Real and hidden costs

One of the arguments in favor of the cloud is its costs. By moving to the cloud, you expect to save money, since you no longer must invest in hardware and software. But it is not always as economical or as simple as it is. So, to get a more precise idea, let’s look at the magnifying glass with some advanced arguments in favor of the cloud.

I only pay for what I use, so it’s cheaper

This is the principle of car rental or carpooling, and in general, all rental offers. The calculation is simple. You take the cost of acquiring the equipment, its cost of management and maintenance, its amortization on the duration of use and compare it over the same period to the renting of the same equipment according to your needs.

For the services you only use a few times a month, this can have a certain economic advantage. For example, launching a series of calculations for a marketing study can require a lot of power just for a few days. On the other hand, for the services you can use at any time, such as e-mail or file storage, comparing the price per mailbox can be detrimental to the cloud.

One of the constraints of IT is often the hardware and software acquisition required for the solution we need. There’s, therefore, a fixed cost, almost independent of the number of users. Hence, we get a result that graphically visually favorable to the cloud.

Classic Cost comparison

However, there are two errors in the reasoning:

  1. There are not always variable costs to a local solution. In fact, you can acquire hardware and software at a given price, including maintenance, which will cover the needs of the company for many years, including considering the increase in staff. The cost can, therefore, be considered fixed regardless of the number of users.
  2. There may be fixed costs for a cloud solution. Indeed, the increase in bandwidth often required is a cost incurred by the organization every month regardless of the number of users. Likewise, a virtual machine can form a fixed monthly cost if this is the solution chosen.

You can then have a completely different scheme.

Fixed Cost Solutions

It’s also possible to have variable costs in the cloud that increases faster than anticipated, depending on chosen options. They may rapidly go over those of the on-premises solution.

Explosive variable costs

At this same game comparisons, we often compare amortized purchases to running costs. With the cloud, everything goes into running costs, no depreciation, no cash to use to buy a new solution. More and more equipment suppliers propose rental offers that avoid depreciation. Once again, if the benefit seems to go at first glance to the cloud, it may not, depending on the relationships you have with your hardware vendors.

The argument of “I pay for what I use, therefore it’s cheaper”, does not always work. You need to investigate the details of the licensing model. It’s often complex and sometimes makes the comparison just impossible.

I no longer need IT staff

It will not please IT people: we do not need you anymore! We moved everything to the cloud! Thank you for your contribution! Moving all or partially your IT in the cloud does not kill all the IT infrastructure and therefore the need for IT personnel.

An example, among others, except if you do not need to print anything concerns the print server and the printers. You may need a local server and a local network to print locally. There will also some legacy applications that will not be able to move and will require a local authentication server. And there will be all the local support requirements due to a failed network, a lost file, etc.

There’s also the IT system evolution. With a detailed invoicing, we can precisely measure how much each user costs. It’s, therefore, possible to transform the IT department into a profit center so that each department knows exactly how much IT consumes. Why do I go this route? To let you know that the role of the IT personnel is changing but not completely disappearing. The move to the cloud can be used to outsource more functions, this is another discussion. However, IT is becoming measurable and potentially « profitable », it can be a force to transform the organization, as we will see in Chapter 6, Opportunities.

So, before you scratch one or more wages from your payroll, think twice about it.

My employees will become more productive

On paper, yes, in reality, no. I’m thought-provoking, but barely. In a clear majority of cloud projects I’ve seen in the last four years, the deployment of the new technology faced massive user resistance.

This takes several forms: from the inability of management to decide who should benefit from the new tools to set aside these tools for fear of “policing” by management. So, if the provider promises you the moon and a stellar increase in employee productivity, talk to him about change management. There is a strong bet that this issue will lead to long and insightful discussions.

However, two numbers should make you think. From the Microsoft’s experience, a cloud project without change management succeeds in only 15% of the cases! Yes, you read well, 15%! Frightening! To the opposite, the success rate goes to 84% when change management is part of the project. Six times the rate of success. This is moving from failure to success. The purpose of this book is not to go into the details of change management, there are many books and consulting firms whose job it is, that will be more than happy to assist you.

Start with the principle that change is scary for most people. As Robin Sharma said: “change is hard at the beginning, messy in the middle and gorgeous at the end”. It’s crucial to go through those steps with trust and to be therefore assisted. Now, if the technology lands smoothly, the effects will soon be felt:

  • Possibility to implement a teleworking policy, both in terms of tools and processes.
  • Secure use of personal devices.
  • Ease and speed of implementation of new processes.
  • Acceleration the transformation of the organization

All this may seem trivial, but the experience shows it’s not. Change management can help in landing the new organizational strategy and benefits both the organization and the employee. When technology is not explained and adopted, negative consequences are numerous, starting with useless expenditures. The following two imperatives need to be reconciled:

  • Implement the technologies necessary for the development of the organization.
  • Ensure the safety and adherence to the compliance rules.

This cannot be achieved without the involvement of the staff and without a structured approach. It is at this price that “your employees will become more productive”.

You’ll get more details in my book, Private, Hybrid, and Public Clouds: New computing model…

Photo by Vladimir Solomyani on Unsplash

One thought on “Real and hidden costs

Add yours

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Proudly powered by WordPress | Theme: Baskerville 2 by Anders Noren.

Up ↑

%d bloggers like this: