From why to
why not
The top 5 risks of delaying a move to the cloud
From why to why not
1 Randy Perry, IDC Whitepaper, “The Business Value of Amazon Web Services Accelerates Over Time,” December 2013
At times, the discussion around cloud
deployment of software solutions has had
a similar tone. We all got the message that
broad adoption of cloud hosting was only a
matter of time. Just how much time has been
the difficult part to predict, leaving many to
wonder if those carrying the cloud banner
would eventually become known as the boy
who cried SaaS.
Unlike the metric system, however, it appears
that the moment for cloud has finally arrived.
Precipitous drops in the cost of cloud
computing are making it difficult to ignore the
bottom-line advantages of choosing cloud-
based enterprise solutions over on-premise
implementations. Research shows that most
organizations rapidly realize significant cost
There was a time in the United States when people
were told that everything about the way they measured
their world was going to change. There was a different
system—a much better one—being used by pretty
much everyone else on the planet; and it was time to
change the country’s antiquated ways. Inches? They
were going to become centimeters. Miles? A thing of the
past. Everyone from school children to grandmothers
prepared themselves for the change to the metric
system—which never came to pass.
savings that increase over time as they leave
behind the array of indirect costs related
to on-premise software. A recent IDC study
showed that cloud solutions offer an average
payback period of 7.1 months and 5-year
average ROI of 626%, a level that few other
investments can equal.1
With these types of economic benefits
on the table, attitudes toward cloud are
rapidly changing, and discussions about the
potential downsides of cloud deployment are
quickly evolving into evaluations of the risks
associated with not making the move. Those
risks are far from trivial. Let’s take a look at the
potential impact of maintaining the on-premise
status quo.
The time is now
2
From why to why not
A data center that cost millions to build
consumes even more millions for ongoing
maintenance, upgrades, power, cooling,
administration, and more every year; yet, the
fallacy of sunk costs often seduces managers
into throwing good money after bad. Cutting
the cord on costly data centers can be a
painful decision to make; but in many cases,
the money devoted to supporting them can
be used more productively.
In an environment where consolidation
happens in the blink of an eye, an increasing
number of organizations are being forced to
deal with the challenges that mergers and
acquisitions present, not the least of which are
the hardware, software, and infrastructure that
each organization owns. The cloud can offer
a safe, efficient, and economical way to avoid
disruption, while smoothly folding in new
organizations.
The top 5 risks of delaying
a move to the cloud
1 3
2
Ongoing hardware
costs
Barriers to beneficial
mergers and acquisitions
Delayed response
to disruption
In a world of instant communications and
viral markets, the ability to respond rapidly
to unforeseen events is essential. New
competitors can now spring up overnight,
disrupt existing industries, and claim
overwhelming market share in months. A
surprising proportion of the world’s fastest
growing businesses choose cloud solutions
to rapidly structure, expand, and scale up
operations to seize market positions before
slower competitors can respond. Brands
such as Pinterest™, Foursquare®, Etsy™, and
Yelp™ all grew to become household names in
months, and all of them built their businesses
in the cloud. The business value of the cloud’s
ability to scale up rapidly is difficult to ignore.
3
Cloud solutions offer an
average payback period
of 7.1 months and 5-year
average ROI of 626%,
a level that few other
investments can equal.1
From why to why not
We all like to think it will never happen to
us, but many organizations that host their
own data centers are just one fire or flood
away from a potentially irreversible business
disruption. Backups help, but they only
represent one part of the protection provided
by an enterprise-class cloud service provider.
Similar to the security issue described above,
cloud hosting vendors offer recovery and
failover capabilities that most companies
simply cannot match independently. Even if
a system fails, a cloud provider generally can
restore service quickly at another facility to
ensure continuity. Few companies can afford
to maintain an IT infrastructure with that level
of redundancy.
4
5
Insufficient disaster
preparedness
Lagging sustainability
The pressure for organizations to reduce
their environmental footprints is growing,
and it’s becoming increasingly difficult for
businesses to justify the heating, cooling,
power, space, and resource demands of data
centers when their solutions could easily
live in the cloud. Cloud hosts can optimize
resource consumption by virtue of greater
scale, and then reduce the impact even more
by spreading it across hundreds of customers.
Moving on-premise solutions to the cloud is
a quick and economical way to save money,
while showing significant, measurable
improvements in environmental sustainability.
4
From why to why not
Examine actual costs
Now that we’ve taken a look at risk, let’s move
on to hard dollars. Because while the value of
using cloud-based enterprise software goes
deeper than immediate cost savings, it’s those
reductions that typically present the most
pressing argument for switching to the cloud
sooner rather than later.
Put simply, cloud-based software typically
replaces a wide array of direct and indirect
software costs with a single, use-based
subscription fee. Although the direct costs
look comparable at first, it’s worth digging
deeper to uncover the real savings that come
from considering indirect costs, as well.
CloudLine item On-premise
Initial license fee
Subscription fee
Maintenance fees
Support costs
IT stang
Data center upkeep
and maintenance
Upgrade fees
Hardware costs
None
Charged by usage
Included
Included
Significant reductions
None
Included
None
Extensive
None
Percentage of license fee
Extra
Significant
Large, ongoing
Significant
Large
5
The cost breakdown
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From Why to Why Not: Top 5 Risks of Delaying a Move to the Cloud
Take a look at 5 risks you face by not moving to the cloud.
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