Is Cloud Computing Really Cheaper for Corporations?

Posted by: Steve Hamm on August 07

Cloud computing has emerged as one of the hottest topics in the tech world, and it’s clear that the computing cloud will be the primary place that many consumers live their digitial lives. But it’s not yet clear that the cloud will be the same kind of transformative phenomenon for businesses. In fact, there’s a lot of skepticism about that. Is it secure enough? Will the captains of industry lose control of their data? Will it cost too much? James Sims, the chief information officer at SaveMart Supermarkets, told me recently that he’s not planning on shifting to the cloud. “Over the long haul, software-as-a-service will cost you more than running the applications yourself,” he says.

I think it will be a long time before really reliable measures of the costs and benefits of cloud computing for corporations are available. But, in the meantime, some pretty credible pieces of evidence are starting to come in. And they’ve favorable to the cloud-is-the-future point of view.

The newest piece came to me via an interview with Yoon-Sung Lee, the chief technology officer of Avenade Americas—the North American arm of the Accenture/Microsoft tech services joint venture. The company has developed a tool for doing cost-benefit analysis of switching from conventional software to cloud services. The tool considers 120 cost factors in a switchover, including hardware, software license fees, maintenance, power usage, administrative costs, storage, backup, software integration, etc. Says Lee: If you just look at the cost of the hardware and cost of the software versus the monthly charge for SAAS, it doesn’t look that attractive. But if you look deeper and take more factors into consideration, it starts to look fairly attractive.” Avenade has made its money primarily by installing traditional Microsoft software, and you’d expect it to look askance at the cloud/SAAS model. So what Lee has to say has a lot of credibility.

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