Mythbuster Monday (Part 6 of the Series): Cloud Computing is Only For Cost Cutting

September 6, 2010 Appirio

Mark Koenig

Some myths start out being true and become false over time. Today’s myth – “the only reason to move to the cloud is to cut costs” – is a good example. In the early days of SaaS, adoption was driven primarily by a need to cut costs. Sometimes this was expressly stated as a need to reduce the tangible, direct costs (hardware plus software licensing and maintenance) associated with an application, or the desire to opt out of costly upgrade cycles. Other times, it was a softer goal of simplifying the software environment, and with it the cost of managing complexity. Regardless, the initial value proposition of cloud computing was seen primarily as cost reduction, and for some, that remains the primary driver to move to the cloud.

As I’ve written before, there is nothing wrong with “better, faster and cheaper.” But that is only a part of the cloud computing story. While cost reduction remains a key component of the cloud computing value proposition, agility is an equally if not more important reason to invest in cloud computing solutions. This has been supported in a number of research reports coming out. For example, Sandhill reached out to more than 500 IT executives in their “Leaders in the Cloud” survey and found that 49% of participants mentioned “business agility” as a driver of cloud adoption, as compared with 46% who mentioned “cost efficiency”. Appirio’s soon-to-be-published “State of the Cloud” report had similar findings (more on that soon).

The cloud’s agility benefits were made clear to me during a recent client requirements workshop. The workshop was originally conceived as an opportunity to finalize requirements for a prototype of a new cloud application. However, the VP of the business unit had just that week communicated a change in their go-to-market strategy for 2011, so the meeting agenda quickly changed to address the impact of the new strategy across the client’s cloud applications. By the end of the meeting the client team had laid out a plan to modify their applications, including the new prototype, identified the new reports it would need to modify its environment, and validated that these changes could be made in time for the start of the new fiscal year. In contrast, they said the last they went through such a strategic shift, they had to delay the roll-out by three months: they needed the extra time to modify the on-premise application environment that they were running their business on at the time.

When we work with our clients to build a roadmap and business case for cloud investments, we consistently find that the business benefits are often times orders of magnitude more than the cost savings. It is the combination of business agility and cost savings the cloud-model provides that forms the foundation for innovation and business transformation. Companies that fail to recognize this will sub-optimize their cloud investments – and risk being left behind by more nimble competitors.

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