Companies look to cloud to save money, build business
Cloud computing is not pie in the sky. It offers tangible benefits that real-world businesses need to meet the demands—and take advantage of the opportunities—of today's instrumented, interconnected and intelligent world. As the world grows smarter, cloud computing offers ways your midsize organization can work more efficiently and more productively, simultaneously saving money and enhancing your business and IT operations.
Consider what two companies have accomplished. In one instance, an engineering firm typically required two weeks to run simulations for a project using its installed servers. The firm wanted to speed up its work, but buying additional processing power seemed an unwise choice as such massive requirements were not an everyday occurrence. Instead, the firm moved its simulations to a cloud-based computing model, buying ten times the power it had in-house, paying only for the processing time it used, and reducing the time required for its simulations from two weeks to two days.
The second company normally adhered to a three-year refresh cycle for its desktop PCs and was incurring substantial expense for new equipment. So one year it decided not to make the purchases. Instead, it invested in servers, software and network devices to build a cloud computing system. Because data and applications now live "in the cloud" rather than on users' machines, the company can slow its desktop purchases, get more life from its existing equipment, and accrue continued savings—all while giving users better performance and greater security.
These two companies have something in common: They've used cloud computing to become smarter, creating new value and working together in new ways. They've focused their energies on their core competencies—whether meeting extraordinary demands or managing everyday business operations—and they've saved money in the process.
"So you have an IT staff of 20 to 30 people," notes Ric Telford, vice president of cloud services at IBM, "and half the time they're tied up in rebooting servers and backing up disks and diagnosing failures and applying patches to software. What if they didn't have to do that any more? Now you suddenly have 10 people freed up to redesign your website, to develop an analytics engine, to do predictive analysis of sales, to create a website for a new marketing campaign.
"That's what cloud's really about for medium-sized businesses. It's taking the previous dollars you spent on having IT staff and making sure you get those folks working on the things that are most differentiating to your company."
Use the cloud to focus on your core strengths
Lower cost is a benefit that comes up frequently in discussions of cloud computing. That's because there are inherent efficiencies in the cloud model, which builds on virtualization techniques to pool resources, dynamically provision applications and deliver services to users over high-speed connections. A cloud can be private, in which a company operates its own environment. It can be public, in which a company buys services from a provider who operates the cloud. Or it can be a hybrid, with some services provides in-house and some purchased through a provider.
While large enterprises typically adopt the private cloud model, midsize businesses generally find the public cloud more attractive. That's because midsize companies find tremendous value in focusing on their core services and reducing or re-focusing IT operations. "If you're a law firm, if you're a school district," notes Telford, "for every IT person, that's one less teacher you can employ or one less lawyer or paralegal you can employ."
The key to achieving savings, therefore, is to know your organization's core strengths. "Generally," says Telford, "the first thing to look at is what you do today. What are the IT services you are providing end users? It could be a website, maybe a web-facing e-commerce site that gives you a unique advantage. And that's something you would want to keep managing the way you do. Then look at the rest of the IT services you provide and one by one say, ‘Okay, what's our strategy here? Can we get out of managing this? Is cloud an option?'"
Look at the IT services you provide and one by one say, "Okay, what’s our strategy here? Can we get out of managing this?"
Clouds hold many opportunities to save money
So how can cloud computing help a midsize business save money? Here are some of the key areas:
Reduced labor costs: When a company uses a public cloud, IT functions move to a provider. With a private cloud, the IT functions that remain in-house increase their efficiency—because management is more efficient in a virtualized environment. "In terms of labor costs," says Telford, "the main focus is on automating services so that many of the tasks that people performed are now done in the cloud or done by a machine. So as you standardize and automate, the more people you can free up to do other things."
Faster time to value: Instead of the weeks or months that purchasing and installation typically require, equipment in the cloud can be ready within hours. Notes Telford, "Rapid provisioning and also being able to be highly elastic—to have lots of processing power for a short period of time—are two ways that you get time to value."
Pay-as-you-go model: Especially in the public cloud, where you essentially rent services, a company can make significant strides toward eliminating the cost of unused resources, postponing purchases or even testing solutions without committing to a purchase. "In a public cloud model you pay your service provider for what you use—whether it be how many email boxes per month, how many terabytes of storage or, in the case of servers, how many virtual machine hours you need," explains Telford.
Simplified capital expenses: Cloud computing also can simplify business processes. "The way companies do their accounting," says Telford, "they have to carve out so much for capital expense, and the way capital is depreciated on the books can be a headache for medium-sized businesses." Fewer purchases, however, mean not only less money going in and out, they mean less inventory. "That may make it easier for a lot of medium-sized businesses to manage their books."
Lower real estate and energy costs: A virtualized private cloud has a smaller footprint than a standard data center. A public cloud removes large portions of the data center altogether. And both cut the use of energy. "If you have lots of servers spread out across the data center," says Telford, "they're taking up space. They're throwing out heat. If you consolidate those and move those applications to virtualized images that are dynamically provisioned you can cut down drastically on the space required, and you can optimize the way you do cooling in your data center."
For best results, analyze all your workloads
Even for the midsize business, today's data center can be a complex environment. You likely have spent years deploying and tuning equipment and functions so they meet your company's unique needs. Yet you likely have encountered inefficiencies and expenses that you wish you could do without—and that cloud computing may be able to relieve.
Telford, however, does have a caution. "I tell people, there's no rush to move everything to the cloud. Do your own analysis, look at it workload by workload. What would you like your IT staff to be focused on? What do they not need to be focused on? And use that as a template for figuring out how to best leverage cloud computing inside your medium-sized business."
More from ForwardView
Join the conversation
Analytics: A blueprint for value in midmarket organizations
What if you could save $700,000 over the next five years?
Revolutionizing the internet of things (IoT) technologies with block chain and cloud computing