I’ve been reading a few whitepapers on the economics of the cloud. I was dragged in by the claim that using Cloud technology could save a company 80% on its IT budget in the future. This I believe and I was hoping to find some nice corroborating studies which explained this simply. However, as always I spent a lot of time sifting through hypothesis and some rather confusing graphs and diagrams (they looked pretty but equally made pretty much no sense).Over time however, the economics of moving to the cloud are relatively straight forward and using cloud services i.e. Microsoft Office 365 or Google Apps can certainly save most companies a considerable amount of money.

There is the initial move, which will cost, but should be seen simply as your final server upgrade because it is the last one you will ever have to make. From then on you’ll just be paying for what you use, when you need to use it. Over the coming years, the fact that you won’t need to pay the windfall amounts associated with an upgrade will lower your IT expenditure over time without doubt.

There is also the fact that your cloud data will be backed up. Again, over time, any data loss you might have suffered would cost a good amount to reclaim – if this is indeed possible. The costs implications of this are kind of immeasurable, and there are studies which show this can easily lead companies to bankruptcy. Such charges are clearly impossible to predict. In one recent case a client of ours had lost one of their servers and had to reclaim the data by sending the damaged drives off which cost in excess of £4000 – for a company with 12 employees this is no small hit and still excludes additional labour costs in getting the work done and reassembling the raw data retrieved by the process. The delay in the completion of work for clients can also carry a heavy penalty.

The next major financial advantage offered by the cloud centers around availability. The office internet going down is massively frustrating for many businesses and I’m still yet to meet someone who works in an office environment and hasn’t suffered long outages. Its not just the people in offices who suffer under this but also users who are out and about with a remote connection. If the internet is down, no one can get their email. Cloud email means it is easy enough to go to a local Wi-Fi area and have full access to this information – or even use a 3G adaptor or your mobile phone. There are many industries where certain tasks need to be completed by a certain time and access to your internal server going down can seriously impede such completion.

Sticking with availability, it is estimated (by Gartner no less) that 80% of IT expenditure goes on maintenance and keeping systems up and running. Without doubt, the very nature of the Cloud means this is the major area of saving as you do not need to maintain your own server. The 80% is also compensated by the availability through local Wi-Fi spots or 3G if your Internet Service Provider lets you down. This 80% of service charges can be taken off your budget – before you even know there is a problem a large team will be working on any issues, with no call out charge, and you’ll be re-routed to your clone deployment.

Another money saver is scalability. Currently with an on premises solution your systems are put in place in order to allow growth and prices never reduce in line with requirements. The Cloud changes that meaning you can quickly provision and de provision uses as well as storage space quickly, saving along the way. Only paying for what you use not only saves money by not having to overbuy but avoids the risk of a tech crunch – where costs are incurred due to overloading the IT system when companies expand. This is a risk which is of particular concern to companies without IT managers as there is no one monitoring this eventuality and with on premises solutions this can lead to slow systems, system failures and even data loss (which will certainly not help your company grow!).

To sum up, the economics of moving to a cloud solution are not as complicated as people would have you believe. Upgrade once, reduce risks and then save money year on year getting bigger or smaller in line with your company size rather than in line with the limitations of your existing IT.