16 Comments

Summary:

Remember when the decision to go to Amazon Web Services was all about saving dough? Smart consumers now know that’s not the real reason to move workloads to the cloud.

Money Bags
photo: Corbis / Don Mason

Don’t look now, but there has been a shift in thinking around why companies move — or should move — workloads to the cloud. A few years ago, most of the talk was all around saving money. Look at how cheap Amazon Web Services are! Pennies per hour to spin up instances! We don’t need to buy more servers!

But over the last year, the discussion has morphed more into how cloud offers companies flexibility and agility and there’s growing realization that for stable, non-variable workloads, cloud — even public cloud — may not be the cheapest option at all. But that flexibility for intermittent or variable workloads remains the public cloud’s siren call. Check out posts from Virtual Geek and Cloudave for more thinking on this trend.

So the reason to go to cloud is no longer price but being able to move fast — deploy, re-deploy, and un-deploy workloads as needed without having to buy servers and software that could become shelfware next week or next month.

IaaS follows SaaS arguments of the past

What’s interesting to me is that this debate is evolving much like the discussion around Software as a Service (SaaS) did a decade or so ago. Initially, when Salesforce.com was coming into its own, most of the sales pitch was around price. Salesforce was so much cheaper than Siebel Systems. (Remember Siebel Systems? It’s now part of Oracle).

At that time, Microsoft was getting into the CRM business with its own on-premises edition. It’s counter-pitch was: “Sure, Salesforce.com may be cheaper at first, until you use it for three years. Then Microsoft on-premises CRM is cheaper.”

Of course, when Microsoft started rolling out its own cloud-based CRM, that price-based argument dissipated. The new thinking was that “cloud” CRM is better because everyone’s on the same, latest release and you can add/subtract users easily. Salesforce.com’s message likewise evolved to mirror that same message — especially as the more feature-rich Salesforce.com package options started to get um, quite pricey. Then Salesforce’s benefits became that it freed companies from the tedium and expense of on-site server and software upgrades. You could focus on business and leave the IT heavy lifting to your provider.

Everest Group partner Scott Bils agrees that the thinking around cloud deployment motivation is happening. “No doubt the conversation has shifted from [total cost of ownership] to agility,” he said. A survey Everest conducted of about 350 attendees at last week’s Cloud Connect show reflects that trend.

Cloud Connect 2012 Enterprise Cloud Adoption Survey

Cloud Connect 2012 Enterprise Cloud Adoption Survey

Customers surveyed cited reduced time to provision applications and infrastructure as their primary reason to move to cloud, followed by the cloud’s overall flexible capacity. TCO, on the other hand, came in way down the list. Now, remember, these people were at a cloud computing conference, so they may be more up to speed on these issues than the average IT user. But as Bils noted: “Interestingly, vendors still mistakenly believe [cost remains] the most important factor.”

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  1. Keith Townsend Thursday, April 11, 2013

    It’s the same argument for most disruptive technologies and service models. Remember when the marketing hype around VoIP was all around saving money? It turned at that very few companies saved money on toll charges. The value was in the productivity and capability that followed the implementation of VoIP. VoIP made applications that were not possible now standard features of enterprise voice systems.

    The same with an adjacent technology to Cloud, VDI. VDI has promised savings on hardware and software licensing. What enterprises normally find is that they shift costs from one charge code to another. What the focus has become is again capability and operational excellence.

    The discussion around Cloud has now morphed into how transforming the service model to a *aaS model enhances an organization to meet its mission.

    1. yah, the more things change…..

  2. Robert Cathey Thursday, April 11, 2013

    I think Scott’s a partner with EG, not an analyst, FYI.

    1. tx robert. i fixed.

  3. Customers want to build out applications or see a return on investment as fast as possible regardless of the project; cloud is an enabler of faster iteration/agility. It’s good to see the market validate time to business value is the most powerful factor in adopting cloud, not ownership cost.

  4. Just saw a customer being sold features they will never need. If it’s such a great deal, so easy, why does salesforce make customers sign a 3 year contract? If it adds value, why not sell month to month? Earn the customer business every month. Easy to turn up, turn down – that’s what they claim. So stop the long contracts.

    They have long contracts for a reason. They know you will leave after the first 3 months.

    1. @dean Good point. SaaS used to be sold as easy-on-easy-off so i was surprised to learn a few years ago that most customers have to pay for a year in advance and usually are put into longer-term contracts. So much for scaling up and down …. will the same thing happen in IaaS???? i’m sure that’s a possibility..

  5. As business become more product-centric and less IT-centric, the move to cloud-based services means you can focus on making a lot of money, not saving little bits of it. When I moved my business unit completely onto AWS from a legacy data center, cost was not the major consideration. I wanted to be able to spin things up and down instantly to support innovation. I wanted freedom from the tyranny of our IT department!

  6. Finally they starting to focus on the right reasons to move to a cloud solution. Moving to cloud was never about saving money, that was just a nice outcome when that did happen. Now we just need some more private cloud vendors and a good balance point between what a company will put in a public cloud and what they will keep private.

  7. Amen Barb. Interestingly though the agility and financias really tie together. Our here in NYC the banks are increasingly waking up to the potential of transforming their infrastructure assets from a fixed and absurdly chunky investment (“You’re telling me we need another data center!?”) to a variable model and the numbers are extremely compelling capital efficiency (capital agility?) story. So it’s not so much about “do it cheaper”, it’s about matching the supply and demand more intelligently. The operational agility side then puts the business case over the top.
    – Ken
    http://www.options-it.com

  8. Yes, different technology, same story.

    I was pretty shocked the other day when I heard a sales rep lead with cost reduction for cloud. To me, this is a silly lead. All you’re doing is chasing a small number of dollars down the rat hole.

    If you can create value for your customer, you will have a happy customer. End of story.

  9. Justin Scott-Rogers Friday, April 12, 2013

    Lets not forget about why the cloud vendor wishes to lock in contract terms. Like any managed services offering, there is a huge investment in the personnel, their capabilities, tools, and the actual deployment of services to the customers hosted in a cloud environment. The inter network and systems complexities, the security considerations, data management incl DR, monitoring and reporting, the management systems and other related products/apps licensed at enterprise levels.

    There is an IT team of considerable capability and cost to feed behind an ‘aaS’ model, so when offering these services you want to get an ongoing annuity return on your HR and infrastructure investment. How else can you acurately forecast your cost of doing business and plan further investment ?

    The custromer too wants stability when it all boils down, they want to feel like they are going to be looked after for the next 3 years, that you have the technical capability to migrate their business critical apps. I dont believe they are more interested in how quickly they can move on to a slightly lower cost per hour of I/O by taking up month to month service arrangements.

  10. Robert McDonald Monday, April 15, 2013

    Leading with cost in any sales situation can be, er, costly. While cost is always a consideration, I would never want to compete on that alone. On paper, we can always show that it is less costly to purchase than lease in the long run. Cloud is about agility, flexibility, and taking advantage of a pay as you go approach to manage growth. And, we’re seeing the same in the cloud backup space. While cost is a key consideration, it is also about moving backups off premise and having a sound disaster recovery plan in place, which cloud based backup enables. I recently wrote a series of blogs on these considerations, including cost (efficiency, Part 1), Security (Part 2), and Simplicity (Part 3). More detail here: http://blog.quantum.com/index.php/author/robertmcdonald/

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