Cloud computing is on everyone's radar as a way to reduce in-house data center costs and economize the deployment, support, and use of applications. But businesses often go forward without realistically assessing cloud ROI or planning for hidden costs in cloud services.
"There is a tendency for people to focus on the headline proposition of getting a cloud-computing service that is based on low costs of hourly computing," said Vuk Triskovic, senior analyst for industry researcher Ovum Ltd. "They look at the hourly rent of a cloud resource, or at the amount of storage that they no longer will have to deploy in their data center. They don't add other incremental costs like the cost of the broadband, and there's good reason for this. The people in IT who are charged with getting the bandwidth are not the same people who are doing the networking. Consequently, costs from the two areas in a cloud-computing evaluation are often not consolidated into an ROI computation."
To be sure, many organizations are willing to absorb broadband costs in exchange for cloud services -- but those costs may be worth examining more closely.
"Broadband prices continue to fall," said Michael Philpott, senior analyst for Ovum. Meanwhile, service providers continue to charge customers for tidy profits.
Investment firm Panorama Capital spelled this out in a bandwidth example where a cloud services customer was paying $30/month for bandwidth to the cloud provider for 20 business days per month at 12 hours per day. At an average bandwidth use of 1.85Mbit/s, the service provider was paying a wholesale bandwidth rate of $14.81/month, leaving a profit for the services provider of $15.91/month, or 51 percent.
"This is a case of businesses being so focused on the SaaS [software as a service] element of cloud computing that they forget about the impact of the networking," said Ovum's Triskovic.
Another area of networking that organizations can overlook in their rush to the cloud is redundant Internet connectivity. They capture this in the SLAs (service level agreements) with their cloud providers, but they may overlook the fact that they also have to have redundant Internet failover capability from their corporate premises to the cloud.
"Many companies still only have a single Internet connection to the cloud," said Darin French, vice president at XRoads Networks Inc. , which provides enterprise cloud and bandwidth optimization solutions. "Like their service providers, companies need a strategy of maintaining multiple ways for accessing Internet resources if one of those Internet access links fails."
French recommends sites consider a "best practice" of using more than one service provider and more than one Internet access medium. "For example, if you have one service provider that gives you Internet access via DSL, you should also secure a second service provider that can get you to the Internet via fixed wireless, or cable," said French.
Right on, Mary. This is what the nonprofit I work for is experiencing right now. We've been given Salesforce and Google Apps grants, but we couldn't maximize them--at least not yet--because of bandwidth limitations.
Control is the major element IT gives up in the cloud decision--and it is also noteworthy that most cloud computing enters through an end user department, and not IT. IT, of course, ultimately becomes responsible for managing the relationship and the SLAs.
Security is a major concern that outside audit groups have been working on. They want to know that IT (or someone within the company) has a firm grasp on the security measures the cloud provider offers, and they also look for a SAS70 report from the cloud vendor that can assure everyone that the vendor is financially sound and will be around for the long haul.
Yes, it is extremely important to "vet" your cloud provider, because you are placing all of your eggs in that basket--and it isn't very easy to have a smooth fallback plan if you totally outsource an application. As with most IT trends, I am expecting some kind of "correction" to present cloud deployment thinking over the next few years--as enterprises gain experience with the cloud and fully understand both its advantages and disadvantages.
That was my response to an inquiry from the board regarding clouding our systems. If I don't build it, and have control over everyone that has access to it, and can't physically lock it up, it ain't secure. There have simply been too many breeches in security "out there" for me to even consider putting the info about our donors, or members, or critters, or anything else remotely sensitive somewhere beyond my physical control.
The cloud may eventually become safe and secure, but until it is, and can be absolutely proven as such, the world can do the cloud dance without me.
Oddly enough, bandwidth is the one thing I wouldn't have to worry about if we did go to the cloud, given the size of the pipe we have.
While I love the flexibility of cloud computing, your ideas are spot on, if everyone starts doing all communication and apps via the cloud, plus all our cell phone users are using apps in the cloud, our bandwidth is going to have to increase tenfold to keep up. But, in addition, it brings up another conundrum, we've got a double whammy against us now. Let's say Johns Marketing firm goes 100% digital is everything it does and only uses apps, wireless, and the cloud. Not only do their eggs lie in the device basket, but now they also lie in the cloud basket. Either one goes down, they are out of luck.
Vendor management is a "soft" skillset that IT is still getting a handle on, as you adeptly point out. As you say, it is "hidden" because few people think of it at the time they author an RFP!
I also agree with you that large enterprises in particular have a good grasp of bandwidth costs, and of also deploying alternative bandwidth accesses to net the lowest prices. It is the SMB space I was particularly focused on in the blog. My experience may be different than yours, but I don't always see SMBs reviewing bandwidth costs from their premises (which are used for not only cloud access, but other purposes). I think today that bandwidth is not a backbreaking cost for many of these SMBs, so there might be some rationale behind why bandwidth is not always reviewed at the same level as potential data center and server savings. As cloud computing usage matures, however, I think this will change.
"Silo" problems with respect to communications are still a problem, Rob.
Part of the problem lies with IT, which communicates using a lot of jargon that end users don't understand. The other issue concerns vendors who go directly to the end users with technology--and then IT gets told to "make it work." There are also communications breakdowns within IT. For example, the phone/ line people don't talk with the networking people. All of this compounds the problem of being able to clearly see what a SaaS/Cloud solution is costing.
While some large enterprises may have trouble getting the folks promoting cloud computing and those responsible for bandwidth to communicate, I have yet to see a cost-benefit analysis of a cloud-based solution that did NOT include bandwidth, security (ie SSO or 2-factor authentication services), and other so-called hidden costs.
The challenge, of course, is accurately estimating the need and associated costs ahead of demand.
We work with SMBs under 500 employees. Often times, cloud-based solutions lower bandwidth requirements as mobile, remote office, and telecommuting employees access applications directly via the Internet instead of via VPN or SSL VPN services.
We also see a trend towards alternate forms of carriers to provide redundancy. We see business-class cable, SDSL, and FiOS options being deployed -- with SLAs -- for a fraction of the monthly cost of existing bandwidth. In many cases, the second connection has greater bandwidth and becomes primary, with the legacy connection serving as backup.
One hidden cost we do see, however, is the change in role of the IT staff. Instead of managing disk, systems, or applications, the staff is now managing a vendor. This is a different set of skills and responsibilities for many IT staff members that warrants training and mentoring.
My employer isn't inclined to utilize cloud computing resources. A lot of the information we handle could potentially be subject to classification, so we'll bear the storage costs. But bandwidth considerations are something that I've been looking into for other projects, like redundant and failover Internet options. I've often wondered if bandwidth considerations are in the conversation. Your posting suggests not, or that it's lacking to some extent.
Information Technology, for some time now, has become tightly intertwined into business processes, business strategy, and business continuity. And yet I see far too much of a silo attitude about the various facets that are needed to make sure the I.T. is there to cover all those wider business concerns.
Because of my own situation, I don't have as much of a view into Cloud Computing as others might have, but I was particularly taken by:
They look at the hourly rent of a cloud resource, or at the amount of storage that they no longer will have to deploy in their data center. They don't add other incremental costs like the cost of the broadband, and there's good reason for this. The people in IT who are charged with getting the bandwidth are not the same people who are doing the networking. Consequently, costs from the two areas in a cloud-computing evaluation are often not consolidated into an ROI computation.
It seems like this kind of split personality has been an Achilles heel of I.T. for some time. And while it's getting better in some ways, it's still got a ways to go, doesn't it?
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