The true cost of cloud

Businesses need to consider the key benefits of cloud before investing, one speaker told ITWeb's cloud summit last week.

13 February 2017
George Etheredge, Frost & Sullivan Africa

Tallying the real cost of migrating to the cloud has become easier, but there are still challenges to overcome, according to one expert who spoke at the ITWeb Cloud Summit 2017 in Johannesburg last week.

George Etheredge, ICT research analyst at Frost & Sullivan Africa, made the case for 'a more comprehensive total cost of ownership (TCO)'.

"We are not there yet, but we are on the way," he said. “If businesses that are looking to use cloud versus an on-premises system don't look at some of the key costs and benefits of cloud, they are likely to make the wrong decision."

Generally businesses look at return on investment, 'but when it comes to cloud we are looking at functionally identical systems ... things that are going to do the same thing; for example a cloud CRM system or an on-premises CRM system do the exact same thing and the revenue potential is the same'.

“And so, by looking at return on investment you would be overcomplicating things. All you should actually be interested in is the cost, because the systems do the same thing, and so the measurement tool should be a determination of the total cost of ownership."

True reflection

On the other hand, even the most sophisticated TCO or TCS (total cost of system) models fail to capture the key benefits of cloud, such as the business benefits of agility, scalability, or even the potential costs of security.

“These should be brought in so that we can have a true reflection of the cost and benefits for the business."

For example, a lack of scalability implies a business or opportunity cost. “The key advantage of scalability is that it passes the risk of sub-optimal investment decisions on to the cloud provider,” said Etheredge.

Agility - the ability to deploy new innovations and products quickly - is gaining popularity as the most beneficial feature of cloud computing, he said.

Security concerns are often cited as the primary reason businesses are unwilling to adopt cloud. Estimating the cost of security should include a process that works out the cost and probability of an attack, as well as the impact on a business's reputation.

"For security, a five-minute Google search would be useful, but most people are not interested in the average cost of a breach but rather in what would be their costs as a business individually and that is going to be far more difficult to estimate.

“We may have trouble in measuring all these costs and benefits, but the right thing is to acknowledge that they exist and to have them in mind when choosing between cloud and on-premises systems."

As for local conditions, Etheredge said bandwidth and electricity were among the main costs to consider in Africa.