase, maintain, expand and change and access. Understand that the cloud computing arena is still very young and still changing. In my opinion the market has not seen major fallout from merger and acquisition and the usual consolidation that has traditionally occurred in the technology sector.

So what does all this cloud stuff mean to the business owner or CEO? It means you can reduce or eliminate headcount but you will still have operational expenses that will need to be adjusted over time. The cloud is a good thing but seek out an expert if you don’t have one on site to help you navigate through the fiction so you don’t get rained on under your cloud.

By Ted Franklin


  1. Great advice. It's also not clear how deep a headcount reduction you can get with outsourcing apps to the cloud. Certainly some of the server administration goes away, although most enterprises will maintain a hybrid model, to ensure that bandwidth doesn't go through the roof. In addition, other headcount ends up getting repurposed to monitoring SLAs, measuring performance, and managing usage. Over time, the other benefits of the cloud - simple, rapid, app development and deployment, disaster recovery, and archival management may rise to the fore.

  2. This comment has been removed by a blog administrator.


This message will be reviewed before it shows on the website.