What are The True Cost Savings of Cloud Computing
Cost savings is clearly one of the main reasons why companies are migrating to the Cloud. Although Cloud Computing can offer your company many financial advantages, it is important to clearly understand the cost implications of the Cloud and how it could impact your company.
Some of the most critical cost savings include:
- No large upfront capital investment
- Reduced software costs with upgrades included in the monthly fees
- Reduced spending for IT support
- Business Continuity is included in the Cloud environment
- Savings gained through higher worker productivity and greater efficiency
- Tax Benefits
Here we’ll take a look at each one of these in a little more detail so you can start to get a better picture of the cost savings associated with moving to the Cloud.
The Cloud Can Eliminate Large, Re-occurring Capital Expenditures
With cloud computing you no longer need to spend large amounts of upfront capital on the hardware and software necessary to run your network. In most cloud environments, these costs and the cost to maintain your network are included in a flat, monthly fee. Additionally, when the server and network backbone (switches, firewalls, storage) need to be upgraded, it is the responsibility of the cloud provider to do these upgrades – with no added cost to the user … thus eliminating big financial commitments of performing future company-wide upgrades.
- Cloud Servers and Network Hardware are much Higher Quality – A very important difference in the infrastructure of an onsite-based network versus a cloud-based network is that the servers and network hardware is the very best and highest quality when purchased for cloud environments. A very good premise-based server might cost $10,000 – $15,000 whereas a Cloud-based server might cost $70,000 – $100,000 … or more. The same is found for the firewalls, the switches and all of the rest of the hardware that is used in a cloud environment. Cloud solution providers cannot afford equipment failure, so very high quality equipment is used and all of it is highly redundant within the data center.
- No expenditures on expensive hardware – In general, Cloud solutions do not require the outright purchase of server hardware, network storage, backup systems, disaster recovery systems, power or cooling systems, data center or utility costs. When a business moves to a cloud environment they eliminate the need for servers and the physical space needed to house those servers.
- No need for the Upfront Capital Expense of Infrastructure Software – Cloud computing eliminates the need for the upfront capital requirement of purchasing software like Windows Server, SQL Server, Application and Database Servers, Client Access Licenses, Middleware, SharePoint, Citrix Server and client licenses … etc. These costs are paid in the monthly fees for the cloud environment and support.
- Fewer Expensive Software Upgrades – Many software manufacturers are including free software upgrades for applications that are hosted in the cloud and are paid as a subscription within the monthly cloud environment fees. This means no expensive software upgrades and none of the interruption that software upgrades create in businesses.
The Cloud offers predictable IT costs
The unpredictability of the current “Break-Fix” system of support for computer networks has frustrated business owners for many years. One of the big advantages of cloud computing for business owners and their staff is the predictability that it brings. Continual software upgrade fees, replacing outdated servers and other variable costs are virtually eliminated with Cloud computing. Most businesses that have moved to the Cloud greatly appreciate the consistency and predictability of paying a fixed monthly cost for their IT needs.
This predictability happens on a couple of levels. First, companies only pay for the services they use, instead of paying for hardware, software, power and the support for keeping these items secure, stable and functioning properly.
Second, in the old, on-premise model, when you purchase software you are stuck with that version for many years, along with the software’s multi-year upgrade cycles. While you can work around this with third-party add-ons, it’s not nearly as efficient as cloud software which is updated automatically as the upgrades become available … and when these upgrades occur, there is no downtime or added cost for the business.
As a business owner or manager it is good to know what you are paying for now and in the future … and it is very comforting to know that the software is being updated automatically and without causing major disruption to the business. With Cloud Computing, this all happens behind the scenes!
Never fall behind the technology curve
Although it is impossible to place a specific cost on this for your company, having outdated technology can be very costly to your company. There are many examples of companies purchasing very expensive hardware for their company only to find that within 12-18 months the hardware needs to be upgraded and is already out of date.
Lacking adequate technology support for businesses processes, employees and customer interactions can contribute to a host of lost opportunities … and lost revenues! If one business has automated systems that allow them to do things more efficiently, it is easy to imagine how that could be great advantage within that space. The ability for a company to ramp up production or reduce overhead can greatly affect the profitability of that company.
Reduce spending on IT Operations
This is typically one of the greatest sources of savings when a business moves some or all of its systems to the Cloud. The expense of the typical IT support model (whether outsourced, in-house or a combination of the two) is oftentimes not clearly understood by business managers and owners. Staffing costs in the IT department or for outsourced IT Support for deploying, operating and maintaining applications and underlying infrastructure can be extremely expensive … and many of these costs are greatly reduced in a cloud environment.
When a business is operating in the cloud, the cloud vendor takes on nearly all of the costs associated with installing, running and maintaining the applications, the underlying software infrastructure and the associated hardware. For most businesses, this represents savings of at least one full time IT professional. As an aside – this doesn’t always mean eliminating jobs in the IT department – it can also be seen as removing unnecessary, low value-added work from IT, which allows the IT team to focus on more strategic, value-added services.
Reduced IT Support Costs
The cost to your business, both in downtime and in human costs of diagnosing and fixing the problems, is a major ongoing part of typical IT support costs. A major improvement in the Cloud world is that through the magic of the Internet both the support people at the Cloud vendor and the client can be logged into the system and looking at the same screen / data / problem at the same time. The customer doesn’t have to describe the problem to the support rep anymore – they both can look at it at the same time from the comfort of their own web browser. The ongoing support savings are significant!
Hosting your business applications on the Cloud means you no longer need to install and set up that software across your business yourself. By outsourcing your IT needs your business may no longer need the same levels of in-house technical expertise – allowing you to focus more on your core business.
Higher worker productivity
Cloud Computing typically offers higher working productivity because the network is “always-on,” users can be “always connected” and users can connect to the network from any device (iPhone, iPads, laptops, home desktops, hotels, coffee shops, etc.). Because workers can access the system anytime and from anywhere, they typically get more done than if they can only use the system in the office during normal business hours.
A well-designed cloud platform will allow employees to get work done anytime and from anywhere. If the company is also paperless, and they extend their systems through web-based portals and dashboards, reports can be generated and delivered quickly and efficiently – eliminating wasted time and paper processes – and extending productivity improvements beyond the finance department and across the business. These productivity improvements quickly add up, and in many implementations can free up one or more full time support staff across the business.
Tax benefits of Cloud Computing
Rather than having to account for software and hardware as a capital expense, and then having to depreciate those expenses over time, with The Cloud’s subscription-based model, those expenses are considered operational and can be deducted every year, rather than over several years.
We understand that making the transition to Cloud Computing can be a difficult decision … but with The Cloud you will finally be able to reap the benefits of technology and use that technology to make better business decisions, maximize your profits, and at the same time minimizing risks and overall costs!