Don’t Just Transfer The Costs
by David Merrill on Aug 17, 2011
Cloud offering are the hot topic of the day. There are various options for cloud services these days. Capacity on Demand, Managed Service Utility, SaaS etc. When we talk about clouds being a solution to reduce costs, we make these recommendations after we know what kind of costs the client is interested in reducing.
Within storage economics, we have a mapping process in which we align the costs (to reduce) with options (that reduce them). The graphical view of this mapping looks like this:
Solutions need to be mapped to the right costs.
This brings me back to cloud. What I am seeing in many parts of the world is a blind approach to moving to cloud in the HOPE that it will reduce costs. I am also seeing a transferring of costs, and no real net-reduction in unit costs. A customer can do a mapping process to identify and measure these costs.
When they work with a cloud provider, they transfer some of these costs to the new provider, retaining some of the costs.
Simply shifting the costs without a fundamental re-architecting of the solution may not (and does not) reduce total cost. In this example, $A< $B + $C, and the total costs have increased with a cloud offering. To be sure, cloud providers can, with economies of scale, provide better unit costs. However, with margin and transformation cost and risk, total unit costs do not change as much as was originally expected.
Before jumping on a new cloud offering, be sure to understand your costs before and after the cloud migration. If total costs do not go down, then you need to be satisfied with the other qualitative benefits that cloud services can offer (there are many). Don’t plan to be surprised if this approach does not impact your types of costs.
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