Cloud: Money Saver Or Money Maker?

Not to give too many “spoilers”, the gist of our answer is that organisations should focus on the cloud’s ability to make them money, rather than save it. Space restrictions mean our piece in the Sunday Telegraph will be brief, but here we can go into more depth, as the only shackle on word count is keeping our audience’s attention for as long as the draw of B-list celebrity Twitter feeds can be abated.

Saving or winning?

It is certainly true that one of the most oft cited objectives in cloud adoption is cost savings. In our first Cloud Circle Industry Trends Report (ITR), published last year, ‘reduced hardware and infrastructure costs’ topped the motivations list for both corporates and SMEs, beating off other advantages like scalability, mobility, new product developmental and environmental benefits. This was reinforced in the survey for our second ITR which saw ‘saving money’ emerge as the respondents’ primary objective in moving to the cloud.

More recently, research conducted by big four accountancy firm PricewaterhouseCoopers found that 52 per cent of Irish CIOs see reduced costs as the key driver for moving to cloud. The sentiment of these two surveys has been mirrored elsewhere on a mass scale.

The notion that cloud is a cost saver is arrived at through sound logic. In infrastructure terms, you only pay for the amount of power and storage that you need, meaning you don’t buy resource which is underutilised outside of peak periods. To a similar end, cloud facilities are automatically virtualised – the process whereby one server is set to perform multiple tasks so that capacity does not go to waste. This can of course be performed with in-house servers but then you introduce the costs of the staffing resource needed to set it up and maintain it. When paying for software meanwhile, the advent of ‘as-a-service’  in this space allows you much closer control over which employees need which piece of software – or even elements thereof – instead of buying licenses for all as a one-stop shop. This is especially so when they are delivered on a transparent, centralised platform.

But what works in theory doesn’t always stand up in reality. I have spoken to one IT infrastructure manager recently that received a quote for a cloud hosted server which would have cost the same every month as it would to buy the resource outright once. This doesn’t take into account the staff costs in buying and maintaining the server, or the rent it would require to be housed in a co-location facility, but the professional I spoke to was adamant: in this instance the on-premise solution represented much better value for money.

He’s not the only one either. Mark Evans of construction consultancy Rider Levett Bucknall – a regular speaker at The Cloud Circle events – will happily tell you that the private cloud setup he now has running across the EMEA region of his company costs roughly the same, when Peter, Paul and Polly have all been paid, as the former on-premise arrangement.

Yet Evans’ project has still been a huge success. Why? Because saving money was never part of his agenda. He’s more interested in finding ways to make money – the cornerstone of growth on an individual company level and for the wider economy.

Splashing the cash

The old adage “you gotta spend money to make money, champ” – paraphrased from the ancient Roman playwright Plautus – is now usually uttered by some hapless American wannabe entrepreneur who then proceeds to do much of the former and none of the latter.

But in cloud it might ring true. The biggest cost to most businesses is staff and, as a general rule, the total cost of each employee is around twice their salary. But without people most businesses can’t operate, much less can they grow. Whether you see employees as a cost or an asset will probably determine whether you want to save money or make money from cloud. If you move to a cloud environment you’ll still need some resource in-house ‘to keep the lights turned on’ – but this will be dramatically less than with an on-premise setup.

You’re then faced with two choices: you can either set your IT team to work in creative capacities, using their technological skills (in an increasingly digital world, remember) to come up with new products, processes and horizontal ventures, adding value to your organisation with the aim of wealth creation; or you can issue them P45s to save on their wages. It’s up to you to decide which is most sustainable for your organisation in the long run.

Elsewhere, capital has always been a key barrier to growth. With cloud, this is another load that is lightened somewhat. Instead of paying for your IT infrastructure upfront out of your capital expenditure (and, if you’re a large business, this will amount to at least hundreds of thousands of pounds for a complete set-up) you are charged on a pay-as-you-go model which you therefore cover out of operational expenditure.

This isn’t to say that one model in the long run is necessarily any cheaper than the other – what it means is that you can keep hold of your capital and then invest it, when the right opportunity comes along, in something which makes your business better. During recession, when remittance notices began to become fewer and further between, access to capital was what allowed some businesses simply to survive – and many didn’t.

There are other ways that cloud helps you to make money and save time at the same time, too. Take, for instance, the use of scalable compute power within computer aided design programs, delivered as software-as-a-service. Before, it could often take a product designer hours to render just one design. Now, they can get limitless variations of that design rendered in minutes, meaning they can explore how, for example, changing materials affects the overall durability, cost, environmental performance, production processes and more. This offers the opportunity to potentially add value to your product by making it better which then offers you competitive advantage to increase your market share, margins or both. It may also show you that there’s a cheaper material to buy or a cheaper way to make things which, lo and behold, saves you cash.

Moreover, the rise to prominence of big data offers similar opportunities. Using parallel computing software, delivered via cloud, you can spread the computational task of analysing huge amounts of complex data over potentially limitless computers, allowing you to unlock value from that data – whether that’s in greater customer insight, better product design or anything else that enables you to add value to your offering.

Therefore, I would venture both saving money and making money are possible with cloud – sometimes simultaneously, though sometimes not. It all depends on your outlook to the procurement and your business overall. If your objective is to save money with cloud, it will easily offer you a way to do so. If your principle objective is growth, cloud will just as easily step up in multiple different ways and become a great tool at your disposal. In this instance there’s a good chance that you could save money too as a by-product – but if you’re making enough, you probably won’t care.

Mark Young is editor at The Cloud Circle

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