It is apparent that increasingly more SMB owners and managers express interest in moving to their information technology infrastructure and applications to Cloud. Mostly, we think, this is due to what they pick up from national advertising from companies such as Amazon, Google, and Microsoft. If not, it can be from industry colleagues that pass along their perceptions and trends that they are experiencing in their industries. We believe many organizations get caught up in the Cloud hype without performing a proper analysis of costs, benefits, and possible complexities associated with Cloud technology. Such analysis should involve owners and staff, interviews with internal and external IT resources, and considerations related to the future of the SMB. Instead of jumping on the Cloud bandwagon, SMBs should take the time to evaluate Cloud technology and understand where it fits in with their company’s business strategy.
The attraction of Cloud services is associated with moving computing from on-premises to remotely managed data centers. It includes achieving benefits in areas such as reducing capital investment, while increasing scalability, flexibility, and simplicity. However, implementation still requires certain technical capabilities. Therefore, many SMBS are turning to local managed service providers (MSPs) to migrate from on-premises to hybrid or full Cloud environments.
According to The Computing Technology Industry Association (CompTIA), a major non-profit trade association, SMBs are beginning to view technology as a primary vehicle for achieving objectives, rather than just a mechanism for day-to-day operations. Given their capital investment and resource limitations, the Cloud becomes a vehicle to gain operational and performance benefits while providing flexibility to adapt to changes in their future business model.
CompTIA studies indicate top priorities of SMBs include security, data handling, and infrastructure. According to these studies, a shift is taking place where the Cloud now offers expanded options. Although a benefit of the Cloud is its apparent simplicity, this can be partially offset by an environment of IT becoming broader and more complex. Complexity can be the result of various factors – such as security issues, data management, and architecture. Consequently, Cloud applications need to be properly managed in order to gain the anticipated operating efficiencies.
Something to consider is that manual IT processes can be very time consuming and tedious. Internal IT administrative staff can often get bogged down accommodating changes to accounts associated with employees changing roles and responsibilities. The result is less time for staff to focus on more important projects. Without proper management, Cloud technology can be costlier than originally anticipated in terms of time and money. Additionally, user demands can be greater than planned. This translates into increased demands on internal help desk and IT administrative personnel, which can be unnecessary when simple IT tasks (such as password resets) could be automated through synchronization with the human resources system.
SMBs increasingly turn to the Cloud.
Traditionally, many SMBs have been able to maintain their own office infrastructures. However, much of that infrastructure is changing – causing those SMBs to seek third-party IT firms to move systems into the Cloud and manage them as well. According to a study by CompTIA, nearly half of SMBs are looking to outside IT firms for expertise and new options. Also, more than half are seeking help evaluating and implementing strategic uses of technology, including Cloud IT services, which involves integrating systems and company workflow.
Based on ChannelPro and other industry reports, SMB money is increasingly going to the Cloud. SMBs need help in selecting, customizing, and integrating software-as-a-services and other Cloud technologies. According to research firm IDC studies, public Cloud spending growth will be nearly six times the growth rate of overall IT spending in the upcoming few years. Critical components of Cloud consulting to SMBs includes determining the return-on-investment (ROI), resource plan, and other business plans associated with migrating workloads and implementation of Cloud services. Typically, SMBs have unique individual requirements as far as which applications and workloads should be migrated to the Cloud. Complexities include deciding upon public, private, or hybrid environments for supporting applications. Tradeoffs related to factors such as performance, security, and level of investment need to be evaluated.
One of the primary reasons to move to the Cloud is to achieve a favorable return-on-investment (ROI).
The determination of ROI, along with other factors, is not so simple. The calculation of ROI can be challenging. It is not a relatively simple “lease” versus “buy” type of analysis. The analysis involves evaluating goals, opportunities, and competitive advantage. How does a company value increased flexibility, agility, and “anytime, anywhere” business models? There is an opportunity to significantly reduce up-front costs through a Cloud subscription model.
The cost of capital is another consideration when evaluating ROI associated with the Cloud versus on-premises solutions. The cost of capital, or cost of funds for financing a business, is how much a company could expect to earn if dollars are invested elsewhere. Typically, the cost of capital for an SMB relates to the cost of debt, or the interest expense over the lifespan of the implementation. In addition to capital expenses for equipment, operating expenses associated with on-premises solutions include items such as IT staff, operating software, middleware, applications, electricity, cooling, security, backup, and other auxiliary systems.
A pay-as-you go model reduces capital expenditure and eliminates purchase-associated depreciation. So, the Cloud can generate financial benefits … but an analysis needs to be done to compare the recurring subscription costs, as compared to paying off a one-time capital investment.
A Cloud ROI determination goes beyond looking at factors such as capacity and utilization metrics.
The problem with using the view of capacity and utilization alone is that it is a technology viewpoint essentially based on key performance indicators (KPIs) rather than business benefit metrics. IT capacity includes performance measures associated with storage, CPU cycles, bandwidth, and workload memory capacity. IT utilization activity measures include uptime availability and volume of usage. Unfortunately, cost and performance metrics do not necessarily translate into business benefits.
When moving to the Cloud, migrating applications may involve a significant amount of time and money. This would include training costs associated with new technologies. Also, compliance and privacy issues need to be evaluated and managed.
There can be distinct advantages to moving to the Cloud.
ROI may provide a compelling financial case. There may be opportunities associated with more efficiently and effectively managing factors such as disaster recovery, backup, storage, testing, mobility, and security. By moving to a secure Cloud-based architecture, risks of sensitive data leaks can be mitigated.
Alternatively, a thorough ROI analysis may make it difficult to justify a move to the Cloud.
In some cases, a certain type of Cloud model may not be the right fit. The Cloud solution may be cost prohibitive or it may not provide the right business benefits. The key is to not assume that a Cloud solution is a simple decision. A proper analysis considering the many possible complexities is necessary for SMBs.