If someone told you that you could drop your operating costs by 40 percent, would you listen? If that same person said you could you save between $70 and $150 per user per year in energy savings alone if you tried something new, would you try it?
A lot of companies are listening, and those same businesses are trying something new — cloud computing and software as a service (SaaS) — and reaping the many benefits, which start with the aforementioned cost savings.
Renee Bergeron is vice president of managed services and cloud computing at Ingram Micro Inc., a Fortune 100 company and the world’s largest technology distributor.
“(Savings) vary by solution, and I’ve seen some models that are in the 20 percent range all the way up to 70 or 80 percent,” Bergeron says. “I know it’s a big range, but it is significant. If you’re in an organization that has its own server that isn’t leveraging any virtualization, and you’re moving to the cloud, you’ll get into the 70 or 80 percent [range].”
Jeff McNaught, chief marketing officer at Wyse Technology, says that nearly 80 percent of IT budgets are spent just to keep the lights on.
““It’s about saving money, and there’s a tremendous amount of money to be saved,” McNaught says.
McNaught’s company builds a device that replaces the PC, uses one-tenth the energy of a PC and connects you to the cloud. The device doesn’t make a lot of noise, but more importantly, it doesn’t cost a lot of money.
“When you look at cloud computing, operating expenses can drop by about 40 percent a year, and that’s real money,” McNaught says. “These devices use one-tenth of the energy of the PCs. Now you’re really talking about saving real money.”
How cloud works
So the idea of saving that much money has caught your attention, and now you may be asking, “What exactly is this whole cloud computing thing anyway?”
Feyzi Fatehi, CEO of Corent Technology, which is a leader in SaaS transformation, says that cloud can fall into two categories — hardware and software, but both of them essentially move you to a service as opposed to buying the hardware or software.
“Instead of buying a computer, you subscribe to the amount of computing that you need to accomplish the tasks you’re focused on,” Fatehi says. “That’s really the big trend — moving from computers to computing and moving from buying stuff to subscribing to services.”
Dave Hitz is the co-founder and executive vice president of NetApp, a company that sells enormous amounts of storage, which many companies build their cloud systems on. From his perspective, Hitz also sees two different definitions of cloud computing.
“Definition No. 1 of cloud computing is you no longer buy a computer,” Hitz says. “You access computing service over the Internet to somebody else’s data centers, and they spend the capital and they hire the people to build them and they do everything, and all you do is pay a monthly bill and access the service over the Internet. Style No. 2 of cloud computing is a completely technical definition (that) has to do with if you’re going to build a data center, what does the architecture look like? And if the architecture has a lot of shared infrastructure, then people tend to call that kind of environment a cloud computing environment.”
The idea of the cloud is essentially that you plug into the wall, and you get a whole data center without having to build it and take care of it yourself.
“In the old times, people needed electricity, and they had to buy a generator to have at their office or home,” Fatehi says. “They had to pay money to buy it and spend money to maintain it, and now we simply subscribe to it as a utility, as a service. The monthly fee we pay for our power takes care of all the maintenance and everything else that takes place at the power plant. Cloud computing is moving from generators you have to buy to a power-plant model.”
John Dillon, CEO of Engine Yard Inc., a company that delivers an environment for software developers to write programs that run inside the cloud, points out that in the United States, capital expenditures are huge and about 50 percent of capital expenditures are information technology.
“Unbelievable,” Dillon says. “How many people are getting the ROI on this? What’s happening with the cloud is some big companies are saying, ‘Look, I’ll build the data center.’ It’s changing who buys, why it’s bought, and it changes the capacity and the economic decision-making process around IT.”
When you look at how much of capital expenditure is spent on IT, Fatehi says cloud presents clear advantages, such as taking your cost of maintenance and administration of your hardware or software down to zero. For example, if you wanted to buy a CRM solution, it may cost tens, if not hundreds or thousands of dollars. Or you could start paying about $500 a month to subscribe to a service like Salesforce.com. You don’t have to purchase any hardware or software, and instantly you start receiving the service.
“At the heart of it, it moves capital expenditures to operational expenses,” Fatehi says. “People don’t need to allocate millions of dollars to budget to buy a piece of hardware or software that could be very quickly obsolete — probably the same week they purchase it. They can start subscribing to a cloud computer service provider and get their need for computing for a service and pay on a monthly basis.”
Bergeron says it’s also important to note that cloud technology allows you to pay for only what you use. For example, if you have to build a system that can handle your peak volume time, such as month end, you pay for that all month long, even though you may only use that system at 10 percent capacity the rest of the month. With cloud, you pay for the higher volume only when you use it instead of all month long.
When you look at how much money most organizations spend on their IT systems, these cost savings are a big driver and will, ultimately, be a game changer for business.
The other benefit aside from cost is that everything that is on your PC is now in one location that can be accessed from anywhere — not just from the PC itself — and that comes with numerous benefits.
“When you take your software and your applications and your data and you move it to the cloud, something’s happened,” McNaught says. “First off, the cloud is the data center of your company and you can always get to it. You’re connected to the Internet, so you can get there from home, from the conference center, from the airport. And guess what? Because it’s not on a PC with a hard drive failing and memory getting filled up, it’s protected. It’s backed up. It’s secure. So the cloud provides this real opportunity to take the things that make up our work life, and within five years our home life, as well, and move them to this one place where we can always find our stuff.”
One other benefit that cloud technology provides is agility.
“Cloud solutions can be brought to an enterprise within hours, days or weeks,” Bergeron says. “We’re no longer talking about months to procure the hardware, the software, get it tested and up and running. Solutions that used to take six, nine, 12 months can be done in hours, days or weeks because the environment is already in place and ready to go.”
