You hear a lot about Cloud Computing delivering lower costs, but as a cloud provider myself, even despite offering competitive rates I often get the reaction from potential customers, "I could buy a server and manage it for less than that!"  And, to some extent they're right: a server and a little of your time on the side to manage it is usually a lot less expensive than cloud computing.  Of course, most customers aren't familiar with the true cost of providing a reliable computing service, which includes redundant server and networking technology, power costs, data center costs, etc. so that if they actually tried to provide their own service, the cost would be significantly higher than their off-the-cuff estimates.  But managed colocated servers, which include most of those costs, are still usually less expensive than cloud computing.  So why do customers sign up for the cloud? 

The answer is... services.  The cloud, by separating enterprises from their servers and offering universal (secured) access to the servers, allows cloud providers or third parties to bundle the computing with value-added services starting with simple management and going all the way up to full outsourced IT operations, which can make a little startup company look like a large enterprise by providing application architecture expertise, highly reliable software deployment, and live site management.

This combination of scalable computing and services is what truly lowers the technological and cost barriers to entry in the web-facing application market.  The biggest savings comes in the form of reduced capital (from utility billing) and staffing investments (due to sharing the wide variety of skillsets with other customers) needed to reach enterprise-class service delivery standards necessary to run a SaaS business.  This is truly the breakthrough that Cloud Computing offers, allowing anyone with an idea and a little programming skill to operate a commercially viable website such as a SaaS service.  It also means that there will be a host of other cloud providers other than the Big Three providing both computing and services with unique offerings tailored to meet a wide variety of needs.

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ENovikoff: ...

Thanks for the comments, Paul. I agree. Perhaps the title of the blog should have been "the underappreciated value in Cloud Computing." I was at last week's Cloud Camp, and there was a lot of discussion about "what is cloud computing?" and your observations cover a lot of what was discussed in a very clear summary. I think we're in violent agreement here, since the services that Cloud Computing enables also help to enable flexibility that goes even beyond cost-effective computing resource allocation and allows businesses to respond rapidly to changes in mission or business strategy.

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June 30, 2008

Paul Laskin: Value is greater then just Cost

Good post but I would go one step further beyond just services. The value of Cloud Computing comes from a mix of cost, services and flexibility. In fact comparing the value of Cloud computing to a fully owned brick (or stucco) and mortar data center can be a challenge if one just looks at cost.

Companies have a difficult time measuring their true server cost. There is the capital outlay, power, cooling, network, storage, support, maintenance and licenses. When one includes all of those costs (and potentially more), then the virtual server sitting in the cloud starts to match and in some cases beat that server in one's own data center.

Value comes from more then just cost though. The majority of Cloud Computing value in my opinion is in flexibility. If I need to rapidly increase the number of servers or storage for a project, Cloud Computing lets me quickly scale my systems to meet demand. If I need a number of test servers to carry out some QA for an upcoming upgrade, I can quickly set up the servers, run the tests and then put it to sleep for another day. No longer do I have to budget for real hardware that ends up sitting under utilized most of the year. Cloud computing changes everything. The trick is getting business to understand that "Cost" is only a piece of the Value pie. When you step back and look at the total value, then Cloud Computing makes beautiful sense.

e tutto per oggi!

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June 30, 2008

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