Last Updated on Tuesday, 05 January 2010 09:54 Friday, 21 August 2009 07:56

Q: How can cloud computing save us money if our IT budget is nearly frozen because of the economy?

A: A common reaction to cost savings using cloud computing is that businesses small to large have put a near freeze on IT spending to limit their costs. So, often the reaction to the obvious cost savings from converting physical infrastructure to virtual or "cloud"-based infrastructure is something like "I don't have any room in my budget to make changes like this." Startups or small businesses with no IT infrastructure may put off making any purchases at all for the same reason.

The problem with this line of thinking is that it's based on the idea that leaving everything as it is will cost you nothing. For businesses with existing IT infrastructure, there is a daily cost in operating that infrastructure. Power, cooling, and space costs related to using traditional physical servers, network equipment, and Internet data lines in your own facilities costs money even if you leave it alone.

For businesses with no infrastructure, what does it cost you in lost reputation when customers and associates email you at a Yahoo or Google email address? What does it cost you in lost reputation and even revenue when Yahoo or Google mail server delays cause hours of lost time when responding to urgent emails from customers? What does it cost you when your website is down because of other sites it's hosted with? Obviously, maintaining and building a good reputation is critical to a startup or very small business, so the question is how to do that at the lowest cost.

All of these costs are difficult to quantify, but they are there. Any experienced business owner knows that it costs some money to make strategic decisions that save money in the long term. The real question isn't how can cloud computing save you money, but how soon will you get a return on your investment and then realize true cost savings? Any business, small, medium, or large, should be looking at cloud computing to get that answer for their unique situation.

In most cases you can rent cloud computing server resources at a fraction of the cost of even a server lease, making server equipment expenses irrelevant for most businesses with fewer than one or two hundred employees. Cloud computing resources and their associated costs can be added and removed much more quickly than provisioning physical servers, while retaining all the advantages of a physical server. Based on the widespread adoption of cloud computing in the last few years, if you're not already using it, you are behind your competitors.

The advantage of cloud computing over website or email hosting, for instance, is that you are paying for a virtual server entity that can be moved to another host or even your own hosting equipment with minimal cost and effort. Moving your website and all related files and app resources or moving your email hosting and all related services and emails from one web or email hosting company to another can be very painful.

Startups and very small businesses have a key advantage over their larger competitors: minimal or no physical infrastructure to pay for or worry about migrating to new technology. With the right strategy, you can operate your business IT infrastructure realizing cost savings and high efficiency up until at least two hundred employees before even considering investing in your own physical servers.

Existing businesses, on the other hand, are faced with a groundswell paradigm shift in IT that may leave them behind their new competitors permanently. Decisions made today are sure to have long-lasting effects, with poor decisions possibly costing them their futures.

There are specific cases showing large cost savings using cloud computing, but every business is different and they may or may not apply to yours. For a closer analysis of your business and the advantages of cloud computing for you, contact us.