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Leveraging the cloud to drive down TCO and CAPEX

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It is an undeniable fact that the cloud continues to disrupt all aspects of the IT landscape, and we truly believe that's a good thing. Businesses of all types are taking advantage of the cloud solutions, as they are realizing that cloud implementation ultimately drives down an organization's IT total cost of ownership (TCO) and capital expenditures (CAPEX), while potentially increasing their operating expenditures (OPEX).

Many leading research organizations are stating that the cloud services will continue to evolve over the years and that they will become a significant challenge to all other IT Service delivery models and frameworks. One of the trends that developed over several years is the gradual move of the in-house developed applications to software-as-a-service (SaaS) cloud solutions providers. A parallel trend seen over the years was the commoditization of IT, which demonstrates that the products from various vendors show very little differentiation. This is generally good news for the consumers, as moving between the platforms is becoming less challenging.

Having said that, and not to lose the focus of the article topic, here are the few ways in which the cloud will drive down organizations’ TCO and CAPEX.

Lower TCO will be achieved, but not limited, by:

  • Providing organizations with broader access to applications, which are traditionally only available through distributed data centers
  • Providing the capacity and computing capability on demand, vs. the traditional build-and-wait approach
  • Providing the Service Level Agreements (SLA), which might not be achievable with the traditional IT organizational approach
  • Providing a robust and secure mobile workforce platform, which in-house implementation could find complex to deliver and operate

Lower CAPEX will be achieved, but not limited by:

  • Reducing the requirement for building large IT infrastructure to support vast applications
  • Shifting of the traditional capital investments requirements, for building and maintaining organizations’ primary and secondary data centers as well as IT infrastructure, to cloud service providers - CAPEX to OPEX shift
  • Re-tooling and optimizing your IT Department to provide more project than operational support

In, "Is the cloud the right fit for my organization," I wrote that cloud CIO's and Senior IT Management must ask the right questions before jumping on the cloud bandwagon. Once those questions are answered within the organization, the benefits of the cloud will outweigh any potential downsides.

But please don’t forget the one major downside, which can creep up on you if the cloud portfolio is not managed properly. It is imperative that you have a close eye on the cloud service’s capacity variability, as this is one of the uncertainties that cloud services might have on your OPEX. These uncertainties will be driven by potentially variable month-to-month consumption patterns, which will make your budgeting somewhat difficult to predict.

StratoGrid Advisory IT Advisory practice has assisted numerous organizations analyzing and structuring IT budgets to support their cloud services budget shift. Please let us know if we can be of any assistance to your organization.

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