Friday Apr 18, 2014

You Are Not Even Wrong About the Cloud - Part 4

This series of blogs has been exploring several aspects of Cloud computing which have the difficult property of orthogonality – a characteristic where two aspects of Cloud computing which would seem to work together actually follow separate and sometimes divergent paths. The tangible result of this orthogonality is difficulty coming up with an accurate assessment for a Cloud computing offering, since these multiple areas are not easily resolved into a simple value proposition. The last area in this brief list revolves around cost.

There is a widespread belief that Cloud computing means that IT will cost less. Through the magic of Cloud, the IT budget will shrink while still delivering everything your organization wants and needs. Some people justify this belief with the idea that buying in bulk gives Cloud vendors a cost advantage which they can pass on to their customers. You know – give it away and make it up in volume.

But, unfortunately, the reality is a bit different. Although Cloud vendors probably do get a better discount than individual customers, they still have to make margin themselves, which usually exceeds their lower cost advantage in one stroke.

Cloud vendors can reduce costs, though, by making it easier for them to scale the number of different distinct customer environments they can support with a smaller number of IT staff. There is no real magic in this – Cloud vendors use automation as one of the key ways to achieve this benefit.

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