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Georg Singer is a researcher in the area of cloud computing at the University of Tartu in Estonia. His research focuses on ROI, economic and business aspects of cloud computing.

Selling cloud computing – a no brainer?

The arguments for cloud computing are convincing. You save money with little up front investment.  Selling cloud computing seems like a no-brainer.  Well, it’s not as simple as that.

First of all it starts with the question: who do you sell it to? Trying to sell it into the IT administrator might not be the best idea. He is the one who will maybe made redundant.  So find somebody else to sell it to – the CFO.  Seems to be the ideal choice. But those guys always want to see hard facts and business cases. The business case will compare a base scenario (the costs of the existing infrastructure) with the cloud scenario and clearly point out the financial gains.

And here it gets complicated. Ok, cloud computing saves money, so we just need to proof it. No problem! In theory yes, in practice creating a proper business case has some nasty limitations due to cost allocation issues. Usually companies are not willing to transfer all their IT, their technical heart, in to the almighty cloud. Hence they look for less mission critical parts to migrate and save money. So far so good. Let’s transfer a slice then. Unfortunately allocating costs to this slice is not always that easy. How much is John working on this part of the IT per week? How much is Angela usually doing in this area? Creating the base case relies on allocating proper costs – and those costs are not retrieved by pushing a button.

Even if you happen to easily get the costs for the base case, the financial gains are usually not so big that decision maker see a clear justification for taking risks.

So what to do? So far, we see to options: focus on additional benefits and target projects that inherently are designed for the cloud. The latter should not be too difficult to achieve. Cloud is unbeatable when it comes to providing an elastic service. Who needs an elastic service? Companies who have a big difference between peak load and average load. Research says that average difference peak-average load is 3-10, our own experience shows it to be around 2. Enterprises fulfilling those criteria are usually active in  e-commerce (seasonal peak loads) and high growth start-ups (growing load).  There is only one drawback with this segment: it is not very big.

What about additional benefits then? This is where the real sales pitch is.  It’s not about the quick win. The short term financial gains might be not convincing enough. What can make cloud computing an option, is trying to align the IT strategy with the overall business strategy. An established business that has a pipeline full of potential blockbusters that will be launched over the internet – an ideal candidate.  It has the two options: invest millions into extending its own IT infrastructure (with long project lead times) while having little knowledge about the future peak loads.  This business has a high risk of either under estimating peak loads and losing customers or over estimating peak load and running a under utilized IT infrastructure at too high costs. The cloud offer on the other hand is fully elastic. The worries about peak performance issues are transferred to the cloud service provider. The business can focus on its core competences.

The point is, cloud computing services can offer a very interesting alternative with substantial benefits. If businesses shall pick up on it, then the full range of benefits needs to be analyzed and sold accordingly.


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2 Responses to “Selling cloud computing – a no brainer?”

  1. Cloud-computing is at the peak of the hype-cycle at the moment. Even Oracle-Sun with its private-cloud vision has embraced the fact and is doing a roadshow promoting their vision. Microsoft is far ahead of Oracle with its Azure (PaaS) and Online Services (SaaS), not to mention Amazon.

    We have done cloud testing in MicroLink and are running a few systems on Amazon. With that experience I would like to state the opinion that the real business changer will not be cloud-computing but “SaaS on PaaS” or “SaaS on Cloud”. Cloud-computing is just means, but might not be highly relevant in business sense. :-)

    February 10, 2010 at 11:31 Reply
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    January 23, 2012 at 02:22 Reply

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